Review Chapter 30

Which list ranks assets from most to least liquid?

• currency, fine art, stocks

• currency, stocks, fine art

• fine art, currency, stocks

• fine art, stocks, currency

   Money is the most liquid asset available because

• it is a store of value

• it is a medium of exchange

• it is a unit of account

• it has intrinsic value

When an economy uses silver as money, then that economy’s money

• serves as a store of value but not as a medium of exchange

• serves as a medium of exchange but not as a unit of account

• is fiat money

• has intrinsic value

You receive money as payment for babysitting your neighbors' children. This best illustrates which function of money?

• medium of exchange

• unit of account

• store of value

• liquidity

Which of the following best illustrates the medium of exchange function of money?

• You keep some money hidden in your shoe

• You keep track of the value of your assets in terms of currency

• You pay for your oil change using currency

• None of the above is correct

   The Central Bank does all except which of the following?

• It controls the supply of money

• It acts as a lender of last resort to banks

• It makes loans to large business firms

• It tries to ensure the health of the banking system

   If the reserve ratio is 10 percent, the money multiplier is

• 100

• 10

• 9/10

• 1/10

When the Central Bank conducts open market purchases, reserves / money supply

• increase and banks can increase lending

• increase and banks must decrease lending.

• decrease and banks can increase lending

• decrease and banks must decrease lending

  The Central Bank increases the reserve requirement and makes open market purchases. Which of these by itself will increase the money supply?

• neither the increase in the reserve requirement nor the open market purchases

• both the increase in the reserve requirement and the open market purchases

• only the increase in the reserve requirement

• only the open market purchases

In a fractional-reserve banking system, a decrease in reserve requirements

• increases both the money multiplier and the money supply

• decreases both the money multiplier and the money supply.

• increases the money multiplier, but decreases the money supply.

• decreases the money multiplier, but increases the money supply