Econ

If a pair of Italian shoes cost 100 euros in Italy, excluding the cost of export, and if the exchange rate is $1 = 0.90 euros, then the same pair of Italian shoes will cost how much in U.S. dollars? $111.11 $90 $211.11 $190

$111.11

The U.S. Public Debt in 2011 is approximately: $15 billion $150 billion $14 trillion $90 trillion

$14 trillion

Suppose the reserve requirement is 20 percent. If a bank has checkable deposits of $4 million and total reserves of $1 million, it can safely lend out: $1 million. $1.2 million. $200,000. $800,000.

$200,000.

Suppose the ABC bank has excess reserves of $4,000 and outstanding demand deposits of $80,000. If the reserve requirement is 25 percent, what is the size of the bank's total reserves? $16,000 $84,000 $24,000 $20,000

$24,000

Suppose a commercial banking system has $200,000 of demand deposits and total reserves of $50,000. If the reserve ratio is 10 percent, the banking system can expand the supply of money by the maximum amount of: $300,000. $30,000. $200,000. $500,000.

$300,000.

Suppose a commercial banking system has $100,000 of outstanding checkable deposits and total reserves of $35,000. If the reserve ratio is 20 percent, the banking system can expand the supply of money by the maximum amount of: $122,000. $175,000. $300,000. $75,000.

$75,000.

Assume Company X deposits $100,000 in cash in commercial Bank A. If no excess reserves exist at the time this deposit is made and the reserve ratio is 20 percent, Bank A can lend a maximum of: $50,000. $180,000. $80,000. $500,000. $100,000.

$80,000.

If the exchange rate in the above question changes to $1 = 1.20 euros, the Italian shoes will cost: $120 in the U.S. and imports of Italian shoes will rise $120 in the U.S. and imports of Italian shoes will fall $83.33 in the U.S. and imports of Italian shoes will rise $83.33 in the U.S. and imports of Italian shoes will fall

$83.33 in the U.S. and imports of Italian shoes will rise

The value of the monetary multiplier is: 1/MPS. 1/Excess Reserves. 1/MPC. 1/Required Reserve Ratio.

1/Required Reserve Ratio.

When was the Federal Reserve System created? 1926 1946 1895 1913

1913

Which of the following describes the identity embodied in a balance sheet? Net Worth plus Assets equal Liabilities Assets plus Liabilities equal Net Worth Assets equal Liabilities plus Net Worth Assets plus Reserves equal Net Worth

Assets equal Liabilities plus Net Worth

The group that sets the Federal Reserve Systems policy on buying and selling government securities (bills, notes, and bonds) is the: Federal Advisory Council. Consumer Advisory Council. Council of Economic Advisers. Federal Open Market Committee (FOMC)

Federal Open Market Committee (FOMC)

Say's Law and Classical Macroeconomics were DISPUTED by: John Stuart Mill Adam Smith John Maynard Keynes Jeremy Bentham

John Maynard Keynes

The newest measure of money supply that removes all time deposits from M2 is called: M3 M4 MOM MZM

MZM

The ideas of economist Arthur Laffer became the centerpiece for tax policy during the: Reagan administration Nixon administration Clinton administration Ford administration

Reagan administration

"Supply creates its own demand" is: Okuns law. the basis for the Phillips curve. Say's Law. Laffer's Law.

Say's Law.

Which one of the following is true about the U. S. Federal Reserve System? There are 10 regional Federal Reserve Banks. The head of the U.S. Treasury also chairs the Federal Reserve Board. There are seven members of the Federal Reserve Board. The Open Market Committee is smaller in size than the Federal Reserve Board.

There are seven members of the Federal Reserve Board.

Which of the following statements best describes the twelve Federal Reserve Banks? They are privately owned and privately controlled central banks whose basic goal is to provide an ample and orderly market for U.S. Treasury securities. They are privately owned and publicly controlled central banks whose basic function is to minimize the risks in commercial banking in order to make it a reasonably profitable industry. They are privately owned and publicly controlled by the Board of Governors, whose basic goal is to control the money supply and interest rates in promoting the general economic welfare. They are privately owned and publicly controlled central banks whose basic goal is to earn profits for their owners.

They are privately owned and publicly controlled by the Board of Governors, whose basic goal is to control the money supply and interest rates in promoting the general economic welfare.

