Fundamentals of Currency and Monetary Systems Quiz

Test your knowledge of monetary economics with questions on money functions, central banking, exchange rates, and more!

#1

Which of the following is NOT a function of money in an economy?

Medium of exchange
Unit of labor
Store of value
Unit of account
#2

Which of the following is an example of fiat money?

Gold coins
Silver bars
Bitcoin
Paper currency
#3

What term describes a situation where a country's imports exceed its exports, leading to a deficit in the balance of trade?

Trade surplus
Trade deficit
Current account surplus
Current account deficit
#4

Which organization is responsible for issuing the currency in the United States?

Federal Reserve System
U.S. Department of the Treasury
International Monetary Fund
World Bank
#5

What term refers to the total amount of money circulating in the economy, including currency, demand deposits, and checking accounts?

M1 money supply
M2 money supply
M3 money supply
M4 money supply
#6

What is the term for the ratio of the money supply to the total value of all final goods and services produced in an economy during a given period?

Inflation rate
GDP per capita
Money supply
Velocity of money
#7

What is the primary tool used by central banks to control the money supply in an economy?

Fiscal policy
Open market operations
Monetary policy
Foreign exchange intervention
#8

Which of the following is NOT a characteristic of commodity money?

Durability
Intrinsic value
Limited supply
Accepted by government decree
#9

What is the term for the interest rate at which a central bank lends money to commercial banks?

Prime rate
Discount rate
Federal funds rate
LIBOR
#10

What is the term for a sudden and significant decline in the value of a currency relative to other currencies?

Currency appreciation
Currency depreciation
Currency devaluation
Currency revaluation
#11

In the context of currency systems, what does the term 'pegging' refer to?

Tying the value of one country's currency to another currency or standard
Controlling the inflation rate
Issuing new banknotes
Implementing capital controls
#12

Which of the following is a characteristic of a floating exchange rate system?

Fixed exchange rates are determined by the government
Exchange rates fluctuate based on market supply and demand
There is no exchange of currencies between countries
Exchange rates are pegged to a gold standard
#13

What term describes a situation where a country's government or central bank allows its currency to freely float against other currencies, without intervention?

Currency peg
Currency band
Currency basket
Currency float
#14

Which of the following is an example of a dual exchange rate system?

Currency board
Crawling peg
Managed float
Black market rate
#15

Which of the following is a disadvantage of a fixed exchange rate system?

High volatility in exchange rates
Inability to control inflation
Reduced uncertainty for international trade
Loss of monetary policy independence

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