Topic Questions (MCQ – EASY): Money Market – 3auk

Following hyperinflation, Zimbabwe abandoned its currency and adopted the use of US dollars. A coin collector in Europe purchased an old Zimbabwean 100 trillion dollar note at an auction, anticipating its rarity and potential increase in value.

If the note's value did increase, which characteristic of money would the Zimbabwean dollar note serve?

a generally accepted means of payment

a medium of exchange

a store of value

a unit of account

The Bank of England introduced a new version of the £1 coin in 2017 due to concerns over the circulation of a significant number of counterfeit £1 coins.

Which characteristic of money did the counterfeit £1 coins endanger?

acceptability

divisibility

durability

portability

During a specific period, the money income in an economy rose by 4%, while prices increased by an average of 2%. What conclusion can be drawn from this information?

Real income increased by 2%.

The velocity of money circulation decreased by 2%.

The money supply increased by 8%.

The volume of output decreased by 2%.

The diagram illustrates the market for loanable funds, currently in equilibrium at point X.

If business confidence decreases and there is an increase in bank lending, what would be the new equilibrium point?

A

B

C

D

What is the meaning of liquidity preference?

a preference for receiving cash payments instead of cheques

a preference for receiving monthly payments instead of weekly

a preference for holding assets that can be easily converted into cash

a preference for holding money rather than alternative assets

What will lead to a decrease in the quantity of money demanded?

an increase in interest rates

an increase in national income

an increase in the price level

an increase in wealth

The diagram depicts a liquidity preference curve (LP) illustrating the relationship between the demand to hold money, the interest rate, and the money supply (MS) in an economy. The market is currently in equilibrium at an interest rate of r.

If the government intervenes and increases the money supply, what will happen to the interest rate?

falls below zero

becomes zero

increases

remains unchanged