1) Which of the following assets is the most liquid? A. Transactions deposits. B
ID: 1112379 • Letter: 1
Question
1) Which of the following assets is the most liquid?
A. Transactions deposits.
B. Stocks and bonds.
C. A certificate of deposit (CD).
D. Cash
2) If Maria buys a latte at Starbucks, her money serves as a
A. store of value.
B. medium of exchange.
C. unit of accounting.
D. standard of deferred payment.
3) People with savings often deposit their funds in a commercial bank, rather than investing them directly with business enterprises, in order to
A. avoid the problems associated with financial intermediation.
B. earn the highest possible return for taking on the riskiest investments.
C. avoid the problems associated with asymmetric information.
D. All of the above are correct.
4) As a "lender of last resort," the Fed
A. protects the deposits of $100,000 or less in all commercial banks in the country.
B. provides loans to banks experiencing temporary liquidity problems.
C. is obligated to bail out any depository institution in the country that is in financial difficulty.
D. bails out any corporation the government has decided should not fail.
5) The level of reserves in the monetary system is determined by
A. the Treasury Department.
B. the President of the United States.
C. Congress.
D. the Federal Open Market Committee
6) Which of the following would reduce the money multiplier?
A. Lowering the required reserve ratio
B. Increases in the required reserve ratio
C. A flow of currency into the banking system
D. The purchase of bonds by the Fed
Explanation / Answer
The correct option is (C). The correct option is (B). exchanges latte for money. The correct option is (c). There is assymetric information. The business enterprises have better knowledge then people. The correct option is (c).
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