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This activity contains 10 questions.

Question 1.
The three major functions of money are; a medium of exchange, means of evaluation and store of wealth.


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Question 2.
The financial sector is a vital part of every economy as it facilitates the mobilisation of funds from lenders to borrowers, allowing the former to earn interest on their savings, and the latter to invest and contribute to economic growth.


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Question 3.
The goals of the Reserve Bank of Australia in its implementation of monetary policy include: a) acting as banker to the government; b) issuing notes and c) holding foreign currency reserves.


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Question 4.
Broad money is equal to M3 plus net borrowings from the financial sector by non bank financial institutions.


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Question 5.
Suppose banks in Singapore have a liquidity ratio of 10 percent of deposits. If a wealthy expatriate Singaporean returns home and deposits $9 million in the banking sector, the total increase in the money supply form this deposit would be $900 million.


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Question 6.
Many people hold some money in liquid form in case of emergency events, such as car accidents or illness. This is known as the transactions motive for holding money.


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Question 7.
Economists agree that the supply of money is exogenously determined, meaning the money supply curve is always graphed as a vertical line, with the rate of interest on the vertical axis, and the quantity of money on the horizontal axis.


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Question 8.
An increase in interest rates results in a decrease in the quantity demanded of money.


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Question 9.
Money demand is represented by an upward sloping curve, which illustrates a positive relationship between interest rates and the demand for money.


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Question 10.
A left shift in the money supply curve will decrease interest rates, which in turn increases borrowing, spending and real GDP.


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