1. Fiat money is:

A) money backed by gold.

B) money that only the government will accept to pay taxes.

C) used only in the United States as a medium of exchange.

D) paper money with no intrinsic value.

2. The demand for money is higher in Japan than in the United States because:

A) the average price level is lower in Japan.

B) the ATMs are open all night.

C) most stores in Japan do not accept credit cards.

D) Japanese banks pay interest on checking accounts.

3. The opportunity cost of holding money is:

A) the difference between interest rates on monetary assets and on nonmonetary assets.

B) zero.

C) the interest rate when someone uses a credit card.

D) the discount rate.

4. Fiscal policy that decreases aggregate demand is:

A) balanced.

B) expansionary.

C) contractionary.

D) supplemental.

5. A decrease in the money supply is likely to cause:

A) a decrease in borrowing and interest rates and an increase in aggregate demand.

B) a decrease in borrowing and interest rates and a decrease in aggregate demand.

C) an increase in borrowing and interest rates and a decrease in aggregate demand.

D) an increase in borrowing and interest rates and an increase in aggregate demand.

6. An inflationary gap can be closed with:

A) a decrease in government purchases.

B) expansionary fiscal policy.

C) expansionary monetary policy.

D) a decrease in taxes.

7. Medicaid, Medicare, and Social Security are examples of:

A) transfer payments.

B) monetary policy.

C) unilateral payments.

D) taxes.

8. Fiscal policy that increases aggregate demand is:

A) contractionary.

B) expansionary.

C) balanced.

D) Supplemental.

9.   The fact that many stores in the United States have found it economical to accept credit cards has:

A) increased the demand for credit card transactions but has had no impact on the demand for money.

B) increased the demand for money.

C) decreased the demand for money.

D) decreased the demand for credit card transactions but has had no impact on the demand for money.