Unit 4 quizzes

If a commercial bank has no excess reserves and the reserve requirement is 20%, what is the value of new loans this single bank can issue if a new customer deposits $1,000?

$800

If the nominal interest rate is 6% and the inflation rate is 5%, then the real interest rate is ___%.

1

If required reserves are $150 and deposits are $1000, what is the required reserve ratio?

15 percent

Which of the following applies to money when it serves as a store of value? I . Money is a store of value because it is an agreed measure for stating goods' prices. II. The more stable money's value, the better it serves as a store of value. III. When money serves as a store of value, it requires a double coincidence of wants.

II only

which of the following is an open market operation?

a central bank purchasing bonds

A $25, 000 price tag on a new car is an example of money as

a unit of account

A decrease in business spending on plant and equipment with an increase in the real interest rate could be caused by:

an increase in borrowing by the federal government.

If a large number of customers withdraw cash from a bank at the same time, the bank might be experiencing a:

bank run

The exchange a cow for two sheep without using money.

barter

This piece of paper represents a liability the firm must pay back at some point in the future.

bond

a highly liquid asset

can be converted into a means of payment easily without loss of value

A type of medium of exchange that has intrinsic value and other uses.

commodity money

Bank lend the excess reserves created when new deposits come in because they want to:

earn a profit

A type of medium of exchange that has value because the government says it does

fiat money

When the baker lost his job and could not pay his mortgage, the bank had to _______ on his home.

foreclosure.

When the Federal Reserve buys bonds, which of the following happens to interest rates and bond prices?

interest rate decrease; bond prices increasse

If the supply of money in the money market shifts to the left:

interest rates will rise and capital investment will fall

M1 is the most ____ measure of money. It is easily spent.

liquid

The fact that using money avoids the double coincidence of wants necessary in a barter economy illustrates which function of money?

medium of exchange

The functions of money are

medium of exchange, unit of account, and store of value.

This type of lending occurs when banks lend money to borrowers who don't need the usual criteria for safe loan candidates.

Sub- prime lending

The federal reserve ratio requires banks to hold a percentage of all its deposits in the bank. This percentage is called the:

required reserve ratio

This piece of pare represents partial ownership of a firm.

stock

The money demand curve illustrates the relationship between the interest rate and:

the quantity demanded of money

When the Fed sells bonds in the open market, which curve in the bond market shifts and in which direction?

the supply curve shifts right

which of following is the primary purpose of money

to serve as a unit of account