Question

12. Which of the following statements is (are) correct?
(x) The legal tender requirement by the U.S. government means that people are more likely to accept the
U.S. dollar as a medium of exchange.
(y) Since the U.S. government has decreed that U.S. currency is legal tender, the government must hold
enough gold to redeem all currency.
(z) The set of items that serve as media of exchange clearly includes credit cards and short-term bonds.
A. (x), (y), and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

13. Which of the following might explain why the United States has so much currency per person?
A. Currency may be a preferable store of wealth for criminals.
B. Online banking for payment of goods and services requires larger checking account balances.
C. Increased purchases of gold and silver by the public as a hedge against inflation
D. People use credit and debit cards more frequently.
E. U.S. citizens are holding a lot of foreign currency.

14. The measure of the money stock called M1 includes
A. wealth held by people in their savings accounts.
B. wealth held by people in their checking accounts.
C. wealth held by people in money market mutual funds.
D. everything that is included in M2 plus some additional items.
E. None of the above

Answer 1

12, Option E

Explanation: The US government does not need gold deposits to support its currency. Also, credit card is not a medium of exchange.

13. Option A

Explanation: Criminals prefer currency to store their wealth as they want to avoid the banking system.

14. Option B

Explanation: M1 is the most liquid portion of the money supply. M1 inlcudes currency and money in the checking account.