Download Practice 22-23

Practice Problems 22-23-24
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____
1. Banks are financial intermediaries that:
A. have customer deposits as its primary asset and loans to borrowers as their primary
liability.
B. provide liquid assets to lenders and long-term financing to borrowers.
C. are types of mutual funds.
D. have customer deposits as its primary asset and that provide liquid assets to lenders.
E. increase transaction costs to both borrowers and depositors.
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2. The budget balance is equal to:
A. taxes minus government spending.
B. taxes plus government spending.
C. GDP minus consumption and government spending.
D. GDP plus taxes.
E. national savings.
____
3. In an open economy:
A. a country with a positive capital inflow will also have a situation where X are greater than
IM.
B. savings of foreigners may be supporting investment spending.
C. capital inflows are always negative.
D. investment spending equals national savings.
E. the budget balance is negative.
____
4. Providing a linkage between savers and investors is an important aspect of:
A. the foreign exchange market.
B. government.
C. the public sector.
D. consumers.
E. a well functioning financial system.
____
5. When you are using money to purchase a new MP3 player, money is serving as a:
A. store of value.
B. unit of barter.
C. unit of account.
D. double coincidence of wants.
E. medium of exchange.
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6. The double coincidence of wants problem can be solved by:
A. more resources.
B. more production.
C. money.
D. economic growth.
E. lower unemployment rates.
____
7. The narrowest definition of money excludes:
A. currency in the vault at the bank.
B. traveler's checks.
C. currency in circulation.
D. checkable bank deposits.
E. coins in circulation.
Monetary Aggregates (in billions)
Currency in circulation
Money market funds
Time deposits
Savings deposits
Checkable bank deposits
Traveler’s checks
American Express gift cards
Table 23-1: Monetary Aggregates
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$500
550
800
1110
380
15
25
8. Use Table 23-1. Consider the information in the table. M2 should be:
A. $2805 billion.
B. $3340 billion.
C. $3355 billion.
D. $2005 billion.
E. $2830 billion.
Components of the Money System (billions of dollars)
Currency
$100
Checkable deposits
300
Travelers checks
50
Small-denomination time deposits
700
Savings deposits
75
Money market mutual funds (individuals)
500
Large-denomination time deposits
200
Table 23-2: Components of the Money System
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9. Use Table 23-2. The money supply measured by M2 is:
A. $450 billion.
B. $1,425 billion.
C. $1,725 billion.
D. $2,075 billion.
E. $1,200 billion.
____ 10. Fiat money is:
A. the same as commodity money.
B. money backed by a government's decree that it be accepted as a means of payment.
C. money which is backed by gold or silver.
D. used in barter exchanges.
E. a near money.
Practice Problems 22-23-24
Answer Section
MULTIPLE CHOICE
1. ANS:
SKL:
2. ANS:
SKL:
3. ANS:
SKL:
4. ANS:
SKL:
5. ANS:
SKL:
6. ANS:
SKL:
7. ANS:
SKL:
8. ANS:
SKL:
9. ANS:
SKL:
10. ANS:
SKL:
B
PTS:
Fact-Based
A
PTS:
Definitional
B
PTS:
Critical Thinking
E
PTS:
Fact-Based
E
PTS:
Critical Thinking
C
PTS:
Concept-Based
A
PTS:
Fact-Based
C
PTS:
Critical Thinking
C
PTS:
Critical Thinking
B
PTS:
Definitional
1
DIF: M
REF: Module 22
1
DIF: E
REF: Module 22
1
DIF: M
REF: Module 22
1
DIF: E
REF: Module 22
1
DIF: M
REF: Module 23
1
DIF: M
REF: Module 23
1
DIF: M
REF: Module 23
1
DIF: M
REF: Module 23
1
DIF: M
REF: Module 23
1
DIF: E
REF: Module 23