Econ Unit 5
What is an example of using money as a store of value?
A babysitter puts her earnings in a dresser drawer which she saves to buy a bicycle
When a household makes a loan to a firm with the firm providing interest to the household, this is known as:
A bond
A financial asset is:
A claim that entitles the owner to future income from the seller
Which of the following qualify as an asset from a viewpoint of a household?
A house
A loan is:
A liability for the borrower and an asset for the lender
A financial intermediary that creates a diversified portfolio of stocks and then resells that portfolio to individual investors is known as:
A mutual fund
A liability is:
A requirement that you pay income in the future
A financial intermediary that provides liquid financial assets in the form of deposits to lenders and uses their funds to finance the illiquid investment spending needs of borrowers is called:
Bank
Who oversees the Federal Reserve System?
Board of Governors of the Federal Reserve System
List the types of financial assets
Bonds, stocks, bank deposits, loans
Which is considered money?
Checking account deposits
When the Fed makes a loan to a commercial bank, it charges
Discount rate
How does it affect the money supply through the money multiplier process: People decide to hold more cash
Down; More people holding onto cash will take that money out of the money multiplier
How does it affect the money supply through the money multiplier process: The Fed decides to increase the required reserve ratio
Down; The banks have less to loan out, so the money supply cannot expand through the money multiplier
How does it affect the money supply through the money multiplier process: banks are forced to hold more excess reserves
Down; The excess money will be held in the bank. This will decrease the expansion of the money supply through the money multiplier
Federal Reserve policy that lowers the interest rate is called _____ because it _____.
Expansionary monetary policy; increases aggregate output (GDP)
Other things equal, an increase in the interest rate leads to a:
Fall in consumer spending
When banks make loans to each other, they charge the
Federal funds rate
In the US, the dollar is...
Fiat money
The reserve ratio is the:
Fraction of deposits the banks hold in their vaults
When a corporation borrows money from lenders in exchange for a fixed share in the firm's assets and potential profits, the corporation is:
Issuing stocks
$.55 in the change cup of your car (M1, M2, both, or neither)
M1 & M2
A U.S. penny (M1, M2, both, or neither)
M1 & M2
A driver pays a $2 toll. (medium of exchange, store value, or unit of account)
Medium of exchange
When you purchase your lunch, money is serving which roles? In this scenario, assume you do not need to compare prices to make the purchase.
Medium of exchange
You pay for your lunch with $5 bill. (medium of exchange, store value, or unit of account)
Medium of exchange
$1,663 in your savings account (M1, M2, both, or neither)
Near money so M2
A Mexican peso (M1, M2, both, or neither)
Neither, cannot be used as a medium of exchange in the US
A gift certificate (M1, M2, both, or neither)
Neither, is only a medium of exchange in certain circumstances
The loan you took out last August to pay for your school fees (M1, M2, both, or neither)
Neither, must be paid back
100 shares of a stock worth $4,000 (M1, M2, both, or neither)
Neither, only has store value
A picasso painting (M1, M2, both, or neither)
No, cannot be a medium of exchange or a unit of account, Can only be store credit
Your visa card (M1, M2, both, or neither)
No, this is a loan
A nonprofit institution collects the savings of its members and invests those funds in a wide variety of assets in order to provide its member with income after retirement. This describes a:
Pension fund
A share in the ownership of a company held by a shareholder is considered a:
Stock
A grandparent puts $200 into a saving account for a grandchild's future. (medium of exchange, store value, or unit of account)
Store of value
You set aside $10 per week to save up for a new computer. (medium of exchange, store value, or unit of account)
Store of value
The term "liquid asset" means:
That the asset is readily convertible to cash
Monetary policy involves changes in:
The quantity of money
A car is described as being worth $5,000. (medium of exchange, store value, or unit of account)
Unit of account
Consider the statement: "Tuition at Tonnistopia State this semester is $12,000." Which demonstrates the function of the money?
Unit of account
When you decide you want $10 worth of a product, money is serving which role?
Unit of account
You decide you want to give $10 worth of candy to a friend for their bday. (medium of exchange, store value, or unit of account)
Unit of account
The value of all accumulated savings of a household is called:
Wealth
Order the following from most liquid to least liquid: a $10 bill, a traveler's check, a house, a car, a money market share
a $10 bill a traveler's check a money market share a car a house
Suppose you transfer $500 from your savings account to your checkings account. Which this transaction, M1 ____ and M2 ____
increased, stayed the same
