Unit 4-Financial Sector

1.  Decreasing which of the following is a task of the financial system? I.  Transaction costs II.  Risk III.  liquidity

•  I only
• II only
• III only
• I and II only

Which of the following is NOT a type of financial asset?

• Bonds
• Stocks
• Bank deposits
• Houses

The federal government is said to be “dissaving” when

• There is a budget deficit.
• There is a budget surplus.
• There is no budget surplus or deficit.
• Savings does not equal investment spending.

1.  A nonprofit institution collects the savings of its members and invests those funds in a wide variety of assets in order to provide its members with income after retirement. This describes 

• Mutual fund.
• Bank.
• Savings and loans.
• Pension fund.

A financial intermediary that provides liquid financial assets in the form of deposits to lenders and uses their funds to finance the illiquid investment spending needs of borrowers is called a 

• Mutual fund
• Bank
• Corporation
• Pension fund

If the Fed conducts open-market sales, the money supply

• increases and aggregate demand shifts right.
• increases and aggregate demand shifts left.
• decreases and aggregate demand shifts right.
• decreases and aggregate demand shifts left.

To increase aggregate demand, the Fed could

• increase the money supply.
• raise interest rates.
• conduct open-market sales.
• both a & c

In recent years, the Fed has conductred policy by setting a target for

• bank reserves.
• the monetary growth rate.
• the exchange rate.
• the federal funds rate.

Fluctuations in aggregate demand create fluctuations in output.

• True
• False

Fiscal policy only affects the economy in the short-run.

• True
• False