PracticeTest3_AnswerKEY - EconS 102, 4th section, 2010 Fall...

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EconS 102, 4 th section, 2010 Fall Practice Test for Exam 3 Multiple Choices __E__1.If action by the President and Congress reduces the federal government budget deficit, then interest rates will ________, the U.S. dollar will ________, and the foreign trade deficit will ________. a. increase; appreciate; increase b. increase; depreciate; increase c. decrease; appreciate; decrease d. decrease; depreciate; increase e. decrease; depreciate; decrease Exhibit 1 EUBANK Assets Liabilities and Net Worth Reserves $ 50,000 Loans $300,000 Securities $150,000 Fed Stock $ 20,000 Checkable deposits $500,000 Net Worth $ 20,000 __C__2. Refer to Exhibit 14-1. If Eubank is holding no excess reserves, what must the required reserve ratio be? a. 5 percent b. 4 percent c. 10 percent d. 20 percent e. 2 percent __A__3.Barter is the exchange of goods and services without the use of money. a. True b. False __A__4.To say that money serves as a store of value is to say that money is a useful way to store wealth for future use. a. True b. False __E__5.Which of the following is not a function of money? a. to act as a medium of exchange b. to act as a unit of account c. to act as a store of value d. to facilitate trade e. to provide a double coincidence of wants __C__6. Suppose the economy is currently operating at full employment, and a negative demand shock shifts the Aggregate Demand curve leftward. If the Fed is pursuing an active monetary policy, which of the following is the most likely response by the Federal Reserve if it wants to maintain full employment?
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a. Decrease the money supply in order to lower the interest rate. b. Decrease the money supply in order to raise the interest rate. c. Increase the money supply in order to lower the interest rate. d. Increase the money supply in order to raise the interest rate. __B__7.Commodity money is something a. that has no intrinsic value b. that has an intrinsic value c. that is based on a valuable metal d. whose value never changes e. whose value changes frequently __D__8.If two kinds of money are circulating at the same time, a. one of them must be commodity money b. one of them must be fiat money c. one of them must be paper money d. the poorer quality one will be offered by purchasers of goods and the better one will be hoarded e. the better quality one will be offered by purchasers of goods and the poorer one will be hoarded __C__9.The term seigniorage refers to a. the conversion of paper money to a valuable commodity b. clipping c. revenue earned from the power to coin money d. fiat money e. none of the above __A__10.Under a fractional reserve banking system, banks may lend out only a fraction of their reserves. a. True b. False __A__11. Banks earn a profit by making loans. a.
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PracticeTest3_AnswerKEY - EconS 102, 4th section, 2010 Fall...

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