Macroeconomics 2 solved MCQs

1 of 8
chapter:   Money

1. The value of money in Fisher’s equation is determined by

a. Demand for money

B. Supply of money

c. Demand and supply of money

d. None of the above

2. According to the Quantity Theory of Money, the value of money depends upon

a. Quantity theory of money in circulation

B. Purchasing power of money

c. Demand for money

d. Price level

3. According to Cambridge equation, the value of money depends upon

a. Demand for money

B. Supply of money

c. Demand for goods and services

d. All of the above

4. The degree of relationship between the demand for and the supply of money in Fisher’s equation will be

a. 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 > 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑

B. 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 = 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑

c. 𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠𝑠 < 𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑𝑑

d. None of the above

5. Which is not the function of money

a. Make demand and supply equal

B. Store of value

c. Medium of exchange

d. Measure of value

6. High-powered money is also known as

a. Base money

B. Reserve money

c. Narrow money

d. All of the above

7. Who stated, “Bad money drives good money out of circulation, when both of them arefull legal tender”?

a. Irving Fisher

B. Milton Friedman

c. J.M. Keynes

d. Thomas Gresham

8. Value of money is

a. Directly related to the price level

B. Inversely related to the price level

c. Proportionately related to the price level

d. All the above

9. Who stated, “Money is what money does”?

a. Milton Friedman

B. Walker

c. Irving Fisher

d. Thomas Gresham

10. Barter system means

a. Purchase of commodity with money

B. Sale of commodity with money

c. Purchase and sale of commodity with commodity

d. None of the above

11. Which among the following is considered to be the most liquid asset?

a. Gold

B. Money

c. Land

d. Treasury bonds

12. Currency notes and coins are called as:

a. flat money

B. legal tenders

c. Fiat money

d. Both (b) and (c

13. Convertible money means

a. It can buy goods

B. Government can give gold against it

c. Illegal money

d. Low value of money

14. Barter system has the defect of

a. Goods exchanged are of inferior quality

B. Goods cannot be exchanged for services

c. Lack of common measure of value

d. None of the above

15. Legal money is called so because

a. The buyer must pay in that money

B. Can be converted into gold

c. Sellers do not accept any other money

d. It is official medium of exchange

16. The most important feature of money is

a. General acceptability

B. Convertibility into gold

c. Store of value

d. Medium of exchange

17. Which property the paper money does not possess:

a. acceptability

B. Divisibility

c. Durability

d. Portability

18. In the equation 𝑀𝑀𝑀𝑀 = 𝑃𝑃𝑃𝑃, 𝑉𝑉 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑡𝑡𝑡𝑡

a. Value of money

B. Velocity of circulation of money

c. Variation of national income

d. All of the above

19. In the equation 𝑀𝑀𝑀𝑀 = 𝑃𝑃𝑃𝑃, 𝑀𝑀 𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟𝑟

a. Money supply

B. Money demand

c. Maximum output

d. Minimum output

20. According to Keynes, motives for holding money are

a. Two

B. Three

c. Four

d. Five

21. Under normal circumstances, the velocity of circulation of money in a country is

a. 100 %

B. Negative

c. Less than 10

d. Zero

22. Paper money is called fiat money because

a. It is issued with authority of government

B. It is convertible into gold

c. It can be easily printed

d. It is light weight

23. Value of money means

a. Gold purchased by money

B. General Purchasing power of money

c. Importance of money

d. Demand for money

24. If the quantity of money increases 100%, other things remaining constant, value ofmoney changes by

a. Increases by 100 %

B. Decreases by 100 %

c. Decreases by 200%

d. Does not change

25. Value of money and supply of money are related

a. Inversely

B. Directly

c. Are not related

d. None of the above


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