Unit 4 Econ Quizzes
Using the information in the table, calculate the demand deposits possible if this bank complies with a reserve ratio of 20% and maintains no excess reserves. Reserves: $25,000
$125000
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 required reserves are $150 and deposits are $1000, what is the required reserve ratio?
15 percent
If, upon receiving a checking deposit of $600, a bank's excess reserves increased by $510, the required reserve ratio must be:
15%
Which of the following is an open market operation?
A central bank purchasing bonds
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
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 the following will increase the demand for loanable funds?
a decrease in the interest rate
A $25,000 price tag on a new car is an example of money as
a unit of account.
Which of the following contributed to the financial crisis of 2008?
all of the answers are correct
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.
People's attitudes about the trade-off between risk and return affect how much of their wealth people hold as money. Heightened fear will lead to:
an increase in the demand for money.
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
Liabilities, by definition, mean what is owed, not owned. Which of the following would be included as a liability on a commercial bank's balance sheet?
demand deposits
Banks 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
In the United States, the dollar is
fiat money
When the baker lost his job and could not pay his mortgage, the bank had to ______________ on his home.
forclose
All of the following are components of the money supply in the United States EXCEPT
gold bullion.
When the Federal Reserve buys bonds, which of the following happens to interest rates and bond prices?
interest rates decrease; bond prices increase
If the supply of money in the money market shifts to the left:
interest rates will rise and capital investment will fall.
Under a fractional reserve banking system, banks are required to:
keep part of their demand deposits as reserves.
Banks create money by:
lending excess reserves that get redeposited in other banks.
M1 is the most _______ mesure of money. It is easlipyu spent/
liquid
Which of the following measures of the money supply is largest?
m2
If the reserve ratio was set at 100%, then banks could
make no loans.
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.
Financial intermediaries perform the vital task of:
moving funds from savers to investors.
If a bank customer deposits $1,000 of circulating currency into her demand deposit, what will be the immediate effect on M1?
no change
This type of lending occurs when banks lend money to borrowers who don't meet the usual criterea for safe loan candidates.
sub prime
The opportunity cost of holding money refers to:
the interest that could have been earned if the money balances had been changed into an interest-bearing asset
Which of the following is true of the quantity of money demanded?
It falls when interest rates rise, because the opportunity cost of holding money increases.
Which of the following is an example of using money as a store of value?
Keeping $200 on hand for an emergency
Which of the following is the most liquid monetary aggregate?
M1
Which of the following measures of the money supply is largest?
M2
Which of the following is true regarding short-term and long-term interest rates?
Short-term interest rates are more important for determining the demand for money.
The Federal Reserve requires banks to hold a percentage of all its deposits in the bank. This percentage is called the:
required reserve ratio
The minimum percentage of deposits that a bank must hold and cannot use for lending is known as the
rr
This piece of paper represents partial ownership of a firm.
stock
The money demand curve illustrates the relationship between the interest rate and:
the quantity demanded of money
The money demand curve illustrates the relationship between the interest rate and:
the quantity of money demanded
Which of the following is a primary function of money?
to serve as a unit of account