Question

1. A person had 10 pounds of gold and issued 100 notes on animal skins which promised a pound of gold to the holder of the note:

a) Was issuing fiat money

b) Was engaging in fractional reserve banking

c) Was applying a reserve requirement of 10 percent

d) All of the above

2. Money

a) Facilitates trade and specialization

b) Discourages saving

c) Discourages investment

d) All of the above

3. The financial sector

a) Facilitates saving and investment

b) Makes saving easier

c) Promotes investment

d) All of the above

4. A sophisticated financial sector,

a) Is associated with high-income nations

b) Will typically be associated with low investment rates

c) Is a small sector in the U.S economy

d) All of the above

Answer 1

a) The firm in the market was engaging in fractional reserve banking where a small amount of the gold is backed by actual asset in the bank, the answer is "B".

b) "A"

It facilitates trade and specialization.

c) "D"

A financial sector makes saving easier and promotes investment and helps mobilize the investment and savings.

d) "B"

A sophisticated financial sector is associated with low investment rates and its a large sector in the US economy.