AP Macro Unit 4 Review

The supply of money is determined by

• the price level

• The Treasury and Congressional Budget Office

• the Federal Reserve System

• the demand for money

Which of the following is true regarding bonds?

• There is no opportunity cost in owning a bond

• All bonds earn the same amount of interest

• Bonds are interest-bearing assets

• The bondholder owns a part of a company

Of the following assets, which is the most liquid?

• stocks

• currency

• bonds

• real estate

Which of the following would lead to an increase in the equilibrium real interest rate in the loanable funds market?

• An increase in private savings

• A decrease in foreign financial capital inflows

• A decrease in taxable purchases

• A decrease in the expected inflation rate

When a loanable funds market is in equilibrium,

• borrowing equals lending

• the interest rate is greater than the demand

• supply equals demand

• investment spending equals consumer spending

Which of the following will definitely occur if the nominal interest rate increases?

• the money supply curve will shift to the right

• the money demand curve will shift to the right

• the money supply curve will shift to the left

• the money demand curve will shift to the left

The U.S. Federal Reserve can change the U.S. money supply by changing the

• amount of gold in circulation

• discount rate

• supply of private loans

• price level

If an economy is experiencing a recession and the central bank wants to reduce unemployment by increasing investment, the central bank could

• sell government securities

• print more money

• decrease the gold standard

• buy government securities

A tourist in Japan pays for food with the country's currency, the yen. The price of all purchases is determined by the number of yen needed to buy the goods. The use of Yen to express the price of a good is which function of money?

• store of wealth

• store of value

• unit of account

• means of payment

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

• tax rates

• investment

• government deficits

• interest rates