Econ_199_Win_05_Exam__3 - Introduction to Macroeconomics...

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Introduction to Macroeconomics Allen R. Sanderson Economics 19900 Winter 2005 THIRD HOUR EXAMINATION Name (Please Print): ______________________________________ [44 Points Possible] Part I. Multiple Choice. Circle letter corresponding to your answer. One point each; 23 points total. 1. The major income-earning asset of a commercial bank is its ___________________ and its major liability is __________________________ . a. loans; demand deposits b. reserves; Federal Reserve Notes c. time deposits; government bonds d. securities; loans outstanding e. interest-bearing checking accounts; loans from other banks 2. The United States’ biggest trading partner is: a. Canada. b. China. c. England. d. Japan. e. Mexico. 3. The major difference between M1 and M2 is that: a. credit cards are not considered part of M1 but they are in M2. b. currency is the largest component of M1 while demand deposits are the largest part of M2. c. the components of M2 are more liquid that the ones in M1. d. time deposits (such as certificates of deposit) are included in M2 but not in M1. e. travelers’ checks are included in M2 but not in M1. 4. If two currencies allow for the equal value of money such that the same bundle of goods will cost the same in both countries, we refer to this as: a. an official settlements balance. b. trade equalization. c. the Quantity Theory of Money. d. the exchange rate. e. purchasing power parity. 5. If you purchase for $1,000 a bond that pays $50 annually to the holder, and then “the” (that is, the market) interest rate rises to 8 percent, a. the price of the bond will fall to $625. b. the price of the bond will increase to $1,600. c. the price of the bond will increase to $1,030. d. the price of the bond will fall to $970. e. the price of the bond will not change, just the amount it pays to its holder next year. 6. The “double coincidence of wants” problem generally arises: a. with individual barter transactions or in a barter economy in general. b. in international trade contexts because some countries just don’t want what other countries may have to offer. c. when one uses money as a medium of exchange. d. whenever savers don’t want to lend the same amount of funds as investors want to borrow. e. because the Fed’s monetary policy actions do not coincide with an administration’s fiscal policy goals. 1
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7. If the Fed wanted to increase aggregate demand in the short run, it should: a. raise the required reserve ratio to instill confidence in the banking system on the part of savers and investors. b.
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This test prep was uploaded on 04/07/2008 for the course ECON 199 taught by Professor Sanderson during the Fall '07 term at UChicago.

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Econ_199_Win_05_Exam__3 - Introduction to Macroeconomics...

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