revision questions chapter 24 pt1

Question 1

a banks asset category that caries the highest interest rate is

Answer 1

loans made to business firms

Question 2

The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a

Answer 2

medium of exchange.

Question 3

When you buy a hamburger for lunch, you are using money as a

Answer 3

medium of exchange

Question 4

If a £750 bond promises to pay £30 a year, the interest rate is

Answer 4

interest rate: annual payment/initial investment x100

30/750 x100= 4%

Question 5

which institutions is NOT a financial intermediary?

Answer 5

The bank of England.

Question 6

what is the deposit multiplier

Answer 6

the change in deposits divided by the change in reserves

Question 7

The real quantity of money is

Answer 7

measured in constant pounds.

Question 8

Financial intermediaries earn a profit

Answer 8

from the spread between the interest rate they pay on deposits and the interest rate they receive on loans.

Question 9

________ in real GDP increase the demand for money and ________ in the interest rate decrease the quantity of money demanded.

Answer 9

Increases; increases