Question 1

A financial intermediary's main function is to match ________ with excess funds to ________ who want to borrow funds.

Accepted Answer

A)  households; firms 
B)  firms; firms 
C)  households; households 
D)  firms; households 
A)  households; firms 
B)  firms; firms 
C)  households; households 
D)  firms; households A

Question 2

Suppose that the bank has the following balance sheet:   If the bank's reserve ratio is 0.1,what is the maximum the bank can loan out? Suppose that the bank intends to loan out the maximum amount it can.Show the immediate impact of the loan on the bank's balance sheet.

Accepted Answer

Since the bank's reserve ratio is 10 per cent,its reserves will be $50 000 ($50 000 = 0.1 × $500 000),so that excess reserves are $25 000 ($25 000 = $75 000 - $50 000).If the bank loans out that amount the effect on the balance sheet is shown in the following balance sheet.Essentially,reserves will be reduced by $25 000 and loans will increase by $25 000.Note that the right-hand side of the balance sheet does not change:

Question 3

When a grocery store accepts your $10 note in exchange for bread and milk,this illustrates that the $10 note is serving as a

Accepted Answer

A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  standard of deferred payment. 
A)  medium of exchange. 
B)  unit of account. 
C)  store of value. 
D)  standard of deferred payment. A

Question 4

Liquidity is defined as the ease with which a given asset can be converted to a

Accepted Answer

A)  store of value. 
B)  unit of account. 
C)  medium of exchange. 
D)  standard of deferred payment. 
A)  store of value. 
B)  unit of account. 
C)  medium of exchange. 
D)  standard of deferred payment.

Question 5

Fiat money is generally issued by

Accepted Answer

A)  private banks. 
B)  central banks. 
C)  brokerage firms. 
D)  major multinational corporations. 
A)  private banks. 
B)  central banks. 
C)  brokerage firms. 
D)  major multinational corporations.

Question 6

Your demand-deposit account balance is included in your bank's assets.

Accepted Answer

A) True 
 B)False

Question 7

Explain why Australia's currency is suitable to use as a medium of exchange.

Accepted Answer

a. Dollars are acceptable to most trader

Question 8

The narrowest definition of the money supply in Australia is

Accepted Answer

A)  M1. 
B)  M2. 
C)  M3. 
D)  M4. 
A)  M1. 
B)  M2. 
C)  M3. 
D)  M4.

Question 9

A person's wealth is the same as her or his income.

Accepted Answer

A) True 
 B)False

Question 10

Suppose you decide that you no longer want to hold currency.You transfer all of your currency holdings to your cheque account.Carefully explain how this affects M1.

Accepted Answer

Currency and cheque account ba

Question 11

If households in the economy decide to take money out of demand-deposit accounts and put this money into long-term savings accounts,this will

Accepted Answer

A)  decrease M1 and increase M3. 
B)  decrease M1 and increase broad money. 
C)  decrease M1 and not change M3. 
D)  increase M1 and decrease M3. 
A)  decrease M1 and increase M3. 
B)  decrease M1 and increase broad money. 
C)  decrease M1 and not change M3. 
D)  increase M1 and decrease M3.

Question 12

Liabilities are

Accepted Answer

A)  something owned by a firm. 
B)  something the firm owes to someone else. 
C)  the firm's net worth. 
D)  the firm's reserves. 
A)  something owned by a firm. 
B)  something the firm owes to someone else. 
C)  the firm's net worth. 
D)  the firm's reserves.

Question 13

A bank's assets are

Accepted Answer

A)  things owned by or owed to the bank. 
B)  things the bank owes to someone else. 
C)  a measure of the bank's net worth. 
D)  always greater than the bank's liabilities. 
A)  things owned by or owed to the bank. 
B)  things the bank owes to someone else. 
C)  a measure of the bank's net worth. 
D)  always greater than the bank's liabilities.

Question 14

A cash withdrawal from the banking system

Accepted Answer

A)  lowers demand deposits to zero. 
B)  decreases demand deposits. 
C)  increases the money supply. 
D)  increases excess reserves. 
A)  lowers demand deposits to zero. 
B)  decreases demand deposits. 
C)  increases the money supply. 
D)  increases excess reserves.

