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5 Written questions

5 Matching questions

  1. discount rate
  2. change in prices
  3. interest rate = r2
  4. determinants of investment
  5. near monies
  1. a interest rate, expectations about future sales, capital utilization rate, cost of capital relative to the cost of labor
  2. b close substitutes for transactions money such as savings accountsand money market accounts
  3. c MS<MD; at low interest rates ppl hold cash and sell bonds; decr. demand for bonds = decr. price of bonds = incr. interest rates
  4. d interest rate that banks pay to the Fed to borrow money from it; if DR incr. banks borrow less (decr. MS); DR decr. banks borrow more (incr. MS)
  5. e incr. prices = incr. MD (shift line right) and vice versa

5 Multiple choice questions

  1. avg. level of money that earns the most ineterest taking the cost of switching into account
  2. makes money easy to obtain; federal policies that expand money supply (decr. interest rates) in an effort to stimulate the economy
  3. tendency for an increase in gov't spending to case reductions in private investment spending
  4. fee borrowers pay to lenders for the use of their funds
  5. incr. money supply = decr. interest rates and vice versa; inversely proportional

5 True/False questions

  1. links b/w goods and money marketdemand for money depends on income (y); planned investment (I) depends on interest rates (r)


  2. policy mixcombination of monetary and fiscal policy in use at a given time


  3. bankruptcynegative net worth


  4. required reserve ratioa system in which banks keep less than 100% of their deposits available for withdrawal


  5. excess reservesdeposits that a bank has at the federal reserve plus its cash on hand; apprx. 1.5-2% held as vault cash


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