d. increase in velocity 37. Money is an imperfect store of value when a. the rat
ID: 1110051 • Letter: D
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d. increase in velocity 37. Money is an imperfect store of value when a. the rate of inflation is high. b. the unemployment rate is high. e. gold prices are falling. d. businesses are failing due to bankruptey. 38. How are Treasury bond prices affected when the interest rate rises? a. The purchaser of the bond needs to spend less year, so the price of the bond must decrease. money to obtain a given number of dollars of interest per more money to obtain a given number of dollars of interest per more money to obtain a given number of dollars of interest per b. The purchaser of the bond needs to spend year, so the price of the bond must increase. c. The purchaser of the bond needs to spend year, so the price of the bond must decrease. d. The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year, so the price of the bond must increase. 39. Bank regulation exists because public authorities are convinced that a. the balance betw een public interest and safety does not affect profitability, and should be removed from the hands of managers. b. the balance between bank profitability and public interest cannot be handled with legislation, but can be handled with regulation. e. the balance between bank profitability and safety cannot be left to profit-maximizing managers. d. the balance between bank safety and public interest can best be obtained by reliance on the market. 40. When a banker accepts a deposit of $1,000 in cash and puts $200 aside as required reserves and then makes a loan of $800 to a new borrower, this set of transactions a. decreases the money supply by $1,000. b. decreases the money supply by $200. c. does not change the money supply. d. increases the money supply by $800. 41. Which of the following is a bank liability? a. cash in the vault b. loans made to customers c. money market deposit accounts d. bank computers 42. Milly Miser removes $250,000 from her mattress and opens a checking account. This single transactic immediately increases the money supply by a. $250,000 b. $50,000. c. $0 d. -$250,000.Explanation / Answer
37. c) because gold prices are expected to rise in future and thus it is profitable to invest in gold and increase value of money.
38) (b) . Higher interest rate will increase the demand of treasury bonds and thus will increase its price.
39. (c)
40.(d) increases the money supply by $800
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