University of Maryland, Baltimore - MACRO 1 Homework 4 1)In macroeconomics, a ________ describes the common way in which market values are measured in an economy

University of Maryland, Baltimore - MACRO 1

Homework 4

1)In macroeconomics, a ________ describes the common way in which market values are measured in an economy.

1. Store of value
2. Unit of exchange
3. Unit of account
4. Medium of exchange

2.In macroeconomics, _____________describes a situation in which two people each want to exchange some good or service that the other can provide.

1. A double coincidence of wants
2. Interrelated banking
3. A medium of exchange
4. The usefulness of money

3. Which of the following would function as a store of value, and also provide a medium of exchange, and unit of account?

1. An estate
2. Gym membership[
3. An iPod
4. A new car

4. ___________are funds that the bank keeps on hand that are not loaned out or invested in bonds.

1. Certificates of deposit
2. Demand deposits
3. Time deposits
4. Reserves

5. If Bill performs plumbing upgrades for Alice in exchange for her incorporating his business, then their ____________ will be satisfied.

1. Balance of trade
2. Convenience of exchange
3. Division of labor
4. Double coincidence of wants

6. ______ are a form of deposits held in banks that are available by making a cash withdrawal or writing a check.

1. Time deposits
2. Savings deposits
3. Direct deposits
4. Demand deposits

7. The market in which loans are bought and sold is called the:

1. Secondary loan market
2. Money market
3. Primary loan market
4. Loan market

8. ____________ that require the depositor to commit to leaving their funds in the bank for a certain period of time, in exchange for a higher rate of interest are also called___________.

1. Certificates of deposits; time deposits
2. Demand deposits; certificates of deposits
3. Bonds; term deposits
4. Money market funds; time deposits

9. In uncertain economic times, ____________ serves as a way of preserving economic value that can be spent or consumed in the future.

1. Owning gold
2. Buying a new car
3. Refinancing your home mortgage
4. Obtaining a credit card

10. Antonio tries to limit his risk of overexposure to debt by using a ___________ to store a certain amount of value that he then uses to make purchases.

1. Chip card
2. Smart card
3. Debit card
4. Credit card

11. If loans become far less available, then sectors of the economy that ___________ like business investment, home construction, and car manufacturing can be dealt a crushing blow.

1. Typically generate extraordinary gains
2. Failed to diversify risk
3. Make loans to financial capital markets
4. Depend on borrowed money

12. The term ____ describes the proportion of deposits that the bank must hold in the form of reserves that are not loaned out or invested in bonds.

1. Term deposits
2. Reserve ratio
3. Bond reserves
4. Reserve funds

13. In macroeconomics, __________ describes a situation where a banks liabilities can be withdrawn in the short-term while its assets are being repaid in the long-term.

1. a negative net worth
2. An asset-liability time mismatch
3. Diversification
4. Reserve ratio

14. Banks can protect themselves against an unexpectedly high rate of loan defaults and against the risk of _____ by adopting a strategy that will ___________.

1. An asset-liability mismatch; diversify its loans
2. Rising interest rates; diversity its loans
3. Rising interest rates; provide loans to a variety of customers
4. An increased reserve requirement; provide loans to a variety of customers

15. ______ are a form of financial instrument through which corporations and governments borrow money from financial investors and promise to repay with interest.

1. Time deposits
2. Money market funds
3. Certificates of deposit
4. Bonds

16. In modern economies, credit cards are a ___________ because of their wide acceptance as a method of payment for both goods and service.

1. Unit of exchange
2. Unit of account
3. Medium of exchange
4. Store of value

17. The process of banks making loans in financial capital market is intimately ties to the:

1. Home construction industry
2. Redistribution of wealth
3. Creation of money
4. Financial stress levels of banks

18. ____________ pool the deposits of many investors together and invest them in a safe way like short-term government bonds.

1. Savings deposits
2. Certificates of deposit
3. Money market funds
4. Time deposits

19. If mollusk shells were accepted as a method of payment in modern-day markets, what economic role would they plan in the financial system?

1. Unit of exchange
2. Medium of exchange
3. Currency exchange
4. Capital exchange

20. ___________ is a completely inadequate mechanism ________ in a modern advanced economy.

1. Currency; for providing a medium of exchange
2. Money; for providing a store of value
3. Money; to use as a unit of account
4. Barter; for trying to coordinate trades

21. Why do banks use a T-account?

1. The T-account ensures the final entry made under the assets column is bank reserves
2. The T-account separates assets on the left from liabilities on the right
3. If a bank has become bankrupt, net worth will be shown as a zero on the balance sheet
4. The T-account separates the liabilities on the left from the assets on the right.

22. Which of the following would be classified in the M1 category of the money supply?

1. Certificates of deposit
2. Demand deposits
3. Money market deposit
4. Savings deposit

23. Stealth bank has deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. If the bank sells its loans at market value of $400 million, what will its total assets equal?

1. $480 million
2. $110 million
3. $710 million
4. $510 million

24. Stealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The bank’s loans, if sold at current market value, would be worth $600 million. What does Stealth bank’s net worth equal?

1. $120 million
2. $1.02 billion
3. $270 million
4. $970 million

25. The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 5% of the deposits in reserves. What is the money multiplier in this economy?

1. 10
2. 5
3. 1
4. 20