Question
1. A U.S. five dollar bill is an example of fiat money. M2. certificate money. commodity money. standard money. 2. As a result of a
1.
A U.S. five dollar bill is an example of
fiat money.
M2.
certificate money.
commodity money.
standard money.
2.
As a result of a recession, citizens all over the nation are withdrawing their savings. As a result of this action, there will be
a decrease in the supply of loanable funds.
an increase in the quantity supplied of loanable funds.
a decrease in the demand for loanable funds.
an increase in the supply of loanable funds.
an increase in the demand for loanable funds.
3.
Fiat money is
an economic name for credit cards.
held in federal reserve banks around the United States.
backed by the government's word.
commodity-backed money.
backed by gold.
4.Meagan deposits $750 from her piggy bank into her checking account at Regions National Bank. The reserve requirement is 10% and the bank has no excess reserves.
- What is the immediate effect on the M1 measure of the money supply of her deposit? Explain why.
- What is the amount of money the local bank can lend? Explain how you arrived at your answer.
- Calculate how much money the entire banking system can create. Show your work.
- Give two reasons why money creation may not increase by the amount you identified in (c).
(Calculate means show your work on the AP exam)
5.
If nominal GDP is $9,000 billion and the GDP deflator is 120, then real GDP is approximately
$10,800 billion.
$9,120 billion.
$8,880 billion.
$7,200 billion.
$7,500 billion.
6.
A bank balance sheet shows the bank's
excess and required reserves only.
demand deposits only.
assets and liabilities only.
total reserves and investment purchases only.
assets and what the bank owns only.
7.
If the required reserve ratio is 25%, the money multiplier is
2.
4.
10.
0.04.
5.
8.
Which of the following is/are considered liabilities for a bank?
- Checkable deposits
- Excess reserves
- Required reserves
III only.
I and II only.
I and III only.
I only.
II only.
9.
If the dollar price of the Argentine peso increases, how will U.S. imports from and exports to Argentina be impacted?
Imports/Exports
Decrease / No change
Decrease / Increase
Increase / Decrease
Increase / Increase
Decrease / Decrease
10.
What is the value of M1 if the following is true?
Coin and Currency: $80 million
Demand Deposits: $190 million
Savings Deposits: $400 million
Traveler's Checks: $10 million
Time Deposits: $800 million
$1,200 million
$590 million
$280 million
$1,480 million
$1,390 million
11.
In the past year, six new factories have been built in the Macro Islands that are operating at less than full capacity. Since the factories are still not operating at full capacity, there will be
a decrease in the supply of loanable funds.
an increase in the quantity supplied of loanable funds.
an increase in the demand for loanable funds.
a decrease in the demand for loanable funds.
an increase in the supply of loanable funds.
12.Velocity is
the number of times the average dollar is spent in a year.
equivalent to real GDP.
equivalent to the price level.
equivalent to nominal GDP.
another term for the money multiplier.
13.
With a reserve requirement of 20% and required reserves of $25,000, a bank has a total of
$25,000 in demand deposits.
$100,000 in demand deposits.
$50,000 in checkable deposits.
$125,000 in checkable deposits.
$5,000 in checkable deposits.
14.
If you need $1,500 to make a down payment on a car next year and interest rates are 6%, the amount of money you need to deposit into the bank this year is
$937.50.
$1,415.09.
$900.00.
$250.00.
$1,451.00
15.
The supply of loanable funds will increase if
government spending increases.
investors sell stocks and increase their money holdings.
a personal income tax cut increases household saving.
investors put more money in the stock market.
low interest rates attract foreign investors.
16.
Assume a bank is fully loaned up. If its loans are $750, its total reserves are $250, and its demand deposits are $1,000, then the reserve requirement is
25%.
15%.
5%.
20%.
10%.
17.
Ramon decided to purchase a new car that cost $38,000. He went to the bank, where he secured a fixed rate loan at 10% for a period of five years. The CPI is rising at a rate of 3% each year. The real rate of interest that Ramon will pay for his car loan in year 2 is
25%.
3%.
10%.
7%.
13%.
18.
The most likely reason a business might choose to invest in a project would be
because the rate of return on the project is higher than the interest rate.
because they have extra money to invest.
because the rate of return on the project is lower than the interest rate.
to get more people interested in their products.
to get a low interest rate.
19.
All of the following will occur if the government places an effective price ceiling on coffeeexcept
a black market in coffee will flourish.
there will be a surplus of coffee.
there will be a shortage of coffee.
vendors may discriminate in determining who gets to buy the coffee.
the quantity supplied of coffee will be less than the quantity demanded of coffee.
Description
20.
Assume a bank is fully loaned up. If its loans are $400, its total reserves are $100, and its demand deposits are $500, then the reserve requirement is
25%.
5%.
20%.
10%.
15%.
21.
Some economists argue that trade restrictions
improve allocative efficiency.
increase trade between countries.
are beneficial for at least one of the countries involved in trading.
are instituted because of powerful lobbyists who demand them.
improve productive efficiency.
22.
If April's disposable income increases from $500 to $750 and her savings increases from $100 to $150, then her marginal propensity to
save is 5.
consume is 0.2.
save is 0.8.
consume is 5.
save is 0.2.
23.
Which of the following would cause velocity to decrease?
An increase in public confidence in the economy increases.
Workers are paid more often.
Interest rates on checking accounts increase.
