AP Macro 4.1-4.3 MCQ
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29 Terms
Which of the following is a task of the financial system?
decreasing transaction costs
3 multiple choice options
Which of the following is NOT a type of financial asset?
houses
3 multiple choice options
An asset that can be easily converted into cash is considered
liquid
3 multiple choice options
A financial intermediary that creates a stock portfolio by buying and holding shares in companies and then selling the shares of the stock portfolio to individual investors is a
mutual fund
3 multiple choice options
Stocks
all of the above
3 multiple choice options
When the interest rate increases, the price of previously issued bonds will
decrease
3 multiple choice options
Bonds are
all of the above
3 multiple choice options
The interest rate published by a bank in an advertisement is the
nominal interest rate
3 multiple choice options
When the expected inflation rate is 2% and lenders want a return of 3% on their loans, the nominal interest rate will be set at
5%
3 multiple choice options
If the actual rate of inflation exceeds the expected rate of inflation, which of the following is true?
all of the above
3 multiple choice options
Real interest rates can be negative when which of the following is true?
Actual inflation is greater than the nominal interest rate
3 multiple choice options
The real interest rate will equal the nominal interest rate when inflation is equal to
zero
3 multiple choice options
When lenders begin to expect inflation, nominal interest rates will
rise
3 multiple choice options
If nominal interest rates equal 3% and real interest rates are 2%, the expected rate of inflation
is 1%
3 multiple choice options
When you use money to purchase lunch, money is serving which role?
medium of exchange
3 multiple choice options
Which of the following is the most liquid measure of the money supply?
dollar bills
3 multiple choice options
Which of the following is the best example of using money as a store of value?
A babysitter puts her earnings in a dresser drawer while she saves to buy a bicycle.
3 multiple choice options
Which of the following is NOT a role of the Federal Reserve System?
printing currency
3 multiple choice options
Who oversees the Federal Reserve System?
The Board of Governors of the Federal Reserve System
3 multiple choice options
A central bank could do which of the following in order to change the monetary base?
all of the above
3 multiple choice options
Which of the following is true for bonds but not for stocks?
Bonds are interest-bearing assets
3 multiple choice options
Which of the following is considered the most liquid asset?
Currency
3 multiple choice options
Which of the following will happen when interest rates increase in an economy?
The opportunity cost of holding money will increase
3 multiple choice options
If the interest rate on loans before adjusting for inflation is 9%, and the expected inflation rate is 4%, then which of the following must be true?
The nominal interest rate is 9%
3 multiple choice options
Sam pays monthly installments on a five-year fixed interest rate auto loan. If the expected inflation rate increases, which of the following will happen?
Sam will pay a lower interest rate
3 multiple choice options
Which of the following best describes the nominal interest rate on a mortgage loan that a bank offers to a customer?
It is the interest rate charged by the bank
3 multiple choice options
On the island of Mabera, the local money is called "favoli." The price of every good in Mabera is expressed as the number of favolis needed to buy the good. The use of favolis to express the price of goods describes which function of money?
unit of account
3 multiple choice options
The table below gives the value of various monetary measures in millions of dollars.
Cash in Circulation: $100
Certificates of Deposit: $2
Bank Reserves: $10
Demand Deposits: $1,000
Savings Deposits: $20
Based on the table, what is the value of M1, a measure of the money supply?
$1,120 million
3 multiple choice options
The table below gives the value of various monetary measures in millions of dollars.
Cash in Circulation: $100
Certificates of Deposit: $2
Bank Reserves: $10
Demand Deposits: $1,000
Savings Deposits: $20
Based on the table, what is the value of the monetary base
$110 million
3 multiple choice options
