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Types of Monetary Assets Quiz

#1

Which of the following is an example of a near-money asset?

Credit cards
Explanation

Assets easily converted into cash, like credit cards, but not directly usable as money.

#2

Which of the following is an example of a highly liquid monetary asset?

Certificates of deposit (CDs)
Explanation

Assets easily convertible to cash without significant loss, like Certificates of Deposit.

#3

Which of the following is an example of a non-interest-bearing monetary asset?

Checking account
Explanation

A deposit account where the depositor can withdraw funds at any time without interest.

#4

What is the primary function of a money market mutual fund (MMMF)?

Offering short-term, low-risk investments
Explanation

Investment funds investing in short-term, low-risk securities like Treasury bills and commercial paper.

#5

Which of the following is an example of a time deposit?

Certificate of deposit (CD)
Explanation

A deposit with a fixed term and typically earns interest, like a Certificate of Deposit.

#6

What is the primary function of money market instruments?

Short-term borrowing and lending
Explanation

Tools facilitating short-term borrowing and lending in the financial market.

#7

Which of the following is not considered a traditional form of money?

Barter system
Explanation

A system of trade where goods and services are exchanged directly without a medium of exchange.

#8

What is the primary function of a central bank in managing monetary assets?

Issuing currency
Explanation

The central bank's responsibility of controlling the issuance of currency and regulating monetary policy.

#9

In the context of monetary policy, what is the purpose of open market operations?

Regulating interest rates
Explanation

The central bank's buying and selling of government securities to influence interest rates.

#10

What is the role of the Federal Reserve System in the United States' monetary policy?

Regulating interest rates
Explanation

The Federal Reserve's control over interest rates to stabilize the economy.

#11

Which monetary asset is considered the most liquid form of money?

Currency in circulation
Explanation

Physical currency actively circulating in the economy, highly liquid and widely accepted.

#12

What is the main characteristic of a Treasury Bill (T-Bill)?

Fixed interest rate
Explanation

Government-issued debt securities with fixed interest rates and short-term maturity.

#13

In the context of monetary assets, what does M1 represent?

Physical currency and demand deposits
Explanation

The narrowest definition of money supply including physical currency and demand deposits.

#14

Which term is used to describe the maximum amount of money a central bank allows in circulation?

Money supply
Explanation

The total amount of money in an economy, controlled by a central bank.

#15

What is the primary function of the International Monetary Fund (IMF) in the global monetary system?

Providing financial assistance to member countries
Explanation

The IMF's role in providing loans and financial support to member nations facing economic difficulties.

#16

What is the primary function of a repurchase agreement (repo) in monetary markets?

Short-term borrowing and lending
Explanation

A short-term borrowing and lending arrangement involving the sale and subsequent repurchase of securities.

#17

In the context of monetary assets, what does M2 represent?

Physical currency, demand deposits, time deposits, and savings deposits
Explanation

A broader definition of money supply including M1 plus time deposits and savings deposits.

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