Which of the following statements is correct? The actual reserves of a commercial bank equal its excess reserves minus its required reserves. A bank's liabilities plus its net worth equal its assets. When borrowers repay bank loans, the supply of money increases. A single commercial bank can safely lend a multiple amount of its excess reserves.

When borrowers repay bank loans, the supply of money increases

When economists say that money serves as a medium of exchange, they mean that it is: a way to keep wealth in a readily spendable form for future use. a means of payment. a monetary unit for measuring and comparing the relative values of goods. declared as legal tender by the government.

a means of payment.

If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as: a medium of exchange. a store of value. a unit of account. an economic investment.

a medium of exchange.

Suppose that the economy is in the midst of a recession. Which of the following policies would be consistent with active fiscal policy? a postponement of a highway construction program a reduction in agricultural subsidies and veterans' benefits a Congressional proposal to incur a Federal surplus to be used for the retirement of public debt a reduction in Federal tax rates on personal and corporate income

a reduction in Federal tax rates on personal and corporate income

An appropriate fiscal policy for severe demand-pull inflation is: a tax rate increase. depreciation of the dollar. an increase in government spending. a reduction in interest rates.

a tax rate increase.

If you are estimating your total expenses for school next semester, you are using money primarily as: a medium of exchange. a store of value. a unit of account. an economic investment.

a unit of account.

When economists say that money serves as a store of value, they mean that it is: a way to keep wealth in a readily spendable form for future use. a means of payment. a monetary unit for measuring and comparing the relative values of goods. declared as legal tender by the government.

a way to keep wealth in a readily spendable form for future use

The seven members of the Board of Governors of the Federal Reserve System are: appointed by the President with the confirmation of the Senate. elected by Congress from a slate of nominees provided by the President. appointed by the Senate Finance Committee. appointed by the presidents of the twelve Federal Reserve Banks.

appointed by the President with the confirmation of the Senate.

Suppose a commercial bank has demand deposits of $100,000 and the legal reserve ratio is 10 percent. If the bank's required and excess reserves are equal, then its total reserves: are $30,000. are $10,000. are $20,000. cannot be determined from the given information.

are $20,000.

The Federal funds market is the market in which: banks borrow from the Federal Reserve Banks. U.S. securities are bought and sold. banks borrow reserves from one another on an overnight basis. Federal Reserve Banks borrow from one another.

banks borrow reserves from one another on an overnight basis.

The amount by which Federal tax revenues exceed Federal government expenditures during a particular year is the: Federal reserve. budget surplus. public debt. budget deficit.

budget surplus.

The money supply is backed: by the government's ability to control the supply of money and therefore to keep its value relatively stable. by government bonds. dollar-for-dollar with gold and silver. dollar-for-dollar with gold bullion.

by the government's ability to control the supply of money and therefore to keep its value relatively stable.

Discretionary fiscal policy refers to: the authority that the President has to change personal income tax rates. any change in government spending or taxes that destabilizes the economy. the changes in taxes and transfers that occur as GDP changes. changes in taxes and government expenditures made by Congress to stabilize the economy.

changes in taxes and government expenditures made by Congress to stabilize the economy.

In the Employment Act of 1946, the Federal government: agreed to hire, through public works programs, any employees who cannot find jobs with private industry. agreed to subsidize unemployed workers to the extent of 50 percent of their average incomes. committed itself to accept some degree of responsibility for the general levels of employment and prices.

committed itself to accept some degree of responsibility for the general levels of employment and prices.

The U.S. public debt: consists of the historical accumulation of all Federal government deficits and surpluses. refers to the collective amount that U.S. citizens and businesses owe to foreigners. consists of the total debt of U.S. households, businesses, and government. refers to the debts of all units of government--Federal, state, and local.

consists of the historical accumulation of all Federal government deficits and surpluses.

During inflationary times, a Keynesian economist would call for: contractionary fiscal policy and tight monetary policy. expansionary fiscal policy and easy money policy. contractionary fiscal policy and easy money policy. expansionary fiscal policy and tight monetary policy.

contractionary fiscal policy and tight monetary policy.

The budget deficit that occurs because the economy went into recession is known as a: cyclical deficit functional finance standardized budget full-employment budget

cyclical deficit

Excess reserves refer to the: difference between a bank's vault cash and its reserves deposited at the Federal Reserve Bank. minimum amount of total reserves a bank must keep on hand to back up its customers deposits. difference between total reserves and loans. difference between total reserves and required reserves.

difference between total reserves and required reserves.

