Section 5 WS AP Macroeconomics
UPDATED ACTUAL Questions and
CORRECT Answers
A share in the ownership of a company held by a shareholder is considered a - CORRECT
ANSWER - stock
Which of the following would accurately characterize the portion of a firm's profit paid to the
owner of one share of its stock? - CORRECT ANSWER - dividend
A bond is - CORRECT ANSWER - an IOU that pays interest
When a household makes a loan to a firm with the firm providing interest to the household, this
is known as: - CORRECT ANSWER - a bond
Which of the following is considered investment spending in macroeconomics? - CORRECT
ANSWER - GM builds a new plant to manufacture automobiles
In a simple economy, all investment spending must come from: - CORRECT ANSWER -
saving
From the standpoint of economic growth, banks are important to: - CORRECT
ANSWER - channel investment into savings
The term "liquid asset" means - CORRECT ANSWER - asset that is readily converted to
cash
A mutual fund: - CORRECT ANSWER - owns a diversified portfolio
, The primary difference between M1 and M2 is that: - CORRECT ANSWER - M2 includes
savings deposits and time deposits, but M1 does not
Debit cards are: - CORRECT ANSWER - considered a part of the money supply since
they allow access to a part of the money supply
Currency in circulation plus bank reserves: - CORRECT ANSWER - form in monetary
base
The reserve ratio is the: - CORRECT ANSWER - fraction of deposits the banks hold in
their vaults
A bank run occurs when: - CORRECT ANSWER - many bank depositors are trying to
withdraw their funds from the bank
Banks create money when they: - CORRECT ANSWER - make loans
Suppose a bank already has excess reserves of $800 and the reserve ratio is 20%. If Andy
deposits $1,000 of cash into his checking account and the bank lends $600 to Melanie, that bank
can lend an additional: - CORRECT ANSWER - 1,000
If banks were required to keep 100% of deposits in reserves, they could: - CORRECT
ANSWER - make no loans
The ________ multiplier is equal to ________ - CORRECT ANSWER - money; 1 divided
by the required reserve ratio
Suppose the required reserve ratio was 10% and then it increases to 20%, this would: -
CORRECT ANSWER - results in a drop in the money multiplier from 10 to 5
UPDATED ACTUAL Questions and
CORRECT Answers
A share in the ownership of a company held by a shareholder is considered a - CORRECT
ANSWER - stock
Which of the following would accurately characterize the portion of a firm's profit paid to the
owner of one share of its stock? - CORRECT ANSWER - dividend
A bond is - CORRECT ANSWER - an IOU that pays interest
When a household makes a loan to a firm with the firm providing interest to the household, this
is known as: - CORRECT ANSWER - a bond
Which of the following is considered investment spending in macroeconomics? - CORRECT
ANSWER - GM builds a new plant to manufacture automobiles
In a simple economy, all investment spending must come from: - CORRECT ANSWER -
saving
From the standpoint of economic growth, banks are important to: - CORRECT
ANSWER - channel investment into savings
The term "liquid asset" means - CORRECT ANSWER - asset that is readily converted to
cash
A mutual fund: - CORRECT ANSWER - owns a diversified portfolio
, The primary difference between M1 and M2 is that: - CORRECT ANSWER - M2 includes
savings deposits and time deposits, but M1 does not
Debit cards are: - CORRECT ANSWER - considered a part of the money supply since
they allow access to a part of the money supply
Currency in circulation plus bank reserves: - CORRECT ANSWER - form in monetary
base
The reserve ratio is the: - CORRECT ANSWER - fraction of deposits the banks hold in
their vaults
A bank run occurs when: - CORRECT ANSWER - many bank depositors are trying to
withdraw their funds from the bank
Banks create money when they: - CORRECT ANSWER - make loans
Suppose a bank already has excess reserves of $800 and the reserve ratio is 20%. If Andy
deposits $1,000 of cash into his checking account and the bank lends $600 to Melanie, that bank
can lend an additional: - CORRECT ANSWER - 1,000
If banks were required to keep 100% of deposits in reserves, they could: - CORRECT
ANSWER - make no loans
The ________ multiplier is equal to ________ - CORRECT ANSWER - money; 1 divided
by the required reserve ratio
Suppose the required reserve ratio was 10% and then it increases to 20%, this would: -
CORRECT ANSWER - results in a drop in the money multiplier from 10 to 5
