Question 1

Savers may prefer to use financial intermediaries rather than lending directly to borrowers because financial intermediaries:

Accepted Answer

A)   reduce the cost of gathering information about borrowers.
B)   have a monopoly on lending.
C)   increase the risk of lending.
D)   offer higher rates of return than available elsewhere.E) A) and B)
F) A) and C)

Question 2

Bank reserves are:

Accepted Answer

A)   currency and customer checking deposits.
B)   currency, customer checking and savings deposits.
C)   any asset used to purchase goods and services.
D)   cash and similar assets held to meet depositor withdrawals or payments.E) A) and B)
F) B) and C)

Question 3

If a bank's desired reserve/deposit ratio is 0.33 and it has deposit liabilities of $100 million and reserves of $50 million, it:

Accepted Answer

A)   has too few reserves and will reduce its lending.
B)   has too many reserves and will increase its lending.
C)   has the correct amount of reserves and outstanding loans.
D)   should increase the amount of its reserves.E) B) and C)
F) None of the above

Question 4

The direct trade of goods and services for other goods and services is called:

Accepted Answer

A)   financial intermediation.
B)   diversification.
C)   barter.
D)   using a medium of exchange.E) A) and B)
F) A) and C)

Question 5

The most important, most convenient, and most flexible way in which the Federal Reserve affects the supply of bank reserves is through:

Accepted Answer

A)   conducting open-market operations.
B)   changing the Federal Reserve discount rate.
C)   changing bank reserve requirement ratios.
D)   changing interest rates.E) None of the above
F) A) and C)

Question 6

When the central bank buys $1,000,000 worth of government bonds from the public, the money supply:

Accepted Answer

A)   increases by more than $1,000,000.
B)   increases by $1,000,000.
C)   increases by less than $1,000,000.
D)   decreases by $1,000,000.E) B) and D)
F) None of the above

Question 7

Money market mutual funds are ______ the M1 measure of money and ______ the M2 measure of money.

Accepted Answer

A)   included in; excluded from
B)   included in; included in
C)   excluded from; excluded from
D)   excluded from; included inE) B) and C)
F) All of the above

Question 8

Liabilities of the commercial banking system include:

Accepted Answer

A)   reserves and loans.
B)   deposits.
C)   reserves and deposits.
D)   loans and deposits.E) B) and C)
F) C) and D)

Question 9

Stock prices increase when expected future dividends ____, interest rates _____, and/or the risk premium ______.

Accepted Answer

A)   increase; increase; increases
B)   increase; increase; decreases
C)   decrease; decrease; increases
D)   increase; decrease; decreasesE) None of the above
F) A) and C)

Question 10

After the Federal Reserve increases reserves in the banking system through open-market purchases, banks create new deposits through multiple rounds of lending and accepting deposits until the:

Accepted Answer

A)   Federal Reserve requires them to stop.
B)   deposit insurance limit is reached.
C)   actual reserve/deposit ratio is greater than the desired reserve/deposit ratio.
D)   actual reserve/deposit ratio is equal to the desired reserve/deposit ratio.E) A) and D)
F) A) and B)

Question 11

The specialized information-gathering activities that banks use to evaluate borrowers are an example of the:

Accepted Answer

A)   cost-benefit principle.
B)   principle of comparative advantage.
C)   scarcity principle.
D)   principle of increasing opportunity cost.E) None of the above
F) A) and B)

Question 12

The amount of money in the United States is determined by:

Accepted Answer

A)   the Federal Reserve.
B)   the combined behavior of commercial banks and the public, as well as actions of the Federal Reserve.
C)   the public.
D)   the combined behavior of commercial banks and the public.E) C) and D)
F) None of the above

Question 13

When your grandfather keeps a bundle of $100 dollar bills behind a brick in the basement, this is an example of dollars serving as:

Accepted Answer

A)   bank reserves.
B)   a medium of exchange.
C)   a unit of account.
D)   a store of value.E) A) and C)
F) A) and B)

Question 14

The three functions of money are:

Accepted Answer

A)   spending for consumption, investment, and government purchases.
B)   measuring balance of payments, exchange rates, and interest rates.
C)   implementing monetary policy, fiscal policy, and structural policy.
D)   serving as a medium of exchange, unit of account, and store of value.E) B) and D)
F) A) and B)

Question 15

Two examples of governments that printed large quantities of paper currency to finance massive budget deficits, causing hyperinflation, are ______ and ______.

Accepted Answer

A)   the Confederacy during the American Civil War; Japan after World War II
B)   the Confederacy during the American Civil War; Germany after World War I
C)   the United States during the Great Depression; Japan after World War II
D)   the United States during the Great Depression; Germany after World War IE) None of the above
F) B) and C)

Question 16

In Macroland, currency held by the public is 2000 econs, bank reserves are 300 econs, and the desired reserve/deposit ratio is 10%. If the Central Bank prints an additional 200 econs and uses this new currency to buy government bonds from the public, the money supply in Macroland will increase from ______ econs to ______ econs, assuming that the public does not wish to change the amount of currency it holds.

