ECN 204 Chapter Notes - Chapter 24: Mortgage Loan, Bank Reserves, Barter
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1. The market in which loans are bought and sold is called the:
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loan market. |
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money market. |
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secondary loan market. |
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primary loan market. |
2. Which of the following is omitted in a barter transaction?
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trade |
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medium of exchange |
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store of value |
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money |
3. If Bill performs plumbing upgrades for Alice in exchange for her incorporating his business, then their _________________________ will be satisfied.
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balance of trade |
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double coincidence of wants |
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convenience of exchange |
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division of labour |
4. 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.
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depend on borrowed money |
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typically generate extraordinary gains |
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make loans to financial capital markets |
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failed to diversify risk |
5. 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 the market value of $400 million, what will its total assets equal?
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$110 million |
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$710 million |
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$480 million |
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$510 million |
6. 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?
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medium of exchange |
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unit of account |
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store of value |
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unit of exchange |
7.Which of the following terms is considered to be a narrow definition of the money supply that includes, among other things, currency?
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savings |
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money |
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M2 |
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M1 |
8. Which of the following institutions determines the quantity of money in the economy as its most important task?
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U.S. Department of the Treasury |
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Federal Open Market Committee |
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Central Bank |
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Federal Reserve Board of Governors |
9. How are the specific interest rates for the lending and borrowing markets determined?
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U.S. Treasury Department Board policy |
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by the forces of supply and demand |
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through open market operations |
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by altering the discount rate |
10.When the central bank lowers the reserve requirement on deposits:
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the money supply increases and interest rates decrease. |
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the money supply and interest rates decrease. |
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the money supply and interest rates increase. |
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the money supply decreases and interest rates increase. |
Question 1. Which of the following is not included in M1?
a- currency
b- demand deposits
c- traveller's checks
d- credit cards
b- exactly $200. c- less than $200. d- None of the above are correct. |
b- M2 but not M1. c- M1 and M2. d- neither M1 nor M2. |
b- are a store of value. c- have led to wider use of currency. d- are part of the money supply. |
b- 20 percent. c- 80 per cent. d- 100 per cent. |
b- serves as a medium of exchange but not as a unit of account. c- is commodity money. d- has no intrinsic value. |
b- $125; one explanation for this relatively small average is that U.S. citizens hold a lot of foreign currency. c- $3,700; one explanation for this relatively large amount is that criminals probably prefer currency as a medium of exchange. d- $3,700; one explanation for this relatively large average is that U.S. citizens hold a lot of foreign currency. |
b- it is a medium of exchange. c- it is a unit of account. d- it has intrinsic value. |
b- government bonds are conducted at the New York Fed's trading desk. c- real estate and other real assets are conducted by the Federal Open Market Committee. d- All of the above are correct. |
b- inflation in the long run and employment and production in the long run. c- inflation in the short run and employment and production in the short run. d- inflation in the short run and employment and production in the long run. |