The benefit of ________ is interest, while the benefit of ________ is a portion of a company's profit. (2 points)

	a bond; stock or equity
	cash; a bond
	cash; a demand deposit
	stock; a bond
	business investment; a bond

2.

(04.01 MC) What impact will an increase in the general price level have on the interest rate and bond prices? (2 points)

Interest rate	Bond prices
Expected to increase	Decrease

Interest rate	Bond prices
Expected to decrease	Remain unaffected

Interest rate	Bond prices
Remain unaffected	Decrease

Interest rate	Bond prices
Expected to increase	Increase

Interest rate	Bond prices
Expected to decrease	Decrease

3.

(04.02 MC) If an individual borrows money from their bank at an interest rate of 11% and the interest rate adjusted for inflation is 6%, then what is the expected rate of inflation in the economy? (2 points)

	1%
	17%
	5%
	11%
	6%

4.

(04.02 LC) In what situation would the expected real interest rate be negative? (2 points)

	The nominal interest rate is less than the expected inflation rate.
	The nominal interest rate is greater than the real interest rate.
	The expected inflation rate is greater than the actual inflation rate.
	The expected real interest is greater than the expected inflation rate.
	The actual inflation rate is greater than the nominal interest rate.

5.

(04.03 MC) If $20,000 worth of mutual funds in an economy have lost their value, the M2 will ________ and the M1 will ________. (2 points)

	decrease; remain constant
	increase; remain constant
	remain constant; increase
	increase; decrease
	decrease; increase

6.

(04.03 MC) Which of the following statement shows the difference between the monetary aggregates M1 and M2? (2 points)

	M1 includes the monetary base, travelers' checks, and demand deposits, while M2 only includes the money in circulation.
	M1 includes only the money in circulation, while M2 is composed of savings accounts.
	M1 includes the monetary base and travelers' checks, while M2 includes savings deposits.
	M1 includes the monetary base, travelers' checks, and demand deposits, while M2 includes M1, time deposits, and savings deposits.
	M1 includes only travelers' checks, while M2 includes M1, market shares, and savings deposits.

7.

(04.04 MC) Assume that the required reserve ratio is 10 percent. If excess reserves are $5 million and the circulating currency is $25 million, the maximum possible value for M1 is (2 points)

	$5.5 million
	$30 million
	$75 million
	$250 million
	$255 million

8.

(04.04 MC) Use the given data table to answer the question below.

Asset (billion $)	Liability (billion $)
Required reserves 800	Primary deposits 8,000
Loans 7,200
Total 8,000	Total 8,000

What is the value of the money multiplier given the data above? (2 points)

	8
	9
	10
	11
	12

9.

(04.05 MC) Assuming no other change, there is a decrease in the nominal interest rate. How will the money supply in the economy change as a result of this change in the nominal interest rate? (2 points)

	There will be an increase in the money supply.
	There will be a decrease in the money supply.
	There will be an increase initially, but it will decrease afterwards.
	There will be a decrease initially, but it will increase afterwards.
	There will be no change in the money supply.

10.