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Exam 9: Saving and Capital Formation

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Question 41

Multiple Choice

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A financial intermediary that sells shares in itself to the public, and then uses the funds to buy a wide variety of financial assets is called a:

A) commercial bank.
B) credit union.
C) stock exchange.
D) mutual fund.

E) C) and D)
F) A) and B)

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Question 42

Multiple Choice

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If M stands for the money stock, P for the price level, and Y for real GDP, then velocity, V, equals:

A) (P × Y) ÷ M.
B) (P × M) ÷ Y.
C) (M × Y) ÷ P.
D) (M × P) ÷ Y.

E) All of the above
F) B) and C)

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Question 43

Multiple Choice

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The rate of return that financial investors require to hold a risky asset minus the rate of return on a safe asset is called the:

Fred purchases a bond, newly issued by the Big Time Corporation, for $10,000. The bond pays $400 to its holder at the end of the first, second, and third years and pays $10,400 upon its maturity at the end of four years. The principal amount of this bond is ___, the coupon rate is ____, and the term of this bond is _____.

The ongoing search by savers for high returns leads the bond and stock markets to direct funds to the uses that appear:

Chris pays $10,000 for a newly issued two-year government bond with a $10,000 face value and a 6 percent coupon rate. One year later, after receiving the first coupon payment, Chris sells the bond. If the current one-year interest rate on government bonds is 7 percent, then the price Chris receives is:

In the United States saving is allocated to its most productive use by:

Finding both parties to a trade who have something the other party wishes to trade for is called a:

If bank reserves are 200, the public holds 400 in currency, and the desired reserve/deposit ratio is 0.25, the deposits are ______ and the money supply is _____.

Banks help savers find productive uses for their funds because banks have specialized in:

A decrease in the perceived riskiness of the stock of Company A ______ the risk premium investors require to purchase Company A stock and ______ the price of Company A stock.

Shares of stock are:

The speed at which money circulates is called:

Based on the following information, the value of the M1 measure of the money supply is ______ and the value of the M2 measure of the money supply is ______. $\begin{array}{lr}{\text { Assets }} & \text { Billions of Dollars } \\\text { Currency } & 20 \\\text { Demand deposits } & 300 \\\text { Money market mutual funds } & 800 \\\text { Travelers' checks } & 10 \\\text { Savings deposits } & 1,800 \\\text { Other checkable deposits } & 200 \\\text { Small denomination time deposits } & 1,100\end{array}$

Nominal GDP divided by the money stock equals:

You own shares in a well-managed and diversified company. If a booming economy decreases investors' concerns about market risk, then the price of your shares will _____, holding other factors constant.

If you put a $20 bill in the pocket of your winter coat at the beginning of spring so that you will be surprised when you find it again next winter, you are using money as:

The practice of spreading one's wealth over a variety of different financial investments in order to reduce overall risk is called:

There is $5,000,000 of currency in Econland, all held by banks as reserves. The public does not hold any currency. If the banks' desired reserve/deposit ratio is 0.25, then the money supply equals:

Credit card balances are not considered to be money primarily because they: