IG economics-unit 3

What is a function of a central bank?

• collecting taxes

• issuing currency

• providing bank accounts for individuals

• setting foreign trade tariffs

What is a function of a commercial bank?

• acting as the lender of last resort

• deciding what is a legal tender

• determining monetary policy

• providing overdrafts

A central bank acts as a lender of last resort especially in times of financial crisis.

What is the purpose of this function?

• to cover credit card debts of consumers

• to provide liquidity to the bank system

• to remove failing banks from the financial system

• to safeguard the profits of the banking system

‘Savers suffer as inflation rises to 4.4 %.’

Which function of money is most involved in this statement?

• means of deferred payments

• medium of exchange

• store of value

• unit of account

For anything to be used as money, it must be

• a fixed value.

• in fixed supply.

• legal tender.

• readily acceptable

Which factor is likely to cause an increase in people’s savings?

• an increase in tax rates

• an increase in the interest rate

• a reduction in economic uncertainty

• a reduction in real wages

On completing your studies, you decide you want to work in an organisation that is big enough to give you a chance of promotion but where weekend or shift work will not normally be required.

Which would be the best one to choose?

• a dental surgery

• a hairdressing salon

• an income tax office

• a newspaper publisher

Which asset is the most illiquid?

• cash

• money order

• government bonds

• a house

In developed economies, as a person’s real income rises, a lower proportion of that income is usually spent on

• food

• holidays

• leisure activities

• personal transport.

What would encourage a rise in spending but not a rise in saving?

• easier credit facilities

• more people working

• rising interest rates

• rising standards of living