1a. Which of the following is true for bonds but not for stocks?

A) Bonds are the least liquid form of assets.

B) Bonds represent partial ownership in a company.

C) Bonds earn variable rates of return.

D) Bonds have zero opportunity cost.

E) Bonds are interest-bearing assets.

F) None of the above.

1b. The table below gives the value of various monetary measures, in millions.

Cash in Circulation $100
Cash in Bank Vaults $2
Bank Reserves $10
Demand Deposits $1,000
Traveler’s Checks $20
Based on the table above, what is the value of M1, a measure of the money supply?

A) $100 million

B) $102 million

C) $112 million

D) $1,000 million

E) $1,120 million

1c. On the island of Madera, the local money is favoli. The price of every good in Mabera is expressed as the number of favolis needed to buy the good. The use of favolis to express the price of goods describes which function of money?

A) Store of value

B) Medium of exchange

C) Means of payment

D) Unit of account

E) Store of wealth

F) None of the above.

1d. Which of the following will happen when interest rates increase in an economy?

A) The cost of borrowing will decrease.

B) The spending multiplier will decrease.

C) Investment spending will increase.

D) The opportunity cost of holding money will increase.

E) The price of previously issued bonds will increase.

F) None of the above.