ECON 224 Exam 3B
During a recession we would expect:
a budget deficit to increase the federal debt.
If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as:
a medium of exchange.
The board of governors is:
a seven member group that supervises and controls the money and banking system in the United States.
During an expansion, or economic boom, the government uses:
contractionary fiscal policy to decrease government spending and/or increase taxes.
The money supply is composed of:
currency and checkable deposits
When the government is implementing expansionary fiscal policy they may:
increase government spending or decrease taxes.
A budget deficit:
increases the federal debt.
When it is decided to use expansionary monetary policy, the decision is made by:
the FOMC.
Expansionary fiscal policy is used during a recession.
True
One goal of fiscal policy is to control inflation
True
The market for money has a perfectly inelastic supply curve and downward sloping demand curve.
True
if a bank hold $100,000 in checkable deposits and has a 10% reserve requirement. The bank's required reserves are:
$10,000
Suppose the Federal Reserve requires banks to hold 80% of deposits in reserves. A new deposit of $100 is made. What is the maximum INCREASE in the money supply? (Not asking for the total money supply).
$25
A commercial bank has checkable-deposit liabilities of $50,000 and a reserve ratio of 10 percent. What is the amount of required reserves?
$5,000
Suppose a bank has actual reserves of $10,000 and required reserves of $2,000. What is the amount of excess reserves?
$8,000
Which of the following is not a common concern over the debt?
Bankruptcy
Which of the following is not a tool of monetary policy?
Changes to taxation.
Which of the following is included in the money supply, M1?
Deposits in a checking account.
Which of the following is not a responsibility of the Federal Reserve?
Enacting fiscal policy.
Which of the following is an asset of a bank?
Loans.
One function of money is its use as an investment earning interest.
False
The Federal Reserve Bank overseeing South Carolina banks is located in Atlanta, Georgia.
False
The two goals of a bank are earning a profit and increasing the money supply.
False
When the economy experiences a period of high inflation expansionary monetary policy is implemented.
False
The interest rate the Federal Reserve targets is the:
Federal Funds Rate.
Monetary policy is implemented by:
Federal Open Market Committee
The institution that oversees the money supply is known as the:
Federal Reserve
What is one of the advantages of monetary policy over fiscal policy?
Fewer lags, making it quicker to implement.
During a recession, fiscal policy tries to increase real GDP by targeting , while monetary policy targets ___.
G and C; I
Which of the following is not a goal of fiscal policy?
Increase private investment.
Which of the following is a new form of "money" as presented in the Post ClassTed Talk?
Laundry Detergent
Which of the following is a real concern with government debt?
Lowering incentives for taking risk, innovating, and working.
Which of the following is not a function of the Federal Reserve?
Overseeing government spending.
Which of the following statements are true?
Transactions demand does not vary with interest rates because households require money as a medium of exchange.
Which of the following is not a goal of fiscal policy?
Reduce the federal debt.
Which of the following is not a primary source of revenue for the federal government?
Sales Taxes on Alcohol.
Which of the following is not a location of a Federal Reserve Regional Bank?
Seattle
Government outlays includes all except which of the following?
Tax revenue raised based on the income tax.
Monetary Policy is implemented by:
The Federal Open Market Committee.
Suppose Congress is at a stalemate on whether to increase spending or decrease taxes during a recession. This is known as:
The administration lag.
The Supply and Demand for money determine:
The equilibrium interest rate and quantity of money.
A progressive tax system means:
The rich pay a higher marginal tax rate.
One problem with fiscal policy is passing laws in Congress to change government spending or taxation. This problem is known as:
administration lag.
In a fractional reserve banking system:
banks can create money through the lending process.
The federal funds rate is the interest rate __________________ charge(s) ____________________.
banks; other banks.
When government spending exceeds government revenue in a particular year it is known as:
budget deficit
During a recession, the Federal Reserve may (check all that apply):
buy government securities and decrease required reserve ratio.
The reserves of a commercial bank consist of:
deposits at the Federal Reserve Bank.
The accumulation of government spending and revenue over the life of a country is known as the:
federal debt
U.S. currency has value primarily because it:
is relatively scarce, is legal tender, and is generally acceptable in exchange for goods and services.
When banks decide to hold their excess reserves:
it stops the multiple expansion of money.
One problem associated with fiscal policy is:
offsetting state and local spending
Mandatory Outlays are spending associated with:
on-going programs like Social Security and Medicare.
The primary reason money exists is to:
reduce the amount of time searching with others wanting to trade.
During periods of high inflation the Federal Reserve may:
sell securities.
The price of money is:
the interest rate.
The price, or value, of money is determined by:
the supply and demand for money.
The Goal of Medicare is:
to provide medical insurance to all retired individuals.
One reason there is demand for money is:
transaction demand, people need money to purchase goods and services.
One reason money is valuable is due to its acceptability.
true