Accepted Answer

A)   20,000; 22,000
B)   5,000; 2,000
C)   3,000; 5,000
D)   5,000; 7,000E) B) and C)
F) A) and D)

Question 17

If you post your car on eBay with a Buy-It-Now price of $1,800, you are using money as:

Accepted Answer

A)   bank reserves.
B)   a medium of exchange.
C)   a unit of account.
D)   a store of value.E) B) and D)
F) B) and C)

Question 18

The principal amount of a bond is the amount:

Accepted Answer

A)   originally lent.
B)   of interest agreed upon when the bond was originally issued.
C)   paid to the bondholders on a regular basis.
D)   of interest the bondholder is entitled to when the bond matures.E) B) and C)
F) All of the above

Question 19

Money serves as a medium of exchange when:

Accepted Answer

A)   it is used to purchase goods and services.
B)   there is direct trade of goods and services.
C)   it is a basic measure of economic value.
D)   it is a means of holding wealth.E) None of the above
F) C) and D)

Question 20

If the money supply equals 1,000, velocity equals 5, and real GDP equals 2,500, then the price level equals:

Accepted Answer

A)   2.
B)   2.5.
C)   5.
D)   5,000.E) B) and D)
F) None of the above

Exam 9: Saving and Capital Formation

The amount of money in the United States is determined by:

Correct Answer
verified

The specialized information-gathering activities that banks use to evaluate borrowers are an example of the:

Correct Answer
verified

Bank reserves are:

Correct Answer
verified

The principal amount of a bond is the amount:

Correct Answer
verified

Correct Answer
verified

If the money supply equals 1,000, velocity equals 5, and real GDP equals 2,500, then the price level equals:

Correct Answer
verified

After the Federal Reserve increases reserves in the banking system through open-market purchases, banks create new deposits through multiple rounds of lending and accepting deposits until the:

Correct Answer
verified

The three functions of money are:

Correct Answer
verified

Money serves as a medium of exchange when:

Correct Answer
verified

The most important, most convenient, and most flexible way in which the Federal Reserve affects the supply of bank reserves is through:

Correct Answer
verified

Liabilities of the commercial banking system include:

Correct Answer
verified

Stock prices increase when expected future dividends __, interest rates _, and/or the risk premium ____.

Correct Answer
verified

Savers may prefer to use financial intermediaries rather than lending directly to borrowers because financial intermediaries:

Correct Answer
verified

The direct trade of goods and services for other goods and services is called:

Correct Answer
verified

Money market mutual funds are the M1 measure of money and the M2 measure of money.

Correct Answer
verified

When the central bank buys $1,000,000 worth of government bonds from the public, the money supply:

Correct Answer
verified

If a bank's desired reserve/deposit ratio is 0.33 and it has deposit liabilities of $100 million and reserves of $50 million, it:

Correct Answer
verified

If you post your car on eBay with a Buy-It-Now price of $1,800, you are using money as:

Correct Answer
verified

Two examples of governments that printed large quantities of paper currency to finance massive budget deficits, causing hyperinflation, are and .

Correct Answer
verified

When your grandfather keeps a bundle of $100 dollar bills behind a brick in the basement, this is an example of dollars serving as:

Correct Answer
verified

Exam 9: Saving and Capital Formation

The amount of money in the United States is determined by:

Correct AnswerverifiedShow Answer

The specialized information-gathering activities that banks use to evaluate borrowers are an example of the:

Correct AnswerverifiedShow Answer

Bank reserves are:

Correct AnswerverifiedShow Answer

The principal amount of a bond is the amount:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the money supply equals 1,000, velocity equals 5, and real GDP equals 2,500, then the price level equals:

Correct AnswerverifiedShow Answer

After the Federal Reserve increases reserves in the banking system through open-market purchases, banks create new deposits through multiple rounds of lending and accepting deposits until the:

Correct AnswerverifiedShow Answer

The three functions of money are:

Correct AnswerverifiedShow Answer

Money serves as a medium of exchange when:

Correct AnswerverifiedShow Answer

The most important, most convenient, and most flexible way in which the Federal Reserve affects the supply of bank reserves is through:

Correct AnswerverifiedShow Answer

Liabilities of the commercial banking system include:

Correct AnswerverifiedShow Answer

Stock prices increase when expected future dividends ____, interest rates _____, and/or the risk premium ______.

Correct AnswerverifiedShow Answer

Savers may prefer to use financial intermediaries rather than lending directly to borrowers because financial intermediaries:

Correct AnswerverifiedShow Answer

The direct trade of goods and services for other goods and services is called:

Correct AnswerverifiedShow Answer

Money market mutual funds are ______ the M1 measure of money and ______ the M2 measure of money.

Correct AnswerverifiedShow Answer

When the central bank buys $1,000,000 worth of government bonds from the public, the money supply:

Correct AnswerverifiedShow Answer

If a bank's desired reserve/deposit ratio is 0.33 and it has deposit liabilities of $100 million and reserves of $50 million, it:

Correct AnswerverifiedShow Answer

If you post your car on eBay with a Buy-It-Now price of $1,800, you are using money as:

Correct AnswerverifiedShow Answer

Two examples of governments that printed large quantities of paper currency to finance massive budget deficits, causing hyperinflation, are ______ and ______.

Correct AnswerverifiedShow Answer

When your grandfather keeps a bundle of $100 dollar bills behind a brick in the basement, this is an example of dollars serving as:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Stock prices increase when expected future dividends __, interest rates _, and/or the risk premium ____.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Money market mutual funds are the M1 measure of money and the M2 measure of money.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Two examples of governments that printed large quantities of paper currency to finance massive budget deficits, causing hyperinflation, are and .

Correct Answer
verified

Correct Answer
verified