Supply-side economists argue that tax cuts will: increase saving and investment. increase incentives to work. enhance entrepreneurial risk-taking. do all of the above.

do all of the above.

The money supply is backed: by the government's ability to control the supply of money and therefore to keep its value relatively stable. by government bonds. dollar-for-dollar with gold and silver. dollar-for-dollar with gold bullion.

dollar-for-dollar with gold bullion.

The amount that a commercial bank can lend is determined by its: required reserves. excess reserves. outstanding loans. outstanding checkable deposits.

excess reserves.

The crowding out effect suggests that: imports are replacing domestic production. private investment is increasing at the expense of government spending. government spending is increasing at the expense of private investment. consumption is increasing at the expense of investment.

government spending is increasing at the expense of private investment.

The twelve Federal Reserve Banks: are owned and operated by the U.S. Treasury. were created in 1776. hold the reserve deposits of commercial banks. are also known as national banks.

hold the reserve deposits of commercial banks.

A change in the dollar price of yen from $1 = 100 yen to $1 = 50 yen will: make U.S. goods more expensive to the Japanese. make Japanese goods less expensive to Americans increase U.S.exports and depress Japanese exports. increase Japanese exports and depress U.S. exports.

increase U.S.exports and depress Japanese exports.

The government stimulus package, which was enacted during the recession of 2009, contributed to rising budget deficits, but not to a rising public debt. increased tax revenues, reduced budget deficits, and slowed the growth of the public debt. increased the public debt. was accompanied by equally deep cuts in Federal spending, thus neither increased nor decreased the public debt.

increased the public debt.

Contractionary fiscal policy is so named because it: is expressly designed to contract real GDP. necessarily reduces the size of government. involves a contraction of the nation's money supply. is aimed at reducing aggregate demand and thus achieving price stability.

is aimed at reducing aggregate demand and thus achieving price stability.

Expansionary fiscal policy is so named because it: is designed to expand real GDP. necessarily expands the size of government. involves an expansion of the nation's money supply. is aimed at achieving greater price stability.

is designed to expand real GDP.

Which of the following is not part of the M2 money supply? money market mutual fund balances money market deposit accounts currency large ($100,000 or more) time deposits

large ($100,000 or more) time deposits

The greater the legal reserve ratio, the: higher is the income multiplier. lower is the income multiplier. lower is the monetary multiplier. higher is the monetary multiplier.

lower is the monetary multiplier.

Supply-side economists argue that tax rate cuts will: always reduce tax revenues. may increase tax revenues. always increase budget deficits. have no effect on tax revenues.

may increase tax revenues.

Fiat money is: composed only of checkable deposits. money because the government asserts that it is. money that is "resting" in a commercial bank vault. money that can be redeemed for an intrinsically valuable commodity such as gold.

money because the government asserts that it is.

The primary purpose of the legal reserve requirement is to: prevent banks from hoarding too much vault cash. provide a means by which the monetary authorities can influence the lending ability of commercial banks. prevent commercial banks from earning excess profits. provide a dependable source of interest income for commercial banks.

provide a means by which the monetary authorities can influence the lending ability of commercial banks.

An important routine function of the Federal Reserve Banks is to: supervise the liquidation of the assets of bankrupt state banks. help large commercial banks develop correspondent relationships with smaller commercial banks. advise commercial banks as to the most profitable ways of reinvesting profits. provide facilities by which commercial banks and thrift institutions may clear checks.

provide facilities by which commercial banks and thrift institutions may clear checks.

If the monetary authorities want to reduce the monetary multiplier, they should: lower the legal reserve ratio. raise the legal reserve ratio. increase bank reserves. lower interest rates.

raise the legal reserve ratio.

Recessions have contributed to the public debt by: increasing national saving. increasing real interest rates. increasing the international value of the dollar. reducing national income and therefore tax revenues.

reducing national income and therefore tax revenues.

Recessions have contributed to the public debt by: increasing real interest rates. increasing national saving. reducing national income and therefore tax revenues. increasing the international value of the dollar.

reducing national income and therefore tax revenues.

