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Questions relating to the money and the macroeconomy

Macro set #3 all questions need help


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Most of these are true by definition, but I have provided explanations where I thought they would be useful. Let me know if you need any further assistance with understanding these answers and thank you for using BrainMass.

1. A financial intermediary is an institution that
? Collects funds from lenders and distributes these funds to borrowers

2. A ___________ is a financial intermediary that provides liquid assets in the form of bank deposits to lenders and uses those funds to finance the illiquid investments or investment spending needs of borrowers
? Bank

3. A pension fund
? Is a type of mutual fund that holds assets in order to provide retirement income to its members

4. Money is best defined as
? Anything you can trade in exchange for other goods and services

In the case of fiat money, there would be no intrinsic value and is therefore not an asset.

5. A liquid asset
? Can be quickly converted into currency

6. Money that has value apart from its use as money is
? Commodity money

7. Fiat money is
? A medium of exchange whose value derives entirely from its official government status as a means of payment

8. Which of the following is not a role of money
? Liquid reserve

9. The medium of exchange function means money is used
? To pay for goods and services

10. When the economy experiences inflation, money may not be the best
? Store of value

11. The largest component of M1 is
? Currency

12. __________ is the narrowest and most liquid measure of money
? M1

13. A fractional reserve banking system is one in which banks are required to hold
? A fraction of total deposits on reserve

14. Which of the following are bank reserves
? Deposits with the federal reserve

Reserves consist of vault cash and deposits at the Fed

15. Excess reserves are
? A bank's reserves over and above its required reserves

16. Banks create money when they
? Loan money

When a bank makes a loan based on a ...

Solution Summary

Purposes of money in the macroeconomy