Money and Banking Quiz

Identify the vocab term given each definition: The ease in which an asset can be converted into a medium of exchange.

• liquidity

• M1

• M2

Interest-bearing assets often issued by businesses or the government.

• Bonds or Government Securities

• Stocks

• IRA

Funds deposited in a bank account that can be withdrawn without any penalty.

• demand deposits

• consumer withdraws

• bank balance sheets

The amount charged by a lender to a borrower for the use of money.

• interest

• does it look like I work at bank?

• demand deposit

What is the relationship between interest rates and bond prices?

• inverse relationship

• direct relationship

what is the equation for the real interest rate?

• real=nominal-inflation

• real=real-nominal

• real=nominal-real

When actual inflation is greater than expected inflation, the real interest rate will ____________.

• increase

• decrease

There are three functions of money: its main function is a medium of ____________,

• exchange

• value

__________ reserve banking is the idea that banks hold a fraction of customers' deposits and lend the remaining funds out.

• Fractional Reserve

• Money

Explain the difference between required reserves and excess reserves.

• required must stay in the bank,

  excess is loaned to other customers.

• required must be loaned to other customers,

  excess must stay in the bank.