Unit 4 check
Unit 4 check: Financial Sector
10 questions from 7 lessons in Unit 4. Answer each one, and if you miss, follow the link back to where it is taught, then try again. Your score counts first tries.
Question 1 · from 4.1 · Select all
Which two of these are the most liquid forms of money? Select two.
Select 2 answers, then check.
Question 2 · from 4.2 · Calculate
Marco kept his savings in an account that paid a nominal interest rate of 1.5% for the year. When the year began, forecasters expected inflation of 2.0%. Over the year, prices actually rose 4.0%. What real interest rate did Marco earn, in hindsight? Give a negative number if it is negative.
Question 3 · from 4.3 · Multiple choice
In late April 2020 the Federal Reserve removed its limit of six withdrawals or transfers a month from savings accounts. FRED series M1SL and M2SL (Federal Reserve data, seasonally adjusted) show U.S. M1 rising from $4,856.4 billion in April 2020 to $16,312.5 billion in May 2020, while M2 rose only from $17,064.0 billion to $17,931.9 billion. What best explains the jump in M1?
Question 4 · from 4.4 · Decide and justify
Esterra is an invented economy whose banks have limited reserves and a required reserve ratio of 20 percent. Its banks receive $10 billion of new excess reserves, and an analyst says the money supply will now grow by exactly $50 billion. Will it?
Which reason supports your choice?
Setup for question 5
Larkmoor, a fictional economy, has a banking system with limited reserves, and its money supply is $600 billion. The table shows how much money households and firms in Larkmoor want to hold at each nominal interest rate.
| Nominal interest rate | Quantity of money demanded (billions of dollars) |
|---|---|
| 2% | 800 |
| 3% | 700 |
| 4% | 600 |
| 5% | 500 |
| 6% | 400 |
| 7% | 300 |
Question 5 · from 4.5 · Fill the statement
Tap a blank, then tap an amount.
Larkmoor's money market is in equilibrium at a nominal interest rate of , where the quantity of money demanded equals .
Question 6 · from 4.6 · Spot the error
Graymarsh's banking system has ample reserves, and its central bank lowers the interest rate it pays on reserves. A student described the reserve market graph they drew. Tap the first line with a mistake.
Question 7 · from 4.7 · Decide and justify
In Lorvan, firms cut their borrowing plans, and the real interest rate falls from 4% to 2%. Nothing changes households' saving plans. What happens to the quantity of loanable funds that savers supply?
Which reason supports your choice?
Question 8 · from 4.1 · Sort it
Each card describes one financial asset. Tap a card, then tap the kind of asset it describes.
Bond
Stock
Question 9 · from 4.2 · Calculate
A bank wants an expected real interest rate of 2.5% on one-year loans to small businesses, and it expects inflation of 3.5% over the year. What nominal interest rate should it charge?
Question 10 · from 4.3 · Fill the statement
Tap a blank, then tap a phrase.
The monetary base is currency in circulation plus . Bank reserves are counted in , while checking deposits held by the public are counted in .
0 of 10 answered.