UMUC ECON201 Homework 4 Latest (2015)

UMUC ECON201 Homework 4 Latest (2015)


Chapter 14 Random

Question 1 0 / 1 point

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

a) owning gold

b) obtaining a credit card

c) refinancing your home mortgage

d) buying a new car

Question 2 1 / 1 point

In an economy with _______________, money loses some buying power each year, but it remains money.

a) inflation

b) currency

c) deflation

d) a market orientation

Question 3 1 / 1 point

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

a) Money market funds

b) Savings deposits

c) Time deposits

d) Certificates of deposit

Question 4 1 / 1 point

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

a) division of labor

b) balance of trade

c) convenience of exchange

d) double coincidence of wants

Question 5 1 / 1 point

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

a) an increased reserve requirement; provide loans to a variety of customers

b) an asset-liability time mismatch; diversify its loans

c) rising interest rates; provide loans to a variety of customers

d) rising interest rates; diversify its loans

Question 6 1 / 1 point

Which of the following is a valid criticism of the use of money as a store of value in modern economies?

a) storing money is wasteful

b) imperfect as a unit of account

c) annual inflationary loss of buying power

d) money supply is too narrowly defined

Question 7 1 / 1 point

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.

a) bond reserves

b) term deposits

c) reserve funds

d) reserve ratio

Question 8 1 / 1 point

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.

a) failed to diversify risk

b) make loans to financial capital markets

c) depend on borrowed money

d) typically generate extraordinary gains

Question 9 1 / 1 point

In modern economies, _____________________ receive money from savers and provide funds to borrowers.

a) governments

b) banks

c) credit unions

d) financial intermediaries

Question 10 1 / 1 point

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

a) unit of exchange

b) medium of exchange

c) currency exchange

d) capital exchange

Question 11 1 / 1 point

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

a) Time deposits

b) Money market funds

c) Certificates of deposit

d) Bonds

Question 12 1 / 1 point

____________ is a completely inadequate mechanism ____________________ in a modern advanced economy.

a) Money; to use as a unit of account

b) Barter; for trying to coordinate trades

c) Currency; for providing a medium of exchange

d) Money; for providing a store of value

Question 13 1 / 1 point

The money multiplier is equal to the _______________ in the economy divided by the original _________________.

a) original quantity of reserves; reserve ratio

b) quantity of money; total money

c) total money; quantity of money

d) reserve ratio; original quantity of reserves

Question 14 1 / 1 point

Which of the following is omitted in a barter transaction?

a) medium of exchange

b) trade

c) money

d) store of value

Question 15 1 / 1 point

________________ serves society in three functions: medium of exchange, unit of account, and store of value.

a) A double coincidence of wants

b) Money

c) Currency

d) Barter

Question 16 1 / 1 point

The process of banks making loans in financial capital markets is intimately tied to the:

a) financial stress levels of banks.

b) home construction industry.

c) creation of money.

d) redistribution of wealth.

Question 17 1 / 1 point

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

a) unit of exchange

b) medium of exchange

c) unit of account

d) store of value

Question 18 1 / 1 point

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

a) the usefulness of money

b) a medium of exchange

c) a double coincidence of wants

d) interrelated banking

Question 19 1 / 1 point

The market where loans are made to borrowers is called the:

a) loan market.

b) money market.

c) secondary loan market.

d) primary loan market.

Question 20 1 / 1 point

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.

a) debit card

b) smart card

c) chip card

d) credit card

Question 21 1 / 1 point

Banks typically come under financial stress because of:

a) a widespread decline in the value of their assets.

b) the money multiplier effect.

c) risks associated with extraordinary economic gains.

d) diversification of loan assets.

Chapter 14 money

Question 22 1 / 1 point

Lance paid $175,000 for his house in 2003 and sold it for $325,000 in 2006. What function did the house serve during the time Lance owned it?

a) store of value

b) unit of exchange

c) unit of account

d) medium of exchange

Chapter 14 Bank balance sheet

Question 23 1 / 1 point

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?

a) $1.02 billion

b) $270 million

c) $970 million

d) $120 million

Question 24 1 / 1 point

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?

a) $710 million

b) $480 million

c) $110 million

d) $510 million

Chapter 14 Money multiplier

Question 25 1 / 1 point

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 as reserves. What is the money multiplier in this economy?

a) 5

b) 1

c) 10

d) 20

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