#1
Which of the following is considered a characteristic of money?
Limited supply
ExplanationMoney should have a limited supply to maintain its value.
#2
What is the term for the process of converting assets into a more liquid form, such as cash?
Liquidity
ExplanationLiquidity is the conversion of assets into cash or easily tradable forms.
#3
What is the term for the process of two parties exchanging goods and services without using money?
Bartering
ExplanationBartering is the exchange of goods and services without involving money.
#4
What is the primary function of money in an economy?
To serve as a store of value
ExplanationMoney serves as a store of value, allowing people to save wealth for future use.
#5
Which form of money has intrinsic value?
Commodity money
ExplanationCommodity money has inherent value due to its material, like gold or silver.
#6
Which economist proposed the quantity theory of money?
Milton Friedman
ExplanationMilton Friedman proposed the quantity theory of money.
#7
What is the term for the increase in the general price level of goods and services in an economy over time?
Inflation
ExplanationInflation is the rise in the overall price level.
#8
What is the term for a situation where the value of money decreases over time, leading to a rise in prices?
Hyperinflation
ExplanationHyperinflation is an extreme devaluation of a currency leading to rapid price increases.
#9
What is the term for the percentage of commercial bank deposits that a central bank requires as reserves?
Fractional reserve ratio
ExplanationFractional reserve ratio is the reserve percentage banks must hold.
#10
In the context of money supply, what does M1 include?
Physical currency and coins
ExplanationM1 includes physical currency and coins in circulation.
#11
Which of the following is NOT a function of money?
Store of credit
ExplanationMoney is not designed to be a store of credit.
#12
Which monetary policy tool involves the central bank buying or selling government securities to influence the money supply?
Open market operations
ExplanationOpen market operations involve buying/selling securities to control money supply.
#13
In the context of money supply, what does M2 include?
Checking accounts
ExplanationM2 includes M1 plus checking accounts and near money.