(21) Which of the following is a characteristic of money? Indivisible Perishable
ID: 1218583 • Letter: #
Question
(21) Which of the following is a characteristic of money? Indivisible Perishable Portable All of the above
(22) Over the past few decades, it has become easier to convert assets to cash. For this reason, the ____________________ for holding money has grown less important. transaction motive speculative motive accumulation motive precautionary motive
(23) If the money supply increases, then interest rates will rise. true false
(24) Which of the following actions would most effectively reduce the demand for money? Taking money out of circulation Cutting taxes Sending “tax rebate” checks to all American households Mandating price increases on key consumer goods
(25) Which one of the following is an example of a financial intermediary? A T-bill A brokerage A bank An income-earning consumer
(26) If a pension fund owns stock in a corporation, the stock would be listed as an asset on its balance sheet. true false
(27) If a bond’s coupon rate is 5% and the bondholder receives a $500 interest payment annually, the face value of the bond must be ________. $10,000 $25 $1,000 $100,000
(28) If there is a bond with a face value of $500 that pays $50 in interest annually which of the following statements must be true? The rate of return is equal to 10%. The market interest rate must be less than 10%. The market interest rate must be more than 10%. The coupon rate is equal to 10%.
(29) The Federal Reserve is involved in clearing individuals’ checks and wiring money between financial institutions. true false
(30) How many Federal Reserve districts are there? 7 12 24 Approximately 4,000
(31) Which of the following Federal Reserve actions could explain the shift depicted in the graph?
Buying T-bills Raising the reserve requirement Increasing the discount rate Destroying aged currency
(32) Fractional reserve banking means that the federal banking system is decentralized, operating through 12 districts rather than one central bank. banks are required to hold a fraction of their liabilities in the form of cash in their vaults or as deposits with the Fed. banks must “synchronize” their customers’ withdrawals and deposits so that there is a rough balance in liquidity at any given time. banks are legally permitted to give loans only up to the fractional rate, as determined by the Fed.
(33) Banks could not create money if the reserve requirement were 100%. true false
(34) Which of the following is an example of “near money”? Checking accounts Cash Savings accounts Bank’s reserves
(35) John takes out a loan that increases his purchasing power by 8% over one year. If inflation is 5%, what is the nominal interest rate? 13% 3% 8% 3%
(36) In the macroeconomy, savings comes from the savings of households, a government budget surplus, and a trade surplus. the savings of households, a government budget surplus, and a trade deficit. the savings of households, a government budget deficit, and a trade surplus. the consumption of households, a government budgets surplus, and a trade surplus.
Explanation / Answer
21. Portable. We can carry money anywhere.
22. precautionary motive i.e. holding cash for emergency
23. false. Interest falls with rise in money supply
24. Taking money out of circulation decreases cash in the hands of the public, hence demand falls
25. bank
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