Financial Sector
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Financial Sector
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25 Questions

1. A stock is
2. The best explanation of the quantity theory of money would be
3. If a loan is repaid at a commercial bank
4. What is one effect an increase in the money supply will have on the economy?
5. Christopher decides to buy the electronic back scratcher. He brings it up to the counter and hands the cashier the money to purchase the product. In this scenario, money is serving as
6. Jack wants to buy a new drum set for his band. He goes to two music stores over the weekend to compare prices. For Jay, money is functioning as
7. Two conflicting goals of a commercial bank are
8. A valid reason for requiring commercial banks to have reserve requirements is to
9. The Federal Reserve System is
10. What is a usual course of action if a firm desires to raise investment funds?
11. If Jack deposits $500, and the reserve ratio is 10%, what will result?
12. A bank’s biggest liability is
13. If the required reserve ratio is 25% and a commercial bank has $2 million in cash, $1 million in government securities, $3 million on deposit at a Federal Reserve bank, and $6 million in demand deposits, its total reserves are
14. Consumers will tend to purchase more goods and services using credit if
15. The shift from S1 to S2 on the preceding money supply graph was possibly an attempt to
16. If the Federal Reserve lowered the reserve ratio to 5%, what would be the money multiplier?
17. Which of the following would be considered a major component of the money supply M1?
18. Use the following graph to answer questions 131 and 132. This graph depicts the supply of money in an economy. The shift from S1 to S2 on the preceding money supply graph was most likely caused by
19. M1 money supply refers to
20. Use the following information to answer questions 110 and 111: I. mutual funds II. savings deposits III. currency held by consumers IV. checkable deposits V. money market deposit accounts According to the preceding list of items, which are considered to be part of the M1 money supply?
21. If the consumer price index was 90 in 2011 and five years later in 2016 it was 120, the purchasing power of the U.S. dollar fell by
22. Currency and checkable deposits held by the Federal Reserve and U.S. government
23. Currency in your wallet, travelers’ checks, and checkable deposits represent
24. The value of a bond will decrease if
25. Anna recently celebrated her 18th birthday. In many of her birthday cards, she found slips of paper from the U.S. government promising to repay a loan at a fixed interest rate. These slips of paper are known as

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