AP Macro Unit 4 Review

Money is anything that:

• serves as a medium of exchange for goods and services.
• can be converted into silver with relatively little loss in value.
• can be converted into gold with relatively little loss in value.
• that is traded in the stock market.

The double coincidence of wants problem can be solved by:

• more resources.
• more production.
• money.
• economic growth.

Which of the following statements describes a function of money?
I. Money is a medium of exchange.
II. Money is a store of value.
III. Money is a unit of account.
IV. Money is a factor of production.

• I and IV only.
• I, II and IV only.
• II, III and IV only.
• I, III, and IV only.

Use Table 25-1. If the reserve ratio is 25%, deposits are:

• $5,000.
• $15,000.
• $60,000.
• $80,000.

A reserve ratio is the:

• proportion of cash and security reserves the bank needs to hold.
• fraction of deposits that the bank is required to hold.
• loan to deposit ratio in the bank's balance sheet.
• money belonging to the bank's largest depositors.

Which of the following would be the initial effect of an individual making a $10,000 cash deposit in a bank?

• The money supply would rise by $10,000.
• The money supply would fall by $10,000.
• The money supply would not be affected by the deposit.
• The money supply would fall, but by less than the $10,000 deposit.

Suppose an economy has $200,000 of demand deposits and $40,000 of excess reserves with a 10% required reserve ratio. If the monetary authorities raise the required reserve ratio to 20%, then which of the following will likely follow?

• The excess reserves will rise by 10%.
• The excess reserves will fall by 10%.
• There will be no more excess reserves in the system.
• Excess reserves will decrease by $20,000.

Suppose the banking system does NOT hold excess reserves and the reserve ratio is 20%. If Sam deposits $500 of cash into his checking account, the banking system can increase the money supply by:

• $5,000.
• $2,000.
• $2,500.
• $400.

The Federal Reserve System was created in:

• 1913.
• 1971.
• 1857.
• 1873.

The major tools of monetary policy available to the Federal Reserve System include:

• reserve requirements, margin regulations, and moral suasion.
• reserve requirements, open-market operations, and the discount rate.
• open-market operations, margin regulations, and moral suasion.
• the discount rate, margin regulations, and moral suasion.