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Unformatted text preview: Table 1. GDP $ 2,500.00 Net Taxes $ 700.00 Government Purchases $ 800.00 Planned Investment $ 400.00 Consumption $ 1,300.00 1. Refer to the Table 1. What is the status of the federal budget? a. Budget surplus of $100 b. Budget deficit of $100 c. Budget surplus of $200 d. Budget deficit of $200 2. Refer to the Table 1. What is the supply of loanable funds during the year? a. $500 b. $400 c. $1,300 d. $1,200 3. Refer to the Table 1. What is the demand for loanable funds during the year? a. $500 b. $400 c. $1,300 d. $1,200 4. Given the following information, what would be the values of M1 and M2? Small time deposits $650 billion Checking deposits $300 billion Savings-type accounts $750 billion Money market mutual funds $600 billion Travelers' checks $ 25 billion Large time deposits $600 billion Cash in hand $100 billion a. M1: $400 billion; M2: $2,450 billion b. M1: $100 billion; M2: $1,075 billion c. M1: $425 billion; M2: $2,425 billion d. M1: $425 billion; M2: $3,025 billion e. M1: $1,175 billion; M2: $1,850 billion 5. Financial intermediaries are important because a. the process of finding loans is complicated b. firms are usually unwilling to part with extra revenue c. they are examples of banks d. we could not function in society without them e. they facilitate efficient transactions between borrowers and lenders 6. If a commercial bank has assets valued at $200 million and a net worth of $20 million, what is the value of the bank's liabilities? a. not enough information to determine b. $20 million c. $220 million d. $180 million e. $200 million 7. If the required reserve ratio is 0.2, and a bank has $100 million in demand deposits and $40 million in property and buildings, it must hold reserves of at least a. $8 million b. $20 million c. $26 million d. $12 million e. $10 million 8. If the reserve requirement is 0.2 and demand deposits are $800 (assume no earlier loans), the banks can lend out a. $800 b. $80 c. $640 d. $160 e. $460 9. Assuming that households do not change their cash holdings and banks loan out all of their excess reserves, if the required reserve ratio (RRR) is 10 percent and the Fed purchases $2,000 worth of bonds from banks, how much money will be eventually created? a. $1,800 b. $2,000 c. $9,000 d. $18,000 e. $20,000 10. If the interest rate dropped, what would be the effect on spending? a. Spending on automobiles would decrease. b. Business spending on new capital would decrease. c. Spending on consumer durables would decrease. d. Business spending on new factories would increase. e. Spending on new homes would decrease. 11. The opportunity cost of holding money is a. the dollar cost necessary to change other assets into money b. the time cost of accessing funds c. the value of the goods and services a person is able to obtain with the money d. the interest a person could have earned by holding other forms of wealth instead e. zero, because opportunity costs only apply to real assets, goods and services 12. Suppose that a generic hotel room costs $80 per night in the United States and 80 euros per night in...
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This note was uploaded on 09/14/2011 for the course ECON 103 taught by Professor Gispy during the Spring '11 term at Prairie State College .
- Spring '11