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    Questions relating to the money and the macroeconomy

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    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