AP Macro Unit 4 Review Quiz

Which of the following is true for both stocks and bonds?

• They are interest-bearing assets.
• They are financial assets.
• They are risk-free assets.
• They are equity.
• They are ownership in a company.

Which of the following rankings lists these assets from the least liquid to the most liquid?

• Cash, bonds, house, savings account
• Bonds, house, savings account, cash
• Savings account, cash, bonds, house
• House, bonds, savings account, cash
• Cash, savings account, bonds, house

Nathan has been unable to trust banks since the failure of his savings and loan bank. He claims that storing his hard-earned money at home is costless. Is Nathan correct?

• Yes, because money is the most liquid form of financial assets.
• Yes, because there is no opportunity cost in holding money.
• Yes, because the opportunity cost of holding money is the real value of goods and services it can purchase.
• No, because money is the least liquid form of financial assets.
• No, because the opportunity cost of holding money is the lost interest he could have earned on other financial assets.

Which of the following is adjusted by the actual inflation rate?

• Nominal wages
• Automatic stabilizers
• Unemployment rate
• Price of previously issued bonds
• Real interest rates

Spencer took a 9 percent one-year fixed-rate loan to buy a new car. He expected to pay a real interest rate of 5 percent. If at the end of the year Spencer only paid a 3 percent real interest rate, which of the following is true?

• The nominal interest rate was 3%
• The nominal interest rate was 5%
• The actual inflation rate was 2%
• The actual inflation rate was 4%
• The actual inflation rate was 6%

If the interest rate on a one-year loan is 5% and the expected inflation rate is -2% for the same period, what is the expected real interest rate on the loan?

• -7%
• -2%
• 2%
• 3%
• 7%

Which of the following transactions will keep M1 unchanged?

• Sam transferred money from his certificate of deposit to his checking account.
• Mike purchased government bonds and paid with a check.
• Leila deposited coins from her piggy bank into her checking account.
• Sandy converted a small-denomination time deposit into cash.
• Patty increased her monthly cash deposits to her retirement funds.

Which of the following is included in the monetary base?

• Currency held by the public and commercial bank reserves held with the central bank
• Currency held by the public, demand deposits at depository institutions, and commercial bank reserves held with the central bank
• Currency held by the public, demand deposits, savings deposits, and certificates of deposit
• Currency held by the public and small and large time deposits
• Currency held by the public, small and large time deposits, and commercial bank reserves held with the central bank

Mia transferred $1,000 from her checking account to a certificate of deposit. How will the M1and M2 measures of the money supply change?

• M1 will increase and M2 will decrease
• M1 will increase and M2 will increase
• M1 will decrease and M2 will increase
• M1 will decrease and M2 will not change
• M1 will not change and M2 will increase

Northern City Bank keeps no excess reserves. Assume Northern City Bank receives a cash deposit of $50 dollars. As a result of the deposit, Northern City Bank’s required reserves increase by $10. What is the maximum possible change in the money supply in the banking system that could result from the $50 deposit?

• The money supply will increase by a maximum of $10.
• The money supply will increase by a maximum of $40.
• The money supply will increase by a maximum of $50.
• The money supply will increase by a maximum of $200.
• The money supply will increase by a maximum of $250.