AP Macro Unit 4: Financial Sector

Front

Cash, a house, bonds, and a savings account are all financial assets. Which of the following rankings lists these assets from the least liquid to the most liquid? House, bonds, savings account, cash; Savings account, cash, bonds, house; Bonds, house, savings account, cash; House, cash, savings account, bonds

Back

House, bonds, savings account, cash

Front

Spencer took a 9 percent one-year fixed-rate loan to buy a new car. He expected to pay a real interest rate of 5 percent. If at the end of the year Spencer only paid a 3 percent real interest rate, which of the following is true?

Back

The actual inflation rate was 6%.

Front

Which of the following describes the relationship between the nominal interest rate and the quantity of money people want to hold as depicted by the money demand curve? Options: Inverse, and the money demand curve is downward sloping.; Positive, and the money demand curve is downward sloping.; Inverse, and the money demand curve is upward sloping.; Positive, and the money demand curve is upward sloping.

Back

Inverse, and the money demand curve is downward sloping.

Front

Suppose that the economy has entered a recession. Which of the following is a monetary policy action a central bank can take to restore full-employment output? Selling government bonds, Increasing the required reserve ratio, Decreasing the discount rate, Increasing or decreasing taxes.

Back

Decreasing the discount rate

Front

If the expected inflation rate increases, what will happen to Sam's payments on a five-year fixed interest rate auto loan?

Back

Sam will pay a lower real interest rate.

Front

Which of the following is a monetary policy action a central bank would implement to control inflation?
Lower the required reserve ratio,
Lower the discount rate,
Target a lower overnight interbank lending rate,
Sell government bonds to the public

Back

Sell government bonds to the public

Front

The use of favolis to express the price of goods is ...

Back

Unit of account

Front

ABC Bank is a commercial bank in Country X. Assume the required reserve ratio is 25%. If ABC Bank sells $20 million worth of government bonds to Country X’s central bank, what will happen to the money supply?

Back

The money supply will increase by a maximum of $80 million.

Front

Liquidity

Back

ease with which an asset can be accessed and used as a medium of exchange

Front

A Store of Value

Back

allows you to store purchasing power for the future