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Principles of Economics Ch 29 Quiz

In: Business and Management

Submitted By fall2013
Words 1060
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1. According to the economist's definition, money includes only the few types of wealth that are regularly accepted by sellers in exchange for goods and services. a. True b. False
2. Money that has value as a good is called fiat money. a. True b. False
3. The Fed's primary tool to change the money supply is open-market operations, the buying and selling of bonds. a. True b. False
4. If a bank has $100 million in assets and $95 million in liabilities it has a leverage ratio of 20 and so will remain solvent as long as the value of its assets do not fall by more than 20%.
a. True b. False 5. Which of the following best illustrates money's use as a unit of account? a. Robert uses dollars to buy tickets for a concert.
b. Loan repayments are given in terms of dollars.
c. Ann liquidates stocks.
d. Susan deposits money in her checking account so she can make purchases in the future. 6. Which of the following is included in M2 but not M1? a. savings deposits
b. demand deposits
c. traveler's checks
d. other checkable deposits

7. How many members of the Board of Governors are voting member of the FOMC? a. five
b. twelve
c. four
d. seven 8. Refer to Table 29-1. What is the reserve ratio of Lincoln State Bank? a. 20 percent
b. 10 percent
c. 12.5 percent
d. None of these choices are correct. 9. Refer to Table 29-1. If the Fed buys $10,000 of securities from this bank, all other banks have the same reserve ratio and do not wish to change it, and people hold only deposits and no currency, by how much can the money supply increase?

a. $100,000
b. $50,000
c. $125,000
d. $90,000

10. Which of the following Fed actions both increase the money supply?
a. decreasing reserve requirements, increasing the interest rate it pays on reserves
b. increasing…...

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