AP MacroEconomics Chapter 29 Test 19

Economists use the term "money" to refer to

D. those types of wealth that are regularly accepted by sellers in exchange for goods and services.

Which of the following statements is correct?

a. All items that are included in M1 are included also in M2.

a bank loans Kellie's Print Shop $350,00 to remodel a building near campus to use as a new store. on their respective balance sheets, this loan is

a. an asset for the and bank and a liability for Kellie's Print Shop. THe loan increases the money supply

When the Fed decreases the discount rate, banks will

a. borrow more from the Fed and lend more to the public. The money supply increases

The Fed can decrease the money supply by conducting open market

a. sales or raising the discount rate

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate?

a. store of value

Liquidity refers to

a. the ease with which an asset is converted to the medium of exchange

Diana tutors Tiago for two hours before his economics final exam. Tiago pays Diana through a direct transfer from his bank on a payment app. Diana then uses her debit card to buy pizza for dinner from the local pizza parlor. this is an example of

a. the exchange of money facilitating production and trade

the 2008 credit crunch occured when banks reduced lending in response to

a. the loss of asset value for mortgage backed securities and mortgage loans

the measure of the money stock called M1 includes

a. wealth held by people in their checking accounts.

In a system of 100-percent-reserve banking,

a.banks do not make loans

When the Federal Reserve conducts open-market operations to increase the money supply, it

b. buys government bonds from the public

which of the following statements might explain why the United States has so much currency per person

b. currency may be a preferable store of wealth for criminals

Which lists ranks assets from most to least liquid

b. currency, stocks, fine art

in a fractional-reserve- banking system an increase in reserve requirements

b. decreases both the money multiplier and the money supply

What is the M1 money supply?

c. $505 billion

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600, it has a

c. $510 increase in excess reserves and a $90 increase in required reserves

If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10 then this bank

c. will be able to make new loans up to a maximum of $9.50

a bank's reserve ratio is 5 percent and the bank has $2,280 in reserves. its deposits amount to

d. $45,600

Which of the following lists is included in what economists call "money"?

a. cash

Demand deposits are a type of

a. checking account

which of the following increases when the Fed makes open market purchases

a. currency and reserves

which list ranks assets from most to least liquid

a. currency, demand deposits, money market mutual funds

fiat money

a. has no intrinsic value

You pay for cheese and bread from the deli with currency. Which function of money does this best illustrate?

a. medium of exchange

a bank's reserve ratio is 8 percent and the bank has $1,00 in deposits. its reserves amount to

b. $80

in the special case of the 100-percent-reserve banking the money multiplier is

b. 1 and banks do not create money

If R represents the reserve ratio for all banks in the economy, then the money multiplier is

b. 1/R

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes,

b. M1 increases by $2,500 and M2 stays the same

Treasury bonds are

b. a store of value, but not a medium of exchange

You use U.S. currency to pay the owner of a restaurant for a delicious meal. The currency

b. has no intrinsic value. This exchange is not an example of barter

which of the following is not required for paper dollars to work as a medium of exchange

b. intrinsic value backed by gold

If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to the money supply?

b. it increases by $150,00

Money is the most liquid asset available because

b. it is a medium of exchange.

The tool most often used by the Fed to control the money supply is

b. open market operations

Imagine an economy in which: (1) pieces of paper called yollars are the only thing that buyers give to sellers when they buy goods and services, so it would be common to use, say, 50 yollars to buy a pair of shoes; (2) prices are posted in terms of yardsticks, so you might walk into a grocery store and see that, today, an apple is worth 2 yardsticks; and (3) yardsticks disintegrate overnight, so no yardstick has any value for more than 24 hours. In this economy,

b. the yardstick is a unit of account but it cannot serve as a store of value

which of the following is an example of barter

c. A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet.

in a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount the held in checkable deposits, then

c. M1 would not change

If the reserve ratio increased from 5 percent to 10 percent then the money multiplier would

c. fall from 20 to 10

The Soviet government in the 1980's never abandoned the ruble as the official currency. However, the people of Moscow preferred to accept

c. goods such as cigarettes or American dollars in exchange for goods and services reminding us of the fact that government decree by itself is not sufficient for the success of a commodity money

Jim transfers money from his money market account to his savings account. This action

c. has no effect on M1 or M2.

in fractional-reserve banking system a bank

c. keeps only a fraction of its deposits in reserve.

which of the following is an asset of a bank and a liability for its customers

c. loans to its customers but not deposits of its customers

commodity money is

c. money with intrinsic value

on a bank's T-account, which are a part of the bank's assets

c. reserves but not deposits made by its customers

If a bank has a reserve ratio of 8 percent, then

c. the bank keeps 8 percent of its deposits as reserves and loans out the rest

which of the following is not included in M1

c.savings deposits

Credit card limits are included in

d. neither M1 nor M2

Banks are able to create money only when

d. only a fraction of deposits are held in reserve

the rate at which the Fed lends money to banks is

d. the discount rate