IVY SOFTWARE MBA PREPWORKS
FUNDAMENTALS OF ECONOMICS EXAM
SCRIPT 2026
◉ M2. Answer: includes everything in M1 plus savings deposits,
small time deposits, money market mutual funds, and a few other
minor categories.
◉ currency. Answer: the paper bills and coins in the hands of the
public
◉ demand deposits. Answer: a depositor with such an account can
write a check to demand those deposits at any time
◉ other checkable deposits. Answer: other deposits against which
checks may be written
◉ savings deposits. Answer: deposits that earn interest but have no
specific maturity date
◉ small time deposits (certificate of deposits or CD). Answer:
deposits that earn a fixed rate of interest if held for the specified
,period, which can range anywhere from several months to several
years, commonly referred to as certificates of deposit or CDs.
◉ money market funds. Answer: an open-end mutual fund which
invests only in money markets. These funds invest in short term, one
day to one year debt obligations such as Treasury bills, certificates of
deposit, and commercial paper
◉ assets of the commercial banking system equal. Answer: the value
of the currency sitting in the banks' vaults, the value of the
government bonds held by the bank, and the value of loans issued by
the bank
◉ the liabilities of the commercial banking system equal. Answer:
the deposits of the banks' customers, since checking account
balances represent money owed by the banks to the depositors.
◉ bank reserves equal. Answer: the currency that is held by banks
◉ 100 percent reserve banking. Answer: when 100% of bank's
currency is being held in reserves
◉ fractional-reserve banking system. Answer: a banking system in
which banks have checkable deposits that exceed annual reserves
,◉ checkable deposit balances are counted as money and therefore
are part of the money supply because they may be used in making
transactions throughout the economy. (t/F). Answer: True
◉ the sum of checkable deposits and currency in circulation is.
Answer: money supply
◉ reserve-deposit ratio. Answer: bank reserves divided by
checkable deposits
◉ What is the Federal Reserve's most important tool that it uses to
increase the money supply?. Answer: buying and selling government
securities
◉ desired reserve deposit ration equals. Answer: bank reserves
divided by checkable deposits
◉ checkable deposits equals. Answer: bank reserves divided by
desired reserve deposit ratio
◉ The banking system's ability to create money depends on the
amount of bank reserves and. Answer: the desired reserve deposit
ratio
, ◉ monetary policy. Answer: any action that changes the supply of
money and alters the interest rate. In the U.S. it is implemented by
the Federal Reserve System.
◉ Three tools that the Federal Reserve can use to alter the money
supply:. Answer: 1) open market operations
2) reserve requirement changes
3) changes to the Federal Reserve's discount rate
◉ open market operations. Answer: purchases and sales of
government securities by the Federal Reserve in an effort to
influence the money supply.
◉ when the Federal Reserve decides to purchase government
securities (ie: Treasury bills) it is choosing to _______ the money
supply
increase
decrease. Answer: increase
◉ when the Federal Reserve desides to sell government securities
(ie: treasury bills) it is choosing to ________ the money supply
increase decrease. Answer: decrease
FUNDAMENTALS OF ECONOMICS EXAM
SCRIPT 2026
◉ M2. Answer: includes everything in M1 plus savings deposits,
small time deposits, money market mutual funds, and a few other
minor categories.
◉ currency. Answer: the paper bills and coins in the hands of the
public
◉ demand deposits. Answer: a depositor with such an account can
write a check to demand those deposits at any time
◉ other checkable deposits. Answer: other deposits against which
checks may be written
◉ savings deposits. Answer: deposits that earn interest but have no
specific maturity date
◉ small time deposits (certificate of deposits or CD). Answer:
deposits that earn a fixed rate of interest if held for the specified
,period, which can range anywhere from several months to several
years, commonly referred to as certificates of deposit or CDs.
◉ money market funds. Answer: an open-end mutual fund which
invests only in money markets. These funds invest in short term, one
day to one year debt obligations such as Treasury bills, certificates of
deposit, and commercial paper
◉ assets of the commercial banking system equal. Answer: the value
of the currency sitting in the banks' vaults, the value of the
government bonds held by the bank, and the value of loans issued by
the bank
◉ the liabilities of the commercial banking system equal. Answer:
the deposits of the banks' customers, since checking account
balances represent money owed by the banks to the depositors.
◉ bank reserves equal. Answer: the currency that is held by banks
◉ 100 percent reserve banking. Answer: when 100% of bank's
currency is being held in reserves
◉ fractional-reserve banking system. Answer: a banking system in
which banks have checkable deposits that exceed annual reserves
,◉ checkable deposit balances are counted as money and therefore
are part of the money supply because they may be used in making
transactions throughout the economy. (t/F). Answer: True
◉ the sum of checkable deposits and currency in circulation is.
Answer: money supply
◉ reserve-deposit ratio. Answer: bank reserves divided by
checkable deposits
◉ What is the Federal Reserve's most important tool that it uses to
increase the money supply?. Answer: buying and selling government
securities
◉ desired reserve deposit ration equals. Answer: bank reserves
divided by checkable deposits
◉ checkable deposits equals. Answer: bank reserves divided by
desired reserve deposit ratio
◉ The banking system's ability to create money depends on the
amount of bank reserves and. Answer: the desired reserve deposit
ratio
, ◉ monetary policy. Answer: any action that changes the supply of
money and alters the interest rate. In the U.S. it is implemented by
the Federal Reserve System.
◉ Three tools that the Federal Reserve can use to alter the money
supply:. Answer: 1) open market operations
2) reserve requirement changes
3) changes to the Federal Reserve's discount rate
◉ open market operations. Answer: purchases and sales of
government securities by the Federal Reserve in an effort to
influence the money supply.
◉ when the Federal Reserve decides to purchase government
securities (ie: Treasury bills) it is choosing to _______ the money
supply
increase
decrease. Answer: increase
◉ when the Federal Reserve desides to sell government securities
(ie: treasury bills) it is choosing to ________ the money supply
increase decrease. Answer: decrease