Which of the following is the most important economic policy function of the Federal Reserve System? holding the deposits or reserves of commercial banks acting as fiscal agents for the Federal government regulating the supply of money the collection or clearing of checks among commercial banks

regulating the supply of money

A major advantage of the built-in or automatic stabilizers is that they: require no legislative action by congress to be made effective. guarantee that the Federal budget will be balanced over the course of the business cycle. automatically produce surpluses during recessions and deficits during inflations. simultaneously stabilize the economy and reduce the absolute size of the public debt.

require no legislative action by congress to be made effective.

The members of the Federal Reserve Board (excluding the Chairman and Vice Chairman): serve seven-year terms. are appointed by the American Economic Association. are elected by votes of the 12 presidents of the Federal Reserve Banks. serve 14-year terms.

serve 14-year terms.

Supply-side economists argue that a major effect of tax cuts is to: lower real GDP and increase the price level. shift the aggregate supply curve rightward. shift the aggregate demand curve leftward. shift the aggregate supply curve leftward.

shift the aggregate supply curve rightward.

The Federal budget deficit is found by: subtracting government revenues from the noninvestment-type government spending in a particular year. cumulating the differences between government spending and tax revenues over all years since the nation's founding. subtracting government tax revenues from government spending in a particular year. subtracting government tax revenues plusgovernment borrowing from government spending in a particular year.

subtracting government tax revenues from government spending in a particular year.

Say's law indicates that: a stable, inflexible interest rate will guarantee perpetual full employment. falling prices will decrease the purchasing power of a declining level of total money demand. supply creates its own demand. prices which rise most during prosperity are likely to fall least during depression.

supply creates its own demand

The Laffer curve is a central concept in: monetarism Keynesianism welfare economics supply-side economics.

supply-side economics.

A Keynesian economist who advocates an active fiscal policy would recommend: increases in government spending during recession and tax cuts during inflation. tax increases during recession and tax cuts during inflation. tax cuts during recession and increases in government spending during inflation. tax cuts during recession and reductions in government spending during inflation.

tax cuts during recession and reductions in government spending during inflation.

A Keynesian economist who advocates an active fiscal policy would recommend: tax cuts during recession and increases in government spending during inflation. tax cuts during recession and reductions in government spending during inflation. tax increases during recession and tax cuts during inflation. increases in government spending during recession and tax cuts during inflation.

tax cuts during recession and reductions in government spending during inflation.

The basic policy-making body in the U.S. banking system is: the 12 District Banks of the Federal Reserve. the Board of Governors of the Federal Reserve. the Federal Advisory Council. the Council of Economic Advisers.

the Board of Governors of the Federal Reserve.

Classical macroeconomics was dealt severe blows by: the Great Depression and Keynes's macroeconomic theory. the Second World War and the writings of Milton Friedman. Adam Smith and his idea of the invisible hand. the strong recovery after the Second World War and Alvin Hansen's stagnation thesis.

the Great Depression and Keynes's macroeconomic theory.

Assume the government purposely incurs a budget deficit that is financed by borrowing. As a result, interest rates rise and the volume of private investment spending declines. This illustrates: the wealth effect. the equation-of-exchange effect. the paradox of thrift. the crowding-out effect.

the crowding-out effect.

If the exchange rate changes from $1 = 2 British pounds to $1 = 1.5 British pounds: the dollar has appreciated in value. the dollar has depreciated in value. the dollar has neither appreciated nor depreciated, but the pound has appreciated in value. U.S. imports from Great Britain will increase.

the dollar has depreciated in value.

According to classical Economists: demand creates its own supply. wages and prices are inflexible downward the market system ensures full employment Say's law is invalid.

the market system ensures full employment.

In defining money as M1 economists exclude time deposits because: the intrinsic value of time deposits is nil. the purchasing power of time deposits is much less stable than that of checkable deposits and currency. they are not directly or immediately a medium of exchange. they are not recognized by the Federal government as legal tender.

they are not directly or immediately a medium of exchange.

To say that the Federal Reserve Banks are quasi-public banks means that: they are privately owned, but managed in the public interest. they deal only with banks of foreign nations and do not have direct business contact with U.S. banks. they deal only with commercial banks, and not the public. they are publicly owned, but privately managed.

they are privately owned, but managed in the public interest.

The reserve ratio refers to the ratio of a bank's: reserves to its liabilities and net worth. capital stock to its total assets. demand deposits to its total liabilities. total reserves to its demand deposits.

total reserves to its demand deposits.