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Exam 9: Money, The Federal Reserve, and Global Financial Markets

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Question 31

Multiple Choice

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An increase in the perceived riskiness of Company A stock ______ the risk premium investors require to purchase Company A stock and ______ the price of Company A stock.

A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases

E) None of the above
F) C) and D)

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Question 32

Multiple Choice

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Based on the information in the table, we can conclude that, in 1932, each of the following events occurred except:

A) The public increased the amount of currency it held.
B) Banks were keeping more of their deposits in reserves, and making fewer loans.
C) The Federal Reserve conducted open-market sales of U.S. government bonds.
D) The Federal Reserve injected reserves into the banking system.

E) B) and D)
F) B) and C)

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Question 33

Multiple Choice

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In an open economy, if domestic citizens decide to save more, then the domestic real interest rate will ______ and the level of capital investment in the country will _____, holding other factors constant.

If the desired reserve/deposit ratio is 0.25 and the banking system receives an additional $10 million in reserves, bank deposits will increase by:

When money is the basic measure of economic value, it serves as:

The M1 measure of money consists of the sum of:

Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade. Each company's stock currently sells for $100 per share. If the temperature next year is lower than average, the stock price for ABC will increase by $20, and the stock price for XYZ will not change. If the temperature next year is higher than average, the stock price for XYZ will increase by $20, and the stock price for ABC will not change. There is a 50% chance that it will be colder than average next year, and a 25% chance that it will be warmer than average. If you purchase one share of ABC stock and one share of XYZ stock, your expected gain will be _______.

If domestic saving is greater than domestic investment, then a country will have a ______ and positive net capital ______.

The components of M2 that are not also in M1:

Regular interest payments made to bondholders are called ______ payments.

Which of the following events will decrease the domestic real interest rate in an open economy?

You originally required a risk premium of 6 percent in addition to the rate of return on safe assets before you would purchase shares of Techno Company stock. If you and other investors reduce the risk premium you require to 4 percent, the price of Techno Company stock will:

In Macroland there is $1,000,000 in currency that can either be held by the public as currency or deposited into banks. Banks' desired reserve/deposit ratio is 10%. If the public of Macroland decides to hold more currency, increasing the proportion they hold from 50% to 75%, the money supply in Macroland will ______.

A decrease in the perceived riskiness of Company A stock ______ the risk premium investors require to purchase Company A stock and ______ the price of Company A stock.

An economy with a trade surplus must also have:

Two reasons savers keep deposits at banks are to:

Based on the following information, the value of the M1 measure of the money supply is ______ and the value of the M2 measure of the money supply is ______.

In an open economy, an increase in the government's budget deficit will ______ the domestic real interest rate and ______ the level of capital investment in the country, holding other factors constant.

In an open-market purchase the Federal Reserve ______ government bonds from the public and the supply of bank reserves ______.

In the United States saving is allocated to its most productive use by: