AP Unit 4 Money, banking, & monetary policy Review

If you use money as a store of value, you would be

• Buying a new watch
• Searching the internet for a deal on a new car
• Putting money into a savings account
• Paying for gas on your credit card 

Which if the following is true for the money market graph?

• The demand for money is vertical because of autonomous spending
• The supply of money is downward sloping 
• There is no relationship between the nominal interest rate and the quantity of money demanded in the long-run
• There is an inverse relationship between the nominal interest rate and the quantity of money demanded

The Federal Reserve can increase the money supply by

• Buying financial capital from foreign governments
• Buying bonds on the open market
• Selling government bonds on the open market
• Selling gold on the open market

Assume the required reserve ratio is .2.  If a bank initially has no Excess Reserves and $100,000 cash is deposited in the bank, the maximum amount by which this bank may increase its loans is

• $20,000
• $80,000
• $100,000
• $500,000

If the Fed institutes a policy to reduce inflation, which of the following is most likely to increase?

• Tax rates     
• Investment 
• Interest rates   
• Government deficits     

The interest rate the Fed charges commercial banks for loans

• Fed Fund Rate
• Reserve Requirement Rate
• Discount Rate
• I.O.U Rate

Which function of money encourages people to save money?

• Medium of Exchange
• Store of Value
• Unit of Account
• Acceptability

A basic function of money, providing a unit of measurement for defining, recording, and comparing value, example, one dollar signifies not only a one dollar bill

• unit of account
• store of value
• medium of exchange
• greenbacks

The regulation of the money supply and interest rates by a central bank, such as the Federal Reserve Board in the U.S., in order to control inflation and stabilize currency

• foreclosures
• reserves
• monetary policy
• check clearing

In the money supply, what represents the cash held by the public and money deposited in checking accounts?

• M1
• liquidity
• M2
• store of value