Question 15

________ are financial securities that represent promises to repay a fixed amount of funds.

Accepted Answer

A)  Shares 
B)  Bonds 
C)  Savings accounts 
D)  Certificates of deposit 
A)  Shares 
B)  Bonds 
C)  Savings accounts 
D)  Certificates of deposit

Question 16

If the reserve ratio is 0.05,then the simple deposit multiplier is

Accepted Answer

A)  10. 
B)  5. 
C)  2. 
D)  20. 
A)  10. 
B)  5. 
C)  2. 
D)  20.

Question 17

A person's wealth

Accepted Answer

A)  is a measure of how much money the person has. 
B)  equals the value of the person's assets minus his or her liabilities. 
C)  is measured independently of his or her current and expected future income. 
D)  All of these options are correct. 
A)  is a measure of how much money the person has. 
B)  equals the value of the person's assets minus his or her liabilities. 
C)  is measured independently of his or her current and expected future income. 
D)  All of these options are correct.

Question 18

Explain whether credit cards are considered to be money.

Accepted Answer

Credit cards are not money,as

Question 19

Suppose that your bank's reserve ratio is 0.1 and you withdraw $25 000 from the bank.What is the deposit multiplier? What is the total decrease in deposits in the banking system? What is the change in the money supply?

Accepted Answer

The simple deposit multiplier is equal t

Question 20

As credit is now the main measure of monetary movements used by the Reserve Bank of Australia,credit is now defined as money.

Accepted Answer

A) True 
 B)False

A financial intermediary's main function is to match with excess funds to who want to borrow funds.

Suppose that the bank has the following balance sheet: If the bank's reserve ratio is 0.1,what is the maximum the bank can loan out? Suppose that the bank intends to loan out the maximum amount it can.Show the immediate impact of the loan on the bank's balance sheet.

When a grocery store accepts your $10 note in exchange for bread and milk,this illustrates that the $10 note is serving as a

Liquidity is defined as the ease with which a given asset can be converted to a

Fiat money is generally issued by

Your demand-deposit account balance is included in your bank's assets.

Explain why Australia's currency is suitable to use as a medium of exchange.

The narrowest definition of the money supply in Australia is

A person's wealth is the same as her or his income.

Suppose you decide that you no longer want to hold currency.You transfer all of your currency holdings to your cheque account.Carefully explain how this affects M1.

If households in the economy decide to take money out of demand-deposit accounts and put this money into long-term savings accounts,this will

Liabilities are

A bank's assets are

A cash withdrawal from the banking system

________ are financial securities that represent promises to repay a fixed amount of funds.

If the reserve ratio is 0.05,then the simple deposit multiplier is

A person's wealth

Explain whether credit cards are considered to be money.

Suppose that your bank's reserve ratio is 0.1 and you withdraw $25 000 from the bank.What is the deposit multiplier? What is the total decrease in deposits in the banking system? What is the change in the money supply?

As credit is now the main measure of monetary movements used by the Reserve Bank of Australia,credit is now defined as money.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 15: Aggregate Demand and Aggregate Supply Analysis

A financial intermediary's main function is to match ________ with excess funds to ________ who want to borrow funds.

Suppose that the bank has the following balance sheet: If the bank's reserve ratio is 0.1,what is the maximum the bank can loan out? Suppose that the bank intends to loan out the maximum amount it can.Show the immediate impact of the loan on the bank's balance sheet.

When a grocery store accepts your $10 note in exchange for bread and milk,this illustrates that the $10 note is serving as a

Liquidity is defined as the ease with which a given asset can be converted to a

Fiat money is generally issued by

Your demand-deposit account balance is included in your bank's assets.

Explain why Australia's currency is suitable to use as a medium of exchange.

The narrowest definition of the money supply in Australia is

A person's wealth is the same as her or his income.

Suppose you decide that you no longer want to hold currency.You transfer all of your currency holdings to your cheque account.Carefully explain how this affects M1.

If households in the economy decide to take money out of demand-deposit accounts and put this money into long-term savings accounts,this will

Liabilities are

A bank's assets are

A cash withdrawal from the banking system

________ are financial securities that represent promises to repay a fixed amount of funds.

If the reserve ratio is 0.05,then the simple deposit multiplier is

A person's wealth

Explain whether credit cards are considered to be money.

Suppose that your bank's reserve ratio is 0.1 and you withdraw $25 000 from the bank.What is the deposit multiplier? What is the total decrease in deposits in the banking system? What is the change in the money supply?

As credit is now the main measure of monetary movements used by the Reserve Bank of Australia,credit is now defined as money.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

A financial intermediary's main function is to match with excess funds to who want to borrow funds.