1. What are the components of the M1 money supply?
2. What is the largest component?
3. What near monies are included in the M2 money supply?
4. Explain, why a single commercial bank can safely lend only an amount equal to its excess reserves, but the commercial banking system can lend by a multiple of its excess reserves. What is the monetary multiplier and how does it relate to the reserve ratio?
5. List and explain the goals and tools of the Monetary Policy: Open Market Operations, The Reserve Ratio, and the Discount Rate.
6. Suppose that you invest $100 today in a risk-free investment and let the 4 percent annual interest rate compound. Rounded to full dollars, what will be the value of your investment 4 years from now?

Identify each of the following investments as either an economic investment or a financial investment.

1. A company builds a new factory.
2. A pension plan buys some Google stock.
3. A mining company sets up a new gold mine.
4. A woman buys a 100-year-old farmhouse in the countryside.
5. A man buys a newly built home in the city.
6. A company buys an old factory.