WorksheetsAP Macro Unit 4 Review Quiz
Total questions: 21
Worksheet time: 11mins
Name
Class
Date
1.
Which of the following is true for both stocks and bonds?
a)
They are interest-bearing assets.
b)
They are financial assets.
c)
They are risk-free assets.
d)
They are equity.
e)
They are ownership in a company.
2.
Which of the following rankings lists these assets from the least liquid to the most liquid?
a)
Cash, bonds, house, savings account
b)
Bonds, house, savings account, cash
c)
Savings account, cash, bonds, house
d)
House, bonds, savings account, cash
e)
Cash, savings account, bonds, house
3.
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?
a)
Yes, because money is the most liquid form of financial assets.
b)
Yes, because there is no opportunity cost in holding money.
c)
Yes, because the opportunity cost of holding money is the real value of goods and services it can purchase.
d)
No, because money is the least liquid form of financial assets.
e)
No, because the opportunity cost of holding money is the lost interest he could have earned on other financial assets.
4.
Which of the following is adjusted by the actual inflation rate?
a)
Nominal wages
b)
Automatic stabilizers
c)
Unemployment rate
d)
Price of previously issued bonds
e)
Real interest rates
5.
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?
a)
The nominal interest rate was 3%
b)
The nominal interest rate was 5%
c)
The actual inflation rate was 2%
d)
The actual inflation rate was 4%
e)
The actual inflation rate was 6%
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?
a)
-7%
b)
-2%
c)
2%
d)
3%
e)
7%
7.
Which of the following transactions will keep M1 unchanged?
a)
Sam transferred money from his certificate of deposit to his checking account.
b)
Mike purchased government bonds and paid with a check.
c)
Leila deposited coins from her piggy bank into her checking account.
d)
Sandy converted a small-denomination time deposit into cash.
e)
Patty increased her monthly cash deposits to her retirement funds.
8.
Which of the following is included in the monetary base?
a)
Currency held by the public and commercial bank reserves held with the central bank
b)
Currency held by the public, demand deposits at depository institutions, and commercial bank reserves held with the central bank
c)
Currency held by the public, demand deposits, savings deposits, and certificates of deposit
d)
Currency held by the public and small and large time deposits
e)
Currency held by the public, small and large time deposits, and commercial bank reserves held with the central bank
9.
Mia transferred $1,000 from her checking account to a certificate of deposit. How will the M1and M2 measures of the money supply change?
a)
M1 will increase and M2 will decrease
b)
M1 will increase and M2 will increase
c)
M1 will decrease and M2 will increase
d)
M1 will decrease and M2 will not change
e)
M1 will not change and M2 will increase
10.
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?
a)
The money supply will increase by a maximum of $10.
b)
The money supply will increase by a maximum of $40.
c)
The money supply will increase by a maximum of $50.
d)
The money supply will increase by a maximum of $200.
e)
The money supply will increase by a maximum of $250.
11.
Southern City Bank has $100 million in deposits and has $8 million in excess reserves. If the required reserve ratio is 5%, which of the following is true?
a)
The money multiplier is 20, and the bank can lend out up to $160 million.
b)
The money multiplier is 8, and the bank can lend out up to $20 million.
c)
The money multiplier is 8, and the bank can lend out up to $5 million.
d)
The money multiplier is 8, and loans can increase in the banking system by a maximum of $8 million.
e)
The money multiplier is 20, and loans can increase in the banking system by a maximum of $160 million.
12.
Which of the following describes the relationship between the nominal interest rate and the quantity of money people want to hold as depicted by the money demand curve?
a)
Positive, and the money demand curve is upward sloping.
b)
Positive, and the money demand curve is downward sloping.
c)
Positive, and the money demand curve is vertical.
d)
Inverse, and the money demand curve is upward sloping.
e)
Inverse, and the money demand curve is downward sloping.
13.
An increase in the price level will affect the money market and bond market in which of the following ways?
a)
The nominal interest rate rises, and the price of previously issued bonds rises.
b)
The nominal interest rate falls, and the price of previously issued bonds is unaffected.
c)
The nominal interest rate rises, and the price of previously issued bonds falls.
d)
The nominal interest rate falls, and the price of previously issued bonds rises.
e)
The nominal interest rate is unaffected, and the price of previously issued bonds rises.
14.
Suppose that the banking system in an economy has ample reserves, and the economy has entered a recession. Which of the following is a monetary policy action the central bank can take to restore full-employment output in the short run?
a)
Selling government bonds
b)
Decreasing government spending
c)
Decreasing administered interest rates
d)
Increasing the policy rate
e)
Increasing the required reserve ratio
15.
What is the maximum amount of new loans the bank could lend with the given amounts of reserves?
a)
$10,000
b)
$20,000
c)
$30,000
d)
$50,000
e)
$70,000
16.
What does "liquidity" refer to in the context of assets?
a)
The profitability of an asset.
b)
The tax implications of selling an asset.
c)
How easily an asset can be converted into cash.
d)
The long-term growth potential of an asset.
17.
Of the choices listed below, the most liquid is...
a)
stock
b)
U.S. EE Savings Bond
c)
money market mutual fund
d)
real estate
18.
Assets
a)
Finding out whether or not what you are about to buy can be found for a better price or in better shape at a different store.
b)
Payment for work, represented as a yearly sum and paid in portions every week, two weeks, or month; can also include and vacation time.
c)
what a person owns of value, such as jewelry, savings, art, a home, and a car.
19.
Describe inflation:
a)
Inflation is the term used to describe the increase in the value of a currency.
b)
Inflation refers to the stability of prices for goods and services over time.
c)
Inflation is the rate at which the general level of prices for goods and services is decreasing.
d)
Inflation is the rate at which the general level of prices for goods and services is rising.
20.
How quickly and easily assets can be accessed and converted into cash.
a)
Interest
b)
Liquidity
c)
Goal
d)
Interest
21.
What is a "currency"?
a)
A type of bird
b)
A system of money in general use in a particular country
c)
A historical document
d)
A type of precious metal
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