Chapter 13

Question 1

The concept of the liquidity trap was formulated by

Answer 1

John Maynard Keynes

Question 2

Which is true?

Answer 2

M1 is not part of M2 is part of M3

Question 3

People tend to hold more money as

Answer 3

The price level rises and credit availability falls

Question 4

The opportunity cost of holding money

Answer 4

Varies directly with the interest rate

Question 5

John Maynard Keynes said that people have three motives for holding money. Each of the following is a Keynesian motive except

Answer 5

Inflation

Question 6

The S and L debacle will ultimately cost American taxpayers

Answer 6

About 200 billion

Question 7

Which statement is true?

Answer 7

M2+large denomination time deposits =M3

Question 8

The most narrow definition of the money stock developed by the Federal Reserve System in the U.S. is

Answer 8

M1

Question 9

In the early 1980s the savings and loan associations started making —— loans and paying their shareholders —– interest rates.

Answer 9

Riskier and higher

Question 10

Which is NOT considered money?

Answer 10

Credit Cards

Question 11

The transaction motive for holding money

Answer 11

Are used to make expected expenditures

Question 12

All large financial institutions have to hold a reserve of almost—–% of their demand deposits.

Answer 12

10

Question 13

As interest rate declines the amount of money the public wishes to hold

Answer 13

Rises

Question 14

The demand for money schedule shows that the quantity of money that people want to hold

Answer 14

falls as the interest rate rises

Question 15

Coins in the hands of the public are

Answer 15

Included in both M1 and in M2

Question 16

Back in the Middle Ages, the only safe place to put your money was

Answer 16

In goldsmiths safes

Question 17

Which of the following is most unlike the others?

Answer 17

Passbook savings account

Question 18

Banking began in

Answer 18

Medieval times

Question 19

Each of the owing hurt the savings and loan industry in the 1980’s except

Answer 19

Falling interest rates

Question 20

Which one of the following is not money?

Answer 20

Gold

Question 21

Which statement is true?

Answer 21

Citigroup is the largest American bank.

Question 22

What led to the bankruptcy of the many goldsmiths?

Answer 22

They had a reserve ratio that was too high.

Question 23

If a person writes a check on a Tulsa bank to purchase a new Oldsmobile, he is employing money as:

Answer 23

A medium of exchange

Question 24

Supposed goldsmith Banker had a certain number of gold coins in his safe and he kept writing more and more Goldsmith receipts for people who came in to borrow money. What would be happening to his reserve ratio

Answer 24

It would be failing.