ECON Final EXAM QUESTIONS AND ANSWERS

ECON Final Economists typically define money as: A. anything in which its value can be inflated. B. a means of payment that lacks intrinsic value. C. currency that is issued by a central bank. D. a widely accepted means of payment. - ANSWERS D Are checking accounts money? A. No, because checking accounts cannot be traded for goods and services. B. Yes, because checking accounts can be used to buy goods and services. C. No, because checking accounts are not physical money. D. Yes, because the value of a checking account is measured in dollars. - ANSWERS B Are saving accounts money? A. No, because counting saving accounts as money would double-count that money. B. No, because they technically can't be used to buy goods and services. C. Yes, because they can be used to buy goods and services. D. Yes, even though they technically can't be used to buy goods and services. - ANSWERS D Are comic books money? A. Yes, because the way economists define money, basically everything is money. B. Yes, because comic books can easily be traded for goods and services. C. No, because money cannot be something with intrinsic value, which comic books have. D. No, because selling a comic book takes work and provides an uncertain amount of funds. - ANSWERS D Which of the following asset would be considered money? A. An asset that has value and could at some time be accessed in order to make transactions. B. An asset that can be bought or sold using a widely-used means of payment. C. An asset that can be easily converted into a widely-used means of payment with little loss in value. D. An asset that is infrequently used as a means of payment. Correct. For this reason, savings accounts and money market mutual funds are usually counted as money. - ANSWERS C Economists have: A. defined money broadly but still only measure currency in circulation. B. one specific measure of the supply of money. C. no systematic way of measuring the supply of money. D. several different measures of the supply of money. - ANSWERS D Which of these is NOT one of the definitions of money supply mentioned in the video? A. M0 B. M1 C. M2 D. MB - ANSWERS A What is included in MB that is not included in either M1 or M2? A. currency B. reserve deposits C. savings accounts D. checking accounts - ANSWERS B Which of the following is true about M1 and M2? A. M1 includes currency, but M2 does not. B. Neither M1 nor M2 includes money market mutual funds. C. M2 includes saving deposits and money market mutual funds, but M1 does not. D. M1 and M2 both include checking accounts and savings accounts. - ANSWERS C In order to impact aggregate demand and the economy, the Fed needs to be able to influence: A. every measure of the money supply. B. MB only. C. MB and M1 D. M1 and M2. - ANSWERS D What does a bank do with the money that you deposit? A. Banks use the money for ordinary business expenses like paying employees. B. Banks keep your money in a vault in case you return to withdraw it. C. Banks lend most of the money to people who want to borrow. D. Banks use the money to purchase assets like gold and other precious metals. - ANSWERS C For a bank, "reserves" refers to: A. the loans it will call back early if a recession starts. B. the cash it keeps on hand to meet withdrawal requests. C. the part-time workers that will be offered full-time jobs if necessary. D. the cash it lends to households or businesses who want to borrow. - ANSWERS B Large banks in the United States: A. may not keep more than 10% of deposits in reserve. B. are required to keep between 10% and 90% of deposits in reserve. C. are not required to keep any deposits in reserve. D. must keep at least 10% of deposits in reserve. - ANSWERS D Which of the following might lead banks to hold more reserves? A. An increase in the demand for loanable funds B. A decrease in the legal reserve requirement C. Fear that customers will want to withdraw most of their deposits D. Fear that businesses may decide to borrow less to fund investments - ANSWERS C If a bank customer deposits $100 in cash, and the bank lends $90 of that deposit to another customer by crediting $90 to her account: A. the money supply has increased by $190. B. the money supply has increased by $90. C. the money supply has decreased by $10. D. the money supply has not changed. - ANSWERS B The _______ tells us how many additional dollars of deposits are created with each additional dollar of reserves. A. reserve ratio, calculated as 1 divided by the money multiplier, B. money multiplier, calculated as 1 divided by the reserve ratio, C. reserve ratio, calculated as 1 minus the money multiplier, D. money multiplier, calculated as 1 minus the reserve ratio, - ANSWERS B How much additional money w