Macroeconomics

‭Chapter 4: Review Questions‬ ‭1. What is the primary function of money as a "medium of exchange"?‬ ‭A.‬ ‭It stores value for future use.‬ ‭B.‬ ‭It serves as a standard measure of value.‬ ‭C.‬ ‭It facilitates the buying and selling of goods and services.‬ ‭D.‬ ‭It earns interest over time.‬ ‭2. Which of the following components is NOT‬‭part of‬‭M1?‬

‭A.‬ ‭Currency in circulation‬ ‭B.‬ ‭Demand deposits‬ ‭C.‬ ‭Saving deposits‬ ‭D.‬ ‭Money market mutual funds‬ ‭3. How do banks contribute to the creation of money?‬

‭A.‬ ‭By printing physical currency‬ ‭B.‬ ‭By offering high-interest savings accounts‬ ‭C.‬ ‭By lending out a portion of their deposits‬ ‭D.‬ ‭By investing in the stock market‬

‭4.‬ ‭Assume‬ ‭that‬ ‭commercial‬ ‭banks‬ ‭hold‬ ‭no‬ ‭excess‬ ‭reserves‬ ‭and‬ ‭the‬ ‭reserve‬ ‭requirement‬ ‭is‬ ‭10%.‬ ‭How much money is created in new loans from all banks after a bank receives a deposit of $2,000?‬

‭A.‬ ‭$19,990‬ ‭B.‬ ‭$18,000‬

‭C.‬ ‭$2,200‬ ‭D.‬ ‭$1,800‬ ‭5. What role do interest rates play in the fnancial sector?‬

‭A.‬ ‭They have no impact on fnancial decisions.‬ ‭B.‬ ‭They determine the prices of goods and services.‬ ‭C.‬ ‭They influence borrowing, lending, and investment decisions.‬ ‭D.‬ ‭They regulate taxation policies.‬ ‭6. Which of the following is NOT one of the three tools of monetary policy used by central banks?‬

‭A.‬ ‭Open-market operations‬ ‭B.‬ ‭Reserve requirement‬

‭C.‬ ‭Discount rate‬ ‭D.‬ ‭Fiscal Policy‬

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