Economics: Unit 4

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 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 following contributed to the financial crisis of 2008?

all of the answers are correct : deleveraging low interest rates leading to a housing boom subprime lending securitization

A highly liquid asset

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

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

earn a profit

In the United States, the dollar is

fiat money

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, store of value

Financial intermediaries perform the vital task of

moving funds from savers to investors

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 minimum percentage of deposits that a bank must hold and cannot use for lending is known as the

required reserve ratio

Which of the following is a primary function of money?

to serve as a unit of account