Answer the following statement(s) true (T) or false (F)
1.Currency in the United States is backed by the gold standard.
2.Banks create money by paying interest on deposits.
3.bank that loans $1,000 to a borrower, who then deposits the money in a bank account, has created $1,000 in new money.
4.Banks use their secondary reserves to make loans.
5.A bank with a money multiplier of 4 receives a deposit of $12,000. From that deposit, it has the potential to create $48,000.
1.FALSE
2.FALSE
3.TRUE
4.FALSE
5.TRUE
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If a bank borrows funds for three years, the borrowing will be classified as:
A) demand deposits. B) short-term borrowing. C) stockholders' equity. D) long-term debt.
In late 2007, the Fed began a series of cuts in the federal funds rate. Because the core inflation rate was about two percent, the most likely reason for these interest rate cuts was
A) to increase the real interest rate. B) to avoid a recession. C) to encourage households to save more money. D) to reduce the natural unemployment rate. E) to raise the price of the dollar in the foreign exchange market.
As part of the "exchange rate effect of monetary policy," a lower money supply causes a __________ interest rate and thus __________ of the domestic currency
A) higher; appreciation B) higher; depreciation C) lower; appreciation D) lower; depreciation
Which of the following people are liquidity providers?
A. Used car salesman B. Stock broker C. Real estate agent D. All of these are considered liquidity providers.