Which of the following correctly describes fractional reserve banking?
a. The federal government only insures a fraction of the deposits at most banks.
b. Banks keep a fraction of their loans with other banks to maintain the quality of their loan portfolio.
c. Banks can loan out all but a small fraction of its own money, but must hold all money deposited at the bank on reserve in bank vaults.
d. Banks can loan out all but a fraction of its own money, but must hold all money deposited at the bank on reserve in bank vaults.
QUESTION 2GDP per capita is a relatively good measurement of:
a. the distribution of income. b. purchasing power.
c. household production. d. the standard of living.
QUESTION 3In the aggregate expenditures model, if an economy operates below equilibrium GDP, there will be unplanned inventory accumulation.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 4European banks began with which of the following?
a. Monarchs were the first bankers, lending out cash to help the poor learn a craft.
b. Churches were the first bankers, lending out cash to help the poor learn a craft.
c. Goldsmiths were the first bankers, and the paper receipts they issued for gold held on deposit became valued as money.
d. Fishermen were the first bankers, and the paper receipts they issued for the fish they stored in the hulls of their ships became valued as money.
QUESTION 5The poorest regions in the world, as measured by GDP per capita, are:
a. Latin America and the Caribbean. b. the Middle East and North Africa.
c. Sub-Saharan Africa and South Asia. d. Australia and New Zealand.
QUESTION 6In the aggregate expenditures model, if aggregate expenditures (AE) are less than GDP, then GDP decreases.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 7Describe the functions of the Federal Reserve System.
QUESTION 8The economies of most less-developed countries (LDCs) are based on:
a. agriculture. b. manufacturing.
c. services. d. oil.
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