5.2

Question 1

money has 4 principle reasons

Answer 1

1. generally accepted medium of exchange for goods and services
2. a unit of account in exchange
3. a store of value for future exchange
4. an income earning asset

Question 2

they key to this is deferred gratification

Answer 2

an income earning asset

Question 3

without money what is the only non-coercive means of exchange

Answer 3

barter

Question 4

has very high transaction costs

Answer 4

barter

Question 5

5 principle forms of money

Answer 5

1, commodity

2. convertible
3. fiat
4. deposit
5. super money

Question 6

first form of money and has a high value/weight ratio

Answer 6

commodity

Question 7

is a major transaction cost

Answer 7

transportation

Question 8

three problems with commodity money

Answer 8

1. debasement or corruption
2. anything “precious” has an attractive alternative use
3. no matter its value/weight, any commodity in quantity is bulky and heavy

Question 9

the next step after commodity is

Answer 9

convertible paper money

Question 10

currency issued by the State generally accepted as “money” within a given jurisdiction

Answer 10

fiat money

Question 11

fiat money is paper currency issued by the state as a medium of: 4

Answer 11

1. exchange
2. unit of account
3. store of value
4. income earning asset

Question 12

the expectation of market players about the productive capacity and balance payments of a country, backs

Answer 12

fiat money

Question 13

the most important form of money is

Answer 13

deposit money

Question 14

main means of settling transaction in the modern world

Answer 14

deposit money

Question 15

the delay between deposit and withdrawal allows banks to

Answer 15

loan out deposits to earn interest

Question 16

based on the changing market value of the stock market and other appreciating assets

Answer 16

super money

Question 17

some argue credit cards are a form of money because of

Answer 17

deferred payment

Question 18

refers to the time and cost associated with converting money into goods and services

Answer 18

liquidity

Question 19

as one moves from M1 to M3 and onward, liquidity becomes

Answer 19

less and less

Question 20

M1 (in Parkin and Bade)

Answer 20

bills and coins

Question 21

the most liquid of monies

Answer 21

M1 (in Parkin and Bade)

Question 22

personal deposits requiring a cheque or credit card and taking longer

Answer 22

M2 (in Parkin and Bade)

Question 23

term deposits which require formalities and a penalty charge if taking longer

Answer 23

M3 (in Parkin and Bade)

Question 24

one difficulty for policymaker lies in how to

Answer 24

measure relevant money supply

Question 25

M3 is known as

Answer 25

broad money

Question 26

broad money (M3) consists of (4)

Answer 26

1. cash
2. current account deposits
3. savings deposits
4. time-restricted deposits

Question 27

M1 is known as

Answer 27

narrow momey

Question 28

narrow money consists of (2)

Answer 28

1. cash in circulation

2. current account deposits

Question 29

is the most liquid measure

Answer 29

M0

Question 30

M0 includes: (2)

Answer 30

1. cash in circulation

2. cash in banks

Question 31

M1 (in first year text)

Answer 31

currency and demand deposits

Question 32

M2 (in first year text)

Answer 32

several “near” monies

Question 33

deposits at credit unions, trust and mortgage loans companies and money market mutual funds

Answer 33

M2+ (in first year text)

Question 34

Canada Savings Bonds and non money market mutual funds

Answer 34

M2++ (in first year text)

Question 35

M1 (in Ragan and Lipsey)

Answer 35

currency and demand deposits

Question 36

non-chequing accounts at the chartered banks

Answer 36

M2 (in Ragan and Lipsey)

Question 37

deposits at credit unions, trust and mortgage loan companies and money market mutual funds

Answer 37

M2+ (in Ragan and Lipsey)

Question 38

Canada Savings Bonds and non money market funds

Answer 38

M2++ (in Ragan and Lipsey)