Econ Quiz 4

$500 invested at an annual interest rate of 10 percent will be worth how much at the end of 2 years?

605

Characteristics of the Fractional Reserve System are banks create money through lending & are subject to panics

TRUE

A goldsmith has $2 million of gold in his vaults. He issues $5 million in gold receipts. His gold holdings are what fraction of the paper money (gold receipts) he has issued?

2/5

Which parts of the balance sheet are affected when clearing a check $50,000 check reduces reserves and checkable deposits?

Assets & Liabilities

What amount is determined with: Actual Reserves - Required Reserves

Excess Reserves

Bonds represent ownership in a company, provide capital gains and dividends

FALSE

Short-term U.S. government bonds are the least safe investment

FALSE

The Balance Sheet equation is Net Worth = Liabilities + Assets

FALSE

The required reserves for a bank with $100 in deposits with a 1/4 reserves ratio, is $104

FALSE

Loans backed with collateral

Have lower interest rates than uncollateralized loans

What form investment is the most diversified

Mutual fund

What are characteristics of interest rates

Price paid for the use of money Determined by the money supply & demand Speak as if only one interest rate

The Goldsmiths

Stored gold & gave a receipt Receipts used as money by public Made loans by issuing receipts

Excess reserves for a bank is the amount on reserve at the Fed above the required amount

TRUE

Financial Investment is broader than economic investments, Buying or building an asset for financial gain a new or old asset, & a financial or real asset

TRUE

Janet Yellen is the current Chairman of the Federal Reserve

TRUE

Mutual funds is a popular type of investment

TRUE

The risk premium is the rate that compensates for risk

TRUE

Reserves must be deposited in the Federal Reserve Banks by

all depository institutions, that is, all commercial banks and thrift institutions