ECON102 Q3

The U.S. dollar is an example of fiat money because

• by law, it is decreed as money.
• it is the most widely used currency in international trade.
• it is backed by a large reserve of gold and silver.
• it is the strongest currency in the world.

Which of the following is considered a liability to a bank?

• the bank's loans
• time deposits
• reserves
• the bank's buildings and equipment

Among the assets of a commercial bank are

• loans.
• savings deposits.
• time deposits.
• demand deposits.

Saturn Bank has liabilities of $400,000 and net worth of $125,000. Saturn Bank's assets are

• $525,000. 
• $400,000. 
• $275,000.
• $125,000.

Jaime transfers $2,500 from his checking account to his savings account. This transaction will

• decrease both M1 and M2.
• decrease M1 and not change M2.
• increase both M1 and M2. 
• not change M1 and decrease M2.

The money supply has increased from $1.4 trillion to $1.45 trillion. Which of the following could have caused this increase?

• The Fed increased the discount rate.
• The Fed sold government securities to the public.
• Commercial banks began to hold excess reserves.
• Consumers who were holding money outside the banking system deposit this money.

The First Commertial Bank has $2 million in Deposits. The researves of the Bank are $800,000. The required reserve rate is 10%.  The  First Commercial Bank's excess reserves equal:

• $600,000. 
• $200,000.
• $1,000,000.
• $1,500,000.

Which of the following activities is one of the responsibilities of the Federal Reserve?

• loaning money to other countries that are friendly to the United States
• auditing the various agencies and departments of the federal government
• assisting banks that are in a difficult financial position
• issuing new bonds to finance the federal budget deficit

Which of the following will most likely cause a decrease in the quantity of money demanded? 

• a decrease in the interest rate 
• an increase in the price level
• an increase in nominal aggregate output
• an increase in the interest rate

 A decrease in nominal aggregate output will likely  

• decrease the equilibrium interest rate without changing equilibrium money holdings.
• increase the equilibrium interest rate and decrease equilibrium money holdings.
• increase the equilibrium interest rate without changing equilibrium money holdings.
• decrease both the equilibrium interest rate and equilibrium money holdings.