Banks stay open for longer hours.
Interest rates on credit cards increase.
24.
The demand for loanable funds will increase if
net exports increases.
low interest rates attract foreign investors.
investors sell stocks and increase their money holdings.
the government cuts expenditures.
a personal income tax cut increases household saving.
25.
If you need $200 to buy a new iPhone next year and interest rates are 2%, the amount of money you need to deposit into the bank this year is
$100.00.
$166.67.
$196.08.
$40.00.
$40.08.
26.
"The ticket to the Fiesta Bowl will cost $750." This statement best illustrates money used as a
liquid asset.
medium of exchange.
store of value.
unit of account.
liability.
27.Given the loanable funds market illustrated above, which of the following is most likely to be true of quantity demanded and quantity supplied of loanable funds if the government imposes an effective interest ceiling of 5%?
Quantity Demanded / Quantity Supplied
Increase / Increase
Increase / Decrease
Decrease / Decrease
Increase / No change
Decrease / Increase
Description
28.
Assume the CPI increases from 100 to 110 and a person's nominal income increases from $50,000 to $55,000 over the same period. This person's real income has
increased by 25%.
increased by 5%.
increased by 20%.
remained the same.
increased by 10%.
29.
If the quantity demanded of loanable funds is $10 million and the quantity supplied of loanable funds is $15 million, then
the interest rate will rise.
there will be a movement up the supply curve for loanable funds.
the supply for loanable funds will shift right.
the demand for loanable funds will shift left.
the interest rate will fall.
30.
If the federal government decided to implement a special tax incentive to encourage household savings, we can expect that
supply of loanable funds will increase.
loanable funds will not be impacted by this action.
supply of loanable funds will decrease.
demand for loanable funds will increase.
supply of loanable funds will decrease and demand for loanable funds will increase.
31.
Assume that national savings in the United States increases.
- Using a correctly labeled loanable funds graph and production possibilities curve, show and explain the impact of the increase in savings on each of the following.
- interest rates
- Long-term economic growth for an economy producing capital and consumer goods
- If the interest rates in the rest of the world remain unchanged, explain the impact of the change you identified in part (a) the international value of the dollar.
- Based on your answer for part (b), explain what happens to imports and exports in the United States.
32.
If the President proposed increasing funding for schools and colleges across the United States as well as providing funding for health care for all Americans, we would most likely see an increase in
short-run aggregate supply.
net exports.
aggregate demand.
long-run aggregate supply.
unemployment.
33.
Apple sells 40,000 iPods that were produced last year, to new customers. As a result,
GDP will increase for this year.
the iPods will decrease GDP for this year and count as inventory for last year.
GDP will decrease for this year.
the iPods will increase GDP for this year and count as inventory for last year.
last year's GDP was increased by the inventory value of the iPods, and this year's GDP increases by the retail value of the iPods less their inventory value from last year.
34.
Firms may invest in fewer projects as a result of
an increase in interest rates that increase economic growth.
an increase in dividends that limit economic growth.
a decrease in interest rates that increase economic growth.
a decrease in interest rates that decrease economic growth.
an increase in interest rates that decrease economic growth.
35.
If a decrease in personal income taxes increase aggregate income, then real interest rates will
decrease with a decrease in aggregate income.
remain stable as the decrease in taxes offsets the decrease in aggregate income.
increase with an increase in aggregate income.
This is an incorrect answer. Have a nice day!
remain stable as the decrease in taxes offsets the increase in aggregate income.
36.
If you use money as a unit of account, you would be
withdrawing $500 from your savings account.
searching the Internet for a deal on a new computer.
putting money in a savings bond.
buying a new radio.
returning a sweater to the department store.
37.
Suppose investors believe the economy will grow in the future. Which of the following best describes the impact of this belief on demand for loanable funds and interest rates?
Loanable Funds / Interest rates
Decrease / Decrease
No change / Increase
Decrease / Increase
Increase / Increase
Increase / Decrease
38.
After saving money in her piggy bank for three years, Beverly decided to deposit $5,000 of the money in the Millertown Bank. If the bank were fully loaned out and the reserve requirement was 20%, then the change in the dollar value of the total money supply would be
$1,000.
$25,000.
$20,000.
$4,000.
$5,000.
39.
Banks may not be able to create the maximum amount of money from a new deposit as a result of
an increase in savings by consumers.
the bank's desire to make new loans.
a decrease in the required reserve ratio.
people's desire to hold cash rather than re-deposit it in the bank.
an increase in investment demand.
Description
40.
Keynes believed all of the following are true,except
the economy is inherently stable.
the government must be involved in the economy.
wages and prices are sticky.
the economy can experience a long period of recession.
the economy is never at full employment of resources.
41.
After saving money in her piggy bank for three years, Linda decided to deposit $5,000 of the money in the Millertown Bank. If the bank was fully loaned out prior to the deposit and the required reserve ratio was 20%, then the additional dollar value that Millertown Bank could loan out as a result of Linda's deposit would be
$5,000.
$20,000.
$25,000.
$4,000.
$1,000.
42.
Which of the following will cause velocity to increase?
Productivity decreases.
People get paid more often.
The price of goods increases.
The money supply decreases.
Interest rates increase.
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Statistical Reasoning For Everyday Life
Authors: Jeff Bennett, William Briggs, Mario Triola
5th Edition
9780134494043
