AP Macro Unit 4 Exam
Quiz by Mark Stegall
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41 questions
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- Q1All of the following are true regarding money exceptMoney measures relative values when it serves as a unit of accountInflation erodes money's ability to serve as a store of valueCommodity money is used more than fiat money todayMoney is used as a medium of exchange30s
- Q2Which of the following is true regarding the balance sheet of a commercial bank?Demand deposits are considered a liabilityLoans from the Federal Reserve are considered an assetSavings accounts are considered an assetBanks make a profit when the value of their assets are greater than the value of their liabilities.30s
- Q3Which of the following best explains why the money demand curve is downward sloping?Households need to hold money for daily transactionsHouseholds demand less money because of the use of debit cardsHigh interest rates lead to less investmentHigher interest rates encourage people to exchange money for other interest-bearing assets30s
- Q4A decrease in the supply of money will cause which of the following?An increase in nominal interest ratesAn increase in demand depositsAn increase in the demand for moneyAn increase in investment30s
- Q5Which of the following is the best example of fractional reserve banking?A bank buys $7000 of U.S Treasuries with excess reservesA bank borrows $10,000 from the country's central bankA bank plans $300 of deposits in reserveA bank borrows $4000 from another commercial bank30s
- Q6The require reserve ratio is 10% and the central bank sells $2 million in bonds to banks. If banks loan out all their excess reserves and there are no leakages, what will happen to the money supply?It will increase by $20 millionIt will decrease by $20 millionIt will decrease by $2 millionIt will decrease by $10 million30s
- Q7Suppose that all banks hold no excess reserves and the reserve requirement is 20%. If Paula deposits $200 she earned for babysitting in the bank, what is the maximum increase in the total money supply?$800$1,200$400$100030s
- Q8Which of the following is true regarding the central banks use of open market operations?Interest rates will decrease when the central bank buys bondsInterest rates will decrease when the central bank buys bondsAggregate demand will decrease when the central bank buys bondsOpen market operations always realist in inflation30s
- Q9Which of the following is an appropriate monetary policy used by central bank to reduce inflation?Increasing consumer income taxesDecreasing the discount rateDecreasing government expendituresSelling government securities30s
- Q10Which of the above combined policies is the most effective in decreasing unemployment?BAC or A will workD or E will work30s
- Q11Which of the following is true regarding the federal funds rate?It is the interest rate that the Federal Reserve charges commercial banksIt is the target rate of inflation set by the Federal Reserveit is usually higher than the discount rateIt is the interest rate that banks charge each other30s
- Q12The Federal Reserve can increase the federal funds rate most effectively byDecreasing the discount ratebuying government bondsIncreasing the discount rateSelling government bonds30s
- Q13Assume that the nominal interest rate that a bank charged is 7% and the expected inflation rate was %5. If the actual inflation rate turned out to by 11%, what is the expected real interest rate and the actual real interest rate?AEDC30s
- Q14If businesses predict that the economy will improve and sales will increase in the future, which of the following will occur in the loanable funds market?ACDB30s
- Q15Which of the following is the best example of the crowding-out effect?Deficit spending leads to a higher national debtDeficit spending results in high interest rates that decrease private investmentthe Federal Reserve buys bonds increasing private investmentThe government changes laws regulating banks30s
