Macroeconomics by David Colander 11th Edition-Test Bank

Macroeconomics by David Colander 11th Edition-Test Bank

Macroeconomics, 11e (Colander)
Chapter 10 The Financial Sector and the Economy

1) The financial sector is very important to the economy.

2) The financial sector channels savings back into the spending stream.

3) Cash is an example of a liquid financial asset.

4) Money doesn’t have to have any inherent value to function as a medium of exchange.

5) As long as money serves as a medium of exchange, it also serves as a store of wealth.

6) When a bank creates loans, it also creates money.

7) The Fed is the only formal and legal organization that can create money.

8) If the reserve ratio is 0.10, the money multiplier is equal to 5.

9) In practice, the Fed focuses on changing reserves to change the total money supply.

10) In the real world, policy makers apply the money multiplier to reserves to predict the amount of money in the economy.

11) The financial sector makes the real sector in a modern economy possible.

12) Holding money for the speculative motive is holding cash for unexpected events.

13) A high-risk premium makes default more likely.

14) The risk that all loans will default at the same time is called:
A) systemic risk.
B) diversified risk.
C) liquid risk.
D) security risk.

15) Money can be many things, but it is not:
A) a financial liability.
B) a financial asset.
C) liquid.
D) illiquid.

16) A financial asset is liquid:
A) if it can be carried easily from one place to another.
B) if it can be readily exchanged for another asset or good.
C) only if it takes the form of cash.
D) if it is held by the public and earning interest.

17) The Federal Reserve Bank is the U.S. central bank:
A) whose liabilities serve as cash in the United States.
B) whose assets serve as cash in the United States.
C) who holds, in reserve, all financial assets of banks.
D) who holds, in reserve, all financial liabilities of banks.