Question :
21) Suppose an economy has two types of money — : 1384441
21) Suppose an economy has two types of money — gold and silver coins — that are both legal tender but have different non-monetary values. Gresham’s law has come into effect when
A) people refuse to use the coins of lesser value.
B) the value of the coins is in the same ratio as their non-monetary values.
C) the lower-valued coin is taken out of circulation.
D) the higher-valued coin is taken out of circulation.
E) people use the higher-valued coins for exchange and the lower-valued for savings.
22) The major problem of a currency that is fractionally backed and convertible into a precious metal is that of
A) clipping, which debases the metal coins.
B) counterfeiting.
C) maintaining its convertability into the metal.
D) paper money being less durable than gold.
E) perennial shortages of paper currency.
23) Most Canadians accept Canadian dollars in payment for goods and services in Canada because they have confidence that the dollar
A) will be accepted in the future.
B) is fully convertible into gold.
C) is accepted by foreigners as more stable than their own currency.
D) is fully convertible into American dollars at a set exchange rate.
E) is fully backed by the British pound sterling.
24) Fiat money has value because it
A) can be manufactured at will by the issuing government.
B) has intrinsic value equal to its face value.
C) is fully backed by gold at a fixed ratio.
D) is only fractionally backed by gold.
E) is generally accepted.
25) For a country to be on a “gold standard,” it must
A) use gold coins as money.
B) use gold coins as money and promise never to debase its coins.
C) use gold as money, but not necessarily in the form of gold coins.
D) make its currency convertible into gold at a fixed rate of exchange.
E) use gold as fiat money.
26) If most individuals accept paper currency in transactions, and paper currency is convertible into gold, then banks can safely issue
A) no more paper currency than the value of the gold they hold.
B) more paper currency than the value of the gold they hold.
C) as much paper currency as they please.
D) paper currency equal to a fraction of the gold they hold.
E) paper currency equal to the bank’s commercial debt divided by their gold reserves.
27) The currency that is in circulation in Canada today is
A) fully backed by gold held at the central bank.
B) backed by the U.S. dollar.
C) backed by the euro.
D) fractionally backed by gold.
E) not officially backed by anything.
28) Which of the following illustrates the use of fiat money?
A) exchanging Canadian dollars for a T-shirt
B) exchanging money-market funds for gold
C) exchanging money-market funds for insurance
D) keeping gold as a hedge against inflation
E) bartering goods for services
29) Debit cards that are issued by commercial banks can be characterized as
A) an example of near money.
B) an electronic version of a cheque.
C) deposit money.
D) fiat money.
E) a store of value.
30) In recent years, the use of debit cards issued by commercial banks has skyrocketed. When you pay for a purchase at a store using a debit card, you are
A) authorizing the transfer of cash from your bank account to the merchant’s bank account.
B) creating an electronic debt to the merchant.
C) authorizing an electronic transfer of a money substitute from you to the merchant.
D) authorizing an electronic transfer of deposit money from you to the merchant.
E) authorizing the transfer of bank notes from you to the merchant.
