Question 1

The ongoing search by savers for high returns leads the bond and stock markets to direct funds to the uses that appear:

Accepted Answer

A)  most likely to be productive. 
B)  least likely to be productive. 
C)  to have the least risk. 
D)  to have no risk. 
A)  most likely to be productive. 
B)  least likely to be productive. 
C)  to have the least risk. 
D)  to have no risk.

Question 2

A decrease in the perceived riskiness of the stock of Company A ______ the risk premium investors require to purchase Company A stock and ______ the price of Company A stock.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases

Question 3

Fred purchases a bond, newly issued by the Big Time Corporation, for $10,000. The bond pays $400 to its holder at the end of the first, second, and third years and pays $10,400 upon its maturity at the end of four years. The principal amount of this bond is ___, the coupon rate is ____, and the term of this bond is _____.

Accepted Answer

A)  $400; 40%; four years 
B)  $10,000; 4%; four years 
C)  $10,000; $400; 4% 
D)  $10,400; 4%; four years 
A)  $400; 40%; four years 
B)  $10,000; 4%; four years 
C)  $10,000; $400; 4% 
D)  $10,400; 4%; four years

Question 4

Chris pays $10,000 for a newly issued two-year government bond with a $10,000 face value and a 6 percent coupon rate. One year later, after receiving the first coupon payment, Chris sells the bond. If the current one-year interest rate on government bonds is 7 percent, then the price Chris receives is:

Accepted Answer

A)  $10,000. 
B)  $700. 
C)  greater than $10,000. 
D)  less than $10,000. 
A)  $10,000. 
B)  $700. 
C)  greater than $10,000. 
D)  less than $10,000.

Question 5

Nominal GDP divided by the money stock equals:

Accepted Answer

A)  real GDP. 
B)  the value of transactions. 
C)  the price level. 
D)  velocity. 
A)  real GDP. 
B)  the value of transactions. 
C)  the price level. 
D)  velocity.

Question 6

A financial intermediary that sells shares in itself to the public, and then uses the funds to buy a wide variety of financial assets is called a:

Accepted Answer

A)  commercial bank. 
B)  credit union. 
C)  stock exchange. 
D)  mutual fund. 
A)  commercial bank. 
B)  credit union. 
C)  stock exchange. 
D)  mutual fund.

Question 7

The speed at which money circulates is called:

Accepted Answer

A)  the multiplier. 
B)  acceleration. 
C)  velocity. 
D)  the pace of money. 
A)  the multiplier. 
B)  acceleration. 
C)  velocity. 
D)  the pace of money.

Question 8

The rate of return that financial investors require to hold a risky asset minus the rate of return on a safe asset is called the:

Accepted Answer

A)  real interest rate. 
B)  nominal interest rate. 
C)  risk premium. 
D)  discount rate. 
A)  real interest rate. 
B)  nominal interest rate. 
C)  risk premium. 
D)  discount rate.

Question 9

The practice of spreading one's wealth over a variety of different financial investments in order to reduce overall risk is called:

Accepted Answer

A)  allocation. 
B)  following the risk premium. 
C)  diversification. 
D)  risk reservation. 
A)  allocation. 
B)  following the risk premium. 
C)  diversification. 
D)  risk reservation.

Question 10

Credit card balances are not considered to be money primarily because they:

Accepted Answer

A)  are rarely used to make purchases. 
B)  are not part of people's wealth. 
C)  are an asset used in making transactions. 
D)  do not represent an obligation to pay someone else. 
A)  are rarely used to make purchases. 
B)  are not part of people's wealth. 
C)  are an asset used in making transactions. 
D)  do not represent an obligation to pay someone else.

Question 11

If bank reserves are 200, the public holds 400 in currency, and the desired reserve/deposit ratio is 0.25, the deposits are ______ and the money supply is _____.

