macro test (chapters 8 & 11)
If Americans become more thrifty, we would expect
the supply of loanable funds to shift to the right and the real interest rate to fall
if government spending exceeds tax collections
there is a budget deficit
T/F The Federal Open Market Committee directs open market operations by buying and selling securities which are the primary instruments of exercising monetary policy
true
t/f: commodity money has value independent of its use as money
true
t/f: if banks choose to hold excess reserves, lending decreases, and the money supply decreases
true
t/f: if the fed desires to contract the money supply, it could do any of the following: sell government bonds, increase the discount rate, increase the reserve requirement, and increase the interest paid on reserves
true
t/f: the M1 money supply is composed of currency, demand deposits, travelers checks and other checkable deposits
true
t/f: the federal reserve is the central bank of the United States and is run by the seven members of the board of governors
true
which of the following financial market securities would likely pay the highest interest rate?
a bond issued by a start-up company
An increase in the budget deficit is
a decrease in public saving
t/f: credit cards are part of the M2 money supply and are valued at the maximum credit limit of the cardholder
false
t/f: fiat money is money that is used in italy
false
t/f: money and wealth are the same thing
false
t/f: money has 3 functions: it acts as a medium of exchange, a unit of account, and a protection against inflation
false
t/f: when you are willing to go to sleep tonight with $100 in your wallet and you have complete confidence that you can spend it tomorrow and receive the same amount of goods as you would have received had you spent it today, money has demonstrated its function as a medium of exchange
false
commodity money
has intrinsic value
which of the following sets of government policies is the most growth oriented?
lower taxes on the returns to saving, provide investment tax credits, and lower the deficit
which of the following statements is true?
municipal bonds pay less interest than comparable corporate bonds
the feds tools of monetary control are
open-market operations, lending to banks, reserve requirements, and paying interest on reserves
An example of fiat money is
paper dollars
national saving for just saving is equal to
private saving + public saving
credit risk refers to a bond's
probability of default
which of the following is not a function of money?
protection against inflation
An increase in the budget deficit
raise the real interest rate and decrease the quantity of loanable funds demanded for investment
If Americans become less concerned with the future and save less at each real interest rate,
real interest rate rises, and investment falls
which of the following policy actions by the fed is likely to increase the money supply?
reducing reserve requirements
If GDP = $1,000, consumption = $600, taxes = $100, and government purchases = $200, how much is saving and investment?
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a financial intermediary is a middleperson between
borrowers and lenders
which of the following policy combinations would consistently work to increase money supply?
buy government bonds, decrease reserve requirements, decrease the discount rate
if an increase in the budget deficit reduces national saving and investment, we have witnessed a demonstration of
crowding out
the M1 money supply is composed of
currency demand deposits, traveler's checks, and other checkable accounts
If the public consumes $100 billion less and the government purchases $100 billion more (other things unchanging), which of the following statements is true?
saving is unchanged
the board of governors