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Principles of Macroeconomics 2e

Review Questions

Principles of Macroeconomics 2eReview Questions
7.

What are the four functions that money serves?

8.

How does the existence of money simplify the process of buying and selling?

9.

What is the double-coincidence of wants?

10.

What components of money do we count as part of M1?

11.

What components of money do we count in M2?

12.

Why do we call a bank a financial intermediary?

13.

What does a balance sheet show?

14.

What are a bank's assets? What are its liabilities?

15.

How do you calculate a bank's net worth?

16.

How can a bank end up with negative net worth?

17.

What is the asset-liability time mismatch that all banks face?

18.

What is the risk if a bank does not diversify its loans?

19.

How do banks create money?

20.

What is the formula for the money multiplier?

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