Question 1

For defining money, _____ and also includes _____.

Accepted Answer

A)   M1 includes M2; near money
B)   M1 includes M2; narrow money
C)   M2 includes M1; near money
D)   M2 includes M1; narrow moneyE) B) and C)
F) B) and D)

Question 2

Which asset is NOT included in M2?

Accepted Answer

A)   currency
B)   demand deposits
C)   savings deposits
D)   large-denomination time depositsE) B) and D)
F) B) and C)

Question 3

An interest rate that is low only for a short time is called a balloon payment.

Accepted Answer

A) True 
 B)False

Question 4

When investors wish to increase their investment activities by using the market for loanable funds:

Accepted Answer

A)   demand shifts left.
B)   demand shifts right.
C)   supply shifts left.
D)   supply shifts right.E) B) and C)
F) A) and B)

Question 5

Which of these will cause the supply of loanable funds curve to shift leftward?

Accepted Answer

A)   a lowering of firms' expectations about the economy
B)   an increase in government regulations that make plant expansion difficult
C)   an increase in asset prices leading to a decrease in purchases of stocks and bonds
D)   an increase in the government deficitE) All of the above
F) A) and D)

Question 6

Currently, _____ is equal to roughly $2.5 trillion, and it is the most liquid part of the money supply.

Accepted Answer

A)   M1
B)   M2
C)   M3
D)   M4E) None of the above
F) All of the above

Question 7

Suppose that while households are deciding to increase savings, the demand by firms for investment funds falls. In the market for loanable funds, the real interest rate will _____ and the quantity of loanable funds will _____.

Accepted Answer

A)   rise; fall
B)   rise; rise
C)   fall; rise, fall, or stay the same
D)   rise, fall, or stay the same; riseE) None of the above
F) A) and D)

Question 8

Money that one puts into a 401(k) account is taxed when it is taken out.

Accepted Answer

A) True 
 B)False

Question 9

The supply of loanable funds includes only private savings.

Accepted Answer

A) True 
 B)False

Question 10

Checking deposits generally have a _____ return on investment than do certificates of deposit because checking deposits are _____.

Accepted Answer

A)   higher; less liquid
B)   higher; more liquid
C)   lower; less liquid
D)   lower; more liquidE) A) and B)
F) A) and C)

Question 11

Which of these is NOT involved in regulating financial markets?

Accepted Answer

A)   Federal Reserve System
B)   Federal Deposit Insurance Corporation
C)   Securities and Exchange Commission
D)   New York Stock ExchangeE) A) and C)
F) All of the above

Question 12

If the government decrees that bottle tops will be treated as money, then a bottle top:

Accepted Answer

A)   can still never be money because it has so little intrinsic value.
B)   is called fiat money.
C)   will not function well as a unit of account.
D)   will serve well for international trade.E) A) and B)
F) A) and C)

Question 13

Which of the following assets is MOST liquid?

Accepted Answer

A)   a house
B)   a U.S. savings bond
C)   money
D)   landE) All of the above
F) A) and D)

Question 14

Missing a minimum payment on your credit card can make it more expensive for you to get a car loan in the future.

Accepted Answer

A) True 
 B)False

Question 15

Savings deposits are included in M1 but not M2.

Accepted Answer

A) True 
 B)False

Question 16

If you withdraw money from your 401(k) account before you turn 59.5 years old, you will likely have to pay a 10% early withdrawal penalty.

Accepted Answer

A) True 
 B)False

Question 17

Liquid assets are assets that have high risk.

Accepted Answer

A) True 
 B)False

Question 18

(Figure: Market for Loanable Funds)  The graph shows the supply and demand for loanable funds. If the market interest rate is 3%:

Accepted Answer

A)   the market will reach equilibrium only if lenders decide to save more.
B)   more funds will be demanded by firms than supplied by households.
C)   there will be pressure for the interest rate to rise.
D)   there will be an excess supply of funds.E) C) and D)
F) A) and B)

Question 19

If a perpetuity bond has an interest payment of $80 and your required yield is 10%, the most you would be willing to pay for the bond is:

Accepted Answer

A)   $80.
B)   $800.
C)   $1,000.
D)   $8,000.E) A) and B)
F) A) and C)

Question 20

When the Capitol City Pension Fund provides a fixed menu of pension plans to its customers, it is acting to reduce transaction costs.

Accepted Answer

A) True 
 B)False

Exam 11: Saving, Investment, and the Financial System

If a perpetuity bond has an interest payment of $80 and your required yield is 10%, the most you would be willing to pay for the bond is:

Correct AnswerverifiedShow Answer

Which of these will cause the supply of loanable funds curve to shift leftward?

Correct AnswerverifiedShow Answer

Which of these is NOT involved in regulating financial markets?

Correct AnswerverifiedShow Answer

Which asset is NOT included in M2?

Correct AnswerverifiedShow Answer

If the government decrees that bottle tops will be treated as money, then a bottle top:

Correct AnswerverifiedShow Answer

Missing a minimum payment on your credit card can make it more expensive for you to get a car loan in the future.

Correct AnswerverifiedShow Answer

Liquid assets are assets that have high risk.

Correct AnswerverifiedShow Answer

Money that one puts into a 401(k) account is taxed when it is taken out.

Correct AnswerverifiedShow Answer

The supply of loanable funds includes only private savings.

Correct AnswerverifiedShow Answer

Which of the following assets is MOST liquid?

Correct AnswerverifiedShow Answer

An interest rate that is low only for a short time is called a balloon payment.

Correct AnswerverifiedShow Answer

(Figure: Market for Loanable Funds) The graph shows the supply and demand for loanable funds. If the market interest rate is 3%:

Correct AnswerverifiedShow Answer

If you withdraw money from your 401(k) account before you turn 59.5 years old, you will likely have to pay a 10% early withdrawal penalty.

Correct AnswerverifiedShow Answer

Checking deposits generally have a _____ return on investment than do certificates of deposit because checking deposits are _____.

Correct AnswerverifiedShow Answer

Currently, _____ is equal to roughly $2.5 trillion, and it is the most liquid part of the money supply.

Correct AnswerverifiedShow Answer

For defining money, _____ and also includes _____.

Correct AnswerverifiedShow Answer

Savings deposits are included in M1 but not M2.

Correct AnswerverifiedShow Answer

When the Capitol City Pension Fund provides a fixed menu of pension plans to its customers, it is acting to reduce transaction costs.

Correct AnswerverifiedShow Answer

When investors wish to increase their investment activities by using the market for loanable funds:

Correct AnswerverifiedShow Answer

Suppose that while households are deciding to increase savings, the demand by firms for investment funds falls. In the market for loanable funds, the real interest rate will _____ and the quantity of loanable funds will _____.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Checking deposits generally have a _ return on investment than do certificates of deposit because checking deposits are _.

Correct Answer
verified

Correct Answer
verified

For defining money, _ and also includes _.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Suppose that while households are deciding to increase savings, the demand by firms for investment funds falls. In the market for loanable funds, the real interest rate will _ and the quantity of loanable funds will _.

Correct Answer
verified