Accepted Answer

A)  200; 600 
B)  400; 800 
C)  600; 1,000 
D)  800; 1,200 
A)  200; 600 
B)  400; 800 
C)  600; 1,000 
D)  800; 1,200

Question 12

Shares of stock are:

Accepted Answer

A)  legal promises to repay a debt. 
B)  claims to partial ownership of a firm. 
C)  regular payments made to owners of a firm. 
D)  legal promises to make regular payments to the stockholder. 
A)  legal promises to repay a debt. 
B)  claims to partial ownership of a firm. 
C)  regular payments made to owners of a firm. 
D)  legal promises to make regular payments to the stockholder.

Question 13

Finding both parties to a trade who have something the other party wishes to trade for is called a:

Accepted Answer

A)  unit of account. 
B)  store of value. 
C)  medium of exchange. 
D)  double coincidence of wants. 
A)  unit of account. 
B)  store of value. 
C)  medium of exchange. 
D)  double coincidence of wants.

Question 14

You own shares in a well-managed and diversified company. If a booming economy decreases investors' concerns about market risk, then the price of your shares will _____, holding other factors constant.

Accepted Answer

A)  increase. 
B)  decrease. 
C)  not change. 
D)  either increase or decrease. 
A)  increase. 
B)  decrease. 
C)  not change. 
D)  either increase or decrease.

Question 15

Based on the following information, the value of the M1 measure of the money supply is ______ and the value of the M2 measure of the money supply is ______. $\begin{array}{lr}
{\text { Assets }} & \text { Billions of Dollars } \
\text { Currency } & 20 \
\text { Demand deposits } & 300 \
\text { Money market mutual funds } & 800 \
\text { Travelers' checks } & 10 \
\text { Savings deposits } & 1,800 \
\text { Other checkable deposits } & 200 \
\text { Small denomination time deposits } & 1,100
\end{array}$

Accepted Answer

A)  $530 billion; $3,700 billion 
B)  $330 billion; $4,230 billion 
C)  $520 billion; $4,320 billion 
D)  $530 billion; $4,230 billion 
A)  $530 billion; $3,700 billion 
B)  $330 billion; $4,230 billion 
C)  $520 billion; $4,320 billion 
D)  $530 billion; $4,230 billion

Question 16

There is $5,000,000 of currency in Econland, all held by banks as reserves. The public does not hold any currency. If the banks' desired reserve/deposit ratio is 0.25, then the money supply equals:

Accepted Answer

A)  $5,000,000 
B)  $6,250,000 
C)  $10,000,000 
D)  $20,000,000 
A)  $5,000,000 
B)  $6,250,000 
C)  $10,000,000 
D)  $20,000,000

Question 17

In the United States saving is allocated to its most productive use by:

Accepted Answer

A)  the Federal Reserve. 
B)  the Federal, state, and local governments. 
C)  regulations and laws designed to improve productivity. 
D)  a decentralized, market-oriented financial system. 
A)  the Federal Reserve. 
B)  the Federal, state, and local governments. 
C)  regulations and laws designed to improve productivity. 
D)  a decentralized, market-oriented financial system.

Question 18

If you put a $20 bill in the pocket of your winter coat at the beginning of spring so that you will be surprised when you find it again next winter, you are using money as:

Accepted Answer

A)  bank reserves. 
B)  a medium of exchange. 
C)  a unit of account. 
D)  a store of value. 
A)  bank reserves. 
B)  a medium of exchange. 
C)  a unit of account. 
D)  a store of value.

Question 19

If M stands for the money stock, P for the price level, and Y for real GDP, then velocity, V, equals:

Accepted Answer

A)  (P × Y) ÷ M. 
B)  (P × M) ÷ Y. 
C)  (M × Y) ÷ P. 
D)  (M × P) ÷ Y. 
A)  (P × Y) ÷ M. 
B)  (P × M) ÷ Y. 
C)  (M × Y) ÷ P. 
D)  (M × P) ÷ Y.

