Question 1

Which statement is incorrect?

Accepted Answer

A)  Near money cannot be drawn upon instantaneously but is nonetheless accessible. 
B)  Near money includes money market mutual fund accounts with check-writing features. 
C)  Near money includes savings accounts. 
D)  Near money includes individual stocks and bonds. 
A)  Near money cannot be drawn upon instantaneously but is nonetheless accessible. 
B)  Near money includes money market mutual fund accounts with check-writing features. 
C)  Near money includes savings accounts. 
D)  Near money includes individual stocks and bonds. D

Question 2

When demand by firms for investment funds falls, real interest rates fall and investment rises.

Accepted Answer

A) True 
 B)False  False

Question 3

The Federal Reserve no longer collects information about M3.

Accepted Answer

A) True 
 B)False  True

Question 4

M2 is _____ in dollar value than M1; it also contains _____ assets.

Accepted Answer

A)  larger; less liquid 
B)  larger; more liquid 
C)  smaller; less liquid 
D)  smaller; more liquid 
A)  larger; less liquid 
B)  larger; more liquid 
C)  smaller; less liquid 
D)  smaller; more liquid

Question 5

Assume that market interest rates are 6% and the bondholder receives a $60 coupon payment per year on a bond with a face value of $1,000. If market interest rates fall to 4%, the bond price:

Accepted Answer

A)  rises to $1,400. 
B)  rises to $2,000. 
C)  falls to $500. 
D)  rises to $1,500. 
A)  rises to $1,400. 
B)  rises to $2,000. 
C)  falls to $500. 
D)  rises to $1,500.

Question 6

Which of these is likely to lead to higher interest rates?

Accepted Answer

A)  a less positive economic outlook 
B)  the end of a government program that provides taxpayers with additional incentives to invest in their retirement plans 
C)  a decrease in asset prices 
D)  a decrease in firms' expectations about the economy 
A)  a less positive economic outlook 
B)  the end of a government program that provides taxpayers with additional incentives to invest in their retirement plans 
C)  a decrease in asset prices 
D)  a decrease in firms' expectations about the economy

Question 7

Which of these would cause the equilibrium interest rate to rise and the equilibrium quantity in the loanable funds market to fall?

Accepted Answer

A)  an increase in the average income in the population 
B)  expectations of greater job security 
C)  increases in the demand for the products of several firms 
D)  an advance in technology 
A)  an increase in the average income in the population 
B)  expectations of greater job security 
C)  increases in the demand for the products of several firms 
D)  an advance in technology

Question 8

When households decide to increase saving, real interest rates fall and investment rises.

Accepted Answer

A) True 
 B)False

Question 9

The functions of money include:

Accepted Answer

A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  a medium of exchange, a unit of account, and a store of value. 
A)  a medium of exchange. 
B)  a unit of account. 
C)  a store of value. 
D)  a medium of exchange, a unit of account, and a store of value.

Question 10

Financial institutions:

Accepted Answer

A)  reduce information costs, set interest rates for bonds, and diversify assets. 
B)  reduce information costs, reduce transaction costs, and diversify assets. 
C)  pool funds from lenders, reduce transaction costs, and diversify assets. 
D)  reduce information costs, reduce transaction costs, and pool funds from lenders. 
A)  reduce information costs, set interest rates for bonds, and diversify assets. 
B)  reduce information costs, reduce transaction costs, and diversify assets. 
C)  pool funds from lenders, reduce transaction costs, and diversify assets. 
D)  reduce information costs, reduce transaction costs, and pool funds from lenders.

Question 11

Which statement about M2 is incorrect?

Accepted Answer

A)  M2 is a broader measure of money than M1. 
B)  Small-denomination time deposits are part of M2. 
C)  Near monies are more liquid than M1. 
D)  Demand deposits are part of M2. 
A)  M2 is a broader measure of money than M1. 
B)  Small-denomination time deposits are part of M2. 
C)  Near monies are more liquid than M1. 
D)  Demand deposits are part of M2.

Question 12

The demand curve for loanable funds represents _____ and is _____.

Accepted Answer

A)  investors; horizontal 
B)  investors; downward sloping 
C)  savers; horizontal 
D)  savers; downward sloping 
A)  investors; horizontal 
B)  investors; downward sloping 
C)  savers; horizontal 
D)  savers; downward sloping

Question 13

Many U.S. retirement accounts have regained much of their lost value since the 2007-2009 stock market crash because investors switched their portfolio mix from stocks to bonds.

Accepted Answer

A) True 
 B)False

Question 14

Which of these has the highest liquidity?

Accepted Answer

A)  cash 
B)  savings accounts 
C)  stocks 
D)  house 
A)  cash 
B)  savings accounts 
C)  stocks 
D)  house

Question 15

According to the trade-off between risk and return, which asset would likely have the highest average return on investment over a 20-year period?

Accepted Answer

A)  a 20-year certificate of deposit issued by a bank 
B)  highly rated bonds issued by major corporations 
C)  shares of stock in social media companies 
D)  government savings bonds 
A)  a 20-year certificate of deposit issued by a bank 
B)  highly rated bonds issued by major corporations 
C)  shares of stock in social media companies 
D)  government savings bonds

Question 16

(Figure: Market for Loanable Funds 2) Based on the graph, if households decide to save a larger portion of their income because they fear job loss due to a recession, the loanable funds supply curve will shift from _____ to _____, and the new equilibrium will be at point _____, holding demand constant at D0.

Accepted Answer

A)  S0; S1; a 
B)  S0; S1; b 
C)  S1; S0; b 
D)  S1; S0; d 
A)  S0; S1; a 
B)  S0; S1; b 
C)  S1; S0; b 
D)  S1; S0; d

Question 17

Which of these items is NOT a function of money?

Accepted Answer

A)  a medium of exchange 
B)  a unit of account 
C)  a method of making change 
D)  a store of value 
A)  a medium of exchange 
B)  a unit of account 
C)  a method of making change 
D)  a store of value

Question 18

M1 is the most _____ of all assets because as a medium of exchange, it requires no conversion.

Accepted Answer

A)  illiquid 
B)  insolvent 
C)  liquid 
D)  None of the answers is correct. 
A)  illiquid 
B)  insolvent 
C)  liquid 
D)  None of the answers is correct.

Question 19

Blue-chip stocks are a higher-risk investment than U.S. Treasury securities.

Accepted Answer

A) True 
 B)False

Question 20

What is the yield on a bond sold for $1,850 that pays $25.50 in interest annually?

Accepted Answer

A)  13.8% 
B)  72.54% 
C)  1.38% 
D)  7.25% 
A)  13.8% 
B)  72.54% 
C)  1.38% 
D)  7.25%

Which statement is incorrect?

When demand by firms for investment funds falls, real interest rates fall and investment rises.

The Federal Reserve no longer collects information about M3.

M2 is _ in dollar value than M1; it also contains _ assets.

Assume that market interest rates are 6% and the bondholder receives a $60 coupon payment per year on a bond with a face value of $1,000. If market interest rates fall to 4%, the bond price:

Which of these is likely to lead to higher interest rates?

Which of these would cause the equilibrium interest rate to rise and the equilibrium quantity in the loanable funds market to fall?

When households decide to increase saving, real interest rates fall and investment rises.

The functions of money include:

Financial institutions:

Which statement about M2 is incorrect?

The demand curve for loanable funds represents _ and is _.

Many U.S. retirement accounts have regained much of their lost value since the 2007-2009 stock market crash because investors switched their portfolio mix from stocks to bonds.

Which of these has the highest liquidity?

According to the trade-off between risk and return, which asset would likely have the highest average return on investment over a 20-year period?

Which of these items is NOT a function of money?

M1 is the most _____ of all assets because as a medium of exchange, it requires no conversion.

Blue-chip stocks are a higher-risk investment than U.S. Treasury securities.

What is the yield on a bond sold for $1,850 that pays $25.50 in interest annually?

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Aggregate Demand and Supply

Fiscal Policy and Debt

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomics

Filters

Exam 11: Saving, Investment, and the Financial System

Which statement is incorrect?

When demand by firms for investment funds falls, real interest rates fall and investment rises.

The Federal Reserve no longer collects information about M3.

M2 is _____ in dollar value than M1; it also contains _____ assets.

Assume that market interest rates are 6% and the bondholder receives a $60 coupon payment per year on a bond with a face value of $1,000. If market interest rates fall to 4%, the bond price:

Which of these is likely to lead to higher interest rates?

Which of these would cause the equilibrium interest rate to rise and the equilibrium quantity in the loanable funds market to fall?

When households decide to increase saving, real interest rates fall and investment rises.

The functions of money include:

Financial institutions:

Which statement about M2 is incorrect?

The demand curve for loanable funds represents _____ and is _____.

Many U.S. retirement accounts have regained much of their lost value since the 2007-2009 stock market crash because investors switched their portfolio mix from stocks to bonds.

Which of these has the highest liquidity?

According to the trade-off between risk and return, which asset would likely have the highest average return on investment over a 20-year period?

Which of these items is NOT a function of money?

M1 is the most _____ of all assets because as a medium of exchange, it requires no conversion.

Blue-chip stocks are a higher-risk investment than U.S. Treasury securities.

What is the yield on a bond sold for $1,850 that pays $25.50 in interest annually?

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Introduction to Macroeconomics

Measuring Inflation and Unemployment

Economic Growth

Aggregate Expenditures

Aggregate Demand and Supply

Fiscal Policy and Debt

Money Creation and the Federal Reserve

Monetary Policy

Macroeconomic Policy: Challenges in a Global Economy

International Trade

Open Economy Macroeconomics

Filters

M2 is _ in dollar value than M1; it also contains _ assets.

The demand curve for loanable funds represents _ and is _.