ECON 3001 Test Questions and Answers Already Passed Latest Update 2025-2026
Given the nominal interest rate of 16% and the expected inflation of 17%, then the value of the real
interest rate is _____%.
With the real interest rate equal to 7% and the expected inflation equal to 4%, then the value of the
nominal interest rate is ______%.
A lender prefers a _____ real interest rate while a borrower prefers a _____ real interest rate. -
Answers-1%
11%
Higher, Lower
Money may serve as an instrument that allows for comparison of the relative worth of various goods
and services. What function of money does this describe?
A. Unit of account
B. Medium of exchange
C. Standard of deferred payment
D. Store of value - AnswersA. Unit of account
is the relative ease and speed with which an asset can be converted into cash.
A. Store of value
B. Liquidity
C. Fiat money
D. Currency
is the most liquid store of value in the economy
,A. Money
B. Income
C. Barter
D. Wealth - AnswersB. Liquidity
A. Money
a. Currency
b. Money market mutual funds (noninstitutional)
c. U.S. T-bills (with maturities of less than 90 days)
d. Small-denomination time deposits
e. Large-cap mutual funds
f. Checkable deposits
M1 and M2
M2 only
Neither M1 nor M2 - Answersa. M1 and M2
b. M2 only
c. Neither M1 nor M2
d. M2 only
e. Neither M1 or M2
, f. M1 and M2
What is the main disadvantage of moving to e-money or moving to a cashless society?
A. There are problems with security and privacy
B. Funds are debited too quickly from the payer's account
C. It is difficult to keep track of electronic purchases
D. The use of e-money does not work with vending machines or other coin-based transactions -
AnswersA. There are problems with security and privacy
It is not unusual to find a business that displays a sign saying "no personal checks, please."
Based on this observation, a checking account must be _______than currency.
less liquid
of the same degree of liquidity
more liquid - Answersless liquid
Which of the Federal Reserve's measures of the monetary aggregates-- M1
or M2-- is composed of the most liquid assets? Which is the larger measure?
All else equal, ____ is the monetary aggregate composed of the most liquid assets and ____ is the larger
measure. - AnswersM1
M2
Assume that you are interested in earning some return on idle balances you usually keep in your
checking account and decide to buy some money market mutual fund shares by writing a check.
Everything else the same, M1 will _____ and M2 will _____.
Decrease
Stay the Same
Increase - AnswersDecrease
Stay the Same
Given the nominal interest rate of 16% and the expected inflation of 17%, then the value of the real
interest rate is _____%.
With the real interest rate equal to 7% and the expected inflation equal to 4%, then the value of the
nominal interest rate is ______%.
A lender prefers a _____ real interest rate while a borrower prefers a _____ real interest rate. -
Answers-1%
11%
Higher, Lower
Money may serve as an instrument that allows for comparison of the relative worth of various goods
and services. What function of money does this describe?
A. Unit of account
B. Medium of exchange
C. Standard of deferred payment
D. Store of value - AnswersA. Unit of account
is the relative ease and speed with which an asset can be converted into cash.
A. Store of value
B. Liquidity
C. Fiat money
D. Currency
is the most liquid store of value in the economy
,A. Money
B. Income
C. Barter
D. Wealth - AnswersB. Liquidity
A. Money
a. Currency
b. Money market mutual funds (noninstitutional)
c. U.S. T-bills (with maturities of less than 90 days)
d. Small-denomination time deposits
e. Large-cap mutual funds
f. Checkable deposits
M1 and M2
M2 only
Neither M1 nor M2 - Answersa. M1 and M2
b. M2 only
c. Neither M1 nor M2
d. M2 only
e. Neither M1 or M2
, f. M1 and M2
What is the main disadvantage of moving to e-money or moving to a cashless society?
A. There are problems with security and privacy
B. Funds are debited too quickly from the payer's account
C. It is difficult to keep track of electronic purchases
D. The use of e-money does not work with vending machines or other coin-based transactions -
AnswersA. There are problems with security and privacy
It is not unusual to find a business that displays a sign saying "no personal checks, please."
Based on this observation, a checking account must be _______than currency.
less liquid
of the same degree of liquidity
more liquid - Answersless liquid
Which of the Federal Reserve's measures of the monetary aggregates-- M1
or M2-- is composed of the most liquid assets? Which is the larger measure?
All else equal, ____ is the monetary aggregate composed of the most liquid assets and ____ is the larger
measure. - AnswersM1
M2
Assume that you are interested in earning some return on idle balances you usually keep in your
checking account and decide to buy some money market mutual fund shares by writing a check.
Everything else the same, M1 will _____ and M2 will _____.
Decrease
Stay the Same
Increase - AnswersDecrease
Stay the Same