Question 20

Banks help savers find productive uses for their funds because banks have specialized in:

Accepted Answer

A)  gathering information about and evaluating potential borrowers. 
B)  obtaining preferential tax treatment for savers. 
C)  securing government guarantees for loans. 
D)  evaluating the riskiness of stocks. 
A)  gathering information about and evaluating potential borrowers. 
B)  obtaining preferential tax treatment for savers. 
C)  securing government guarantees for loans. 
D)  evaluating the riskiness of stocks.

The ongoing search by savers for high returns leads the bond and stock markets to direct funds to the uses that appear:

A decrease in the perceived riskiness of the stock of Company A the risk premium investors require to purchase Company A stock and the price of Company A stock.

Nominal GDP divided by the money stock equals:

A financial intermediary that sells shares in itself to the public, and then uses the funds to buy a wide variety of financial assets is called a:

The speed at which money circulates is called:

The rate of return that financial investors require to hold a risky asset minus the rate of return on a safe asset is called the:

The practice of spreading one's wealth over a variety of different financial investments in order to reduce overall risk is called:

Credit card balances are not considered to be money primarily because they:

If bank reserves are 200, the public holds 400 in currency, and the desired reserve/deposit ratio is 0.25, the deposits are __ and the money supply is _.

Shares of stock are:

Finding both parties to a trade who have something the other party wishes to trade for is called a:

You own shares in a well-managed and diversified company. If a booming economy decreases investors' concerns about market risk, then the price of your shares will _____, holding other factors constant.

There is $5,000,000 of currency in Econland, all held by banks as reserves. The public does not hold any currency. If the banks' desired reserve/deposit ratio is 0.25, then the money supply equals:

In the United States saving is allocated to its most productive use by:

If you put a $20 bill in the pocket of your winter coat at the beginning of spring so that you will be surprised when you find it again next winter, you are using money as:

If M stands for the money stock, P for the price level, and Y for real GDP, then velocity, V, equals:

Banks help savers find productive uses for their funds because banks have specialized in:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Macroeconomics: the Birds-Eye View of the Economy

Measuring Economic Activity: Gdp and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

Workers, Wages, and Unemployment

Money, Prices, and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economics Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: the Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Filters

Exam 9: Saving and Capital Formation

The ongoing search by savers for high returns leads the bond and stock markets to direct funds to the uses that appear:

A decrease in the perceived riskiness of the stock of Company A ______ the risk premium investors require to purchase Company A stock and ______ the price of Company A stock.

Nominal GDP divided by the money stock equals:

A financial intermediary that sells shares in itself to the public, and then uses the funds to buy a wide variety of financial assets is called a:

The speed at which money circulates is called:

The rate of return that financial investors require to hold a risky asset minus the rate of return on a safe asset is called the:

The practice of spreading one's wealth over a variety of different financial investments in order to reduce overall risk is called:

Credit card balances are not considered to be money primarily because they:

If bank reserves are 200, the public holds 400 in currency, and the desired reserve/deposit ratio is 0.25, the deposits are ______ and the money supply is _____.

Shares of stock are:

Finding both parties to a trade who have something the other party wishes to trade for is called a:

You own shares in a well-managed and diversified company. If a booming economy decreases investors' concerns about market risk, then the price of your shares will _____, holding other factors constant.

There is $5,000,000 of currency in Econland, all held by banks as reserves. The public does not hold any currency. If the banks' desired reserve/deposit ratio is 0.25, then the money supply equals:

In the United States saving is allocated to its most productive use by:

If you put a $20 bill in the pocket of your winter coat at the beginning of spring so that you will be surprised when you find it again next winter, you are using money as:

If M stands for the money stock, P for the price level, and Y for real GDP, then velocity, V, equals:

Banks help savers find productive uses for their funds because banks have specialized in:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Macroeconomics: the Birds-Eye View of the Economy

Measuring Economic Activity: Gdp and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

Workers, Wages, and Unemployment

Money, Prices, and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economics Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: the Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Filters

A decrease in the perceived riskiness of the stock of Company A the risk premium investors require to purchase Company A stock and the price of Company A stock.

If bank reserves are 200, the public holds 400 in currency, and the desired reserve/deposit ratio is 0.25, the deposits are __ and the money supply is _.