3rdexam_f2011_ans_version1

# 3rdexam_f2011_ans_version1 - Name Discussion Section...

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Name______________________________________________ Discussion Section Instructor____________________________ Note: If you do not include the name of your official TA, you will be deducted 1 point from your exam total Econ 102: Fall 2011 (Eudey) Third Exam Version 1 The exam is worth 50 points. Please circle your selection in the multiple choice problems, and write your answer in the space provided for the short-answer problems. Each multiple-choice and true/false question is worth 1 point. The point-allocation for short-answer questions is indicated at the start of each short-answer problem. No books or notes are allowed during the exam. Multiple Choice: Circle the letter for the best answer from the choices provided 1. The transaction demand for money comes mostly from the fact that A) money is a store of value. B) money is a medium of exchange. C) money is a unit of account.

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D) money has low opportunity cost. Answer: B 2. Suppose that the interest rate available to you on a long-term bond is 4 percent. If you hold \$1,000 of your wealth in currency instead of in the form of a bond, the annual opportunity cost is A) \$0.04. B) \$4. C) \$40. D) \$400. Answer: C 3. The demand for money that arises because holding money over short periods is less risky than holding stocks or bonds is called the A) transactions demand for money. B) liquidity demand for money. C) opportunity cost demand for money. D) speculative demand for money. Answer: D 4. Decreased investment spending in the economy would be a possible result of A) a decrease in interest rates. B) an open market purchase of bonds by the Fed. C) an open market sale of bonds by the Fed. D) an increase in the money supply. Answer: C
5. The federal funds rate is the interest rate that A) the Fed charges to banks that borrow from it. B) banks charge the Fed for using their reserves. C) the Fed pays on bank reserves. D) banks charge each other for borrowed money. Answer: D 6. Based on the model of the money market, when real GDP increases, the equilibrium interest rate should A) stay the same. B) increase. C) decrease. D) increase to the same extent that the supply of money increases. Answer: B

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7. As interest rates fall, the A) price of bonds rises. B) price of bonds falls. C) face values of bonds fall. D) promised payments of bonds fall. Answer: A 8. If a bond was to pay off one year from now for \$630 and was purchased for \$600, what is the interest rate? A) 3 percent B) 5 percent C) 15 percent D) 30 percent Answer: B 9. If, during an economic recovery, interest rates rose too fast and negatively impacted the recovery, what might the Fed do to reverse this impact? A) decrease the liquidity demand for money B) make an open market purchase C) increase reserve requirements D) increase the discount rate Answer: B
10. The appreciation of the dollar will make U.S. goods ________ to foreigners and make imports ________ for U.S. residents. A) more expensive; more expensive

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## This note was uploaded on 03/28/2012 for the course ECON 102 taught by Professor Drozd during the Fall '08 term at University of Wisconsin.

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3rdexam_f2011_ans_version1 - Name Discussion Section...

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