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KEISER ECO4223 QUIZ 1

Question Question 1 The financial system is primarily a means by which a. funds are transferred from savers to borrowers. b. money is put into circulation. c. the government puts into operation its plans for the economy. d. business firms distribute their goods. 5 points Save Answer Question 2 Economists define risk as a. the difference between the domestic interest rates and foreign interest rates. b. the chance that the value of financial assets will change from what you expect. c. the ease with which an asset can be exchanged for other assets or for goods and services. d. the difference between the return on common stock and the return on corporate bonds. 5 points Save Answer Question 3 Economists define liquidity as a. the difference between the return on the asset and the return on a long-term U.S. Treasury bond. b. the fraction the asset makes up of an investor's portfolio. c. the ease with which an asset can be exchanged for money. d. the difference between the total demand for an asset and the total supply of the asset. 5 points Save Answer Question 4 The objectives of the Federal Reserve include: a. Stable prices (low inflation) b. Low unemployment rates c. Adequate rates of economic growth d. All of the above 5 points Save Answer Question 5 A debt instrument represents a. an ownership claim by the purchaser on the issuer. b. a promise by a borrower to repay principal plus interest to a lender. c. an attempt by a borrower in default to restore his or her credit. d. a nontaxable asset, owned primarily by large corporations. 5 points Save Answer Question 6 If foreign interest rates rise a. the demand for domestic currency rises, causing it to appreciate. b. the demand for domestic currency falls, causing it to depreciate. c. the demand for domestic currency rises, causing it to depreciate. d. the demand for domestic currency falls, causing it to appreciate. 5 points Save Answer Question 7 If a commercial bank lends out all of its’ available funds, it risks becoming: a. Insolvent. b. Illiquid. c. Unprofitable d. Taken over by the FDIC 5 points Save Answer Question 8 Congress created the Federal Reserve System a. to serve as a lender of last resort. b. to process the receipt of taxes received by the Internal Revenue Service. c. to regulate the value of the U.S. dollar against foreign currencies. d. to provide a source of mortgage loans to the residential housing market. 5 points Save Answer Question 9 Bond prices and interests rates a. Vary directly b. Vary inversely c. Are unrelated d. Have an unpredictable relationship 5 points Save Answer Question 10 The most frequently used tool of monetary policy is: a. the Discount Rate b. The Federal Funds Rate c. Open Market Operations d. The Required Reserve Ratio 5 points Save Answer Question 11 If the economy is in recession, then the Federal Reserve would stimulate the national economy by: a. Selling bonds which increases interest rates b. Increasing the Discount Rate c. Buying bonds which decreases interest rates d. Increasing the Required Reserve Ratio 5 points Save Answer Question 12 The federal government agency that insures customer deposits at commercial banks is a. The OCC b. The Federal Reserve c. The FDIC d. The OTS 5 points Save Answer Question 13 In addition to the Board of Governors, the Federal Reserve System has how many Regional Banks? a. 4 b. 8 c. 10 d. 12 5 points Save Answer Question 14 The maximum amount that a commercial can lend is equal to: a. Total Deposits b. Total Reserves c. Total Excess Reserves d. None of the above 5 points Save Answer Question 15 The major function(s) of money is/are: a. Medium of Exchange b. Unit of Account c. Store of Value d. All of these are major functions of money 5 points Save Answer Question 16 Which of the following is NOT included in aggregate demand? a. Demand for goods and services for consumption b. Investment in business plant and equipment c. Net exports d. Investment in Treasury bonds 5 points Save Answer Question 17 A shift of the AD curve a. to the right is considered expansionary, and a shift to the left is considered contractionary. b. to the left is considered expansionary, and a shift to the right is considered contractionary. c. to the right or to the left is considered contractionary. d. to the right or to the left is considered expansionary. 5 points Save Answer Question 18 The aggregate supply curve represents levels of output that producers are willing to sell at a. each level of the real interest rate. b. each level of real GDP. c. each price level. d. each inflation rate. 5 points Save Answer Question 19 A central bank may be reluctant to see its currency appreciate because a. rising prices of imports will contribute to inflation. b. falling prices of exports will contribute to inflation. c. the country's goods may become uncompetitive in world markets. d. the country's monetary base will increase. 5 points Save Answer Question 20 Which of the following accurately describes the Fed's inflation target? a. It is implicit rather than explicit. b. It seeks to maintain an average inflation rate of 2% per year. c. It seeks to keep inflation at 2% all the time. d. Its goal is to achieve zero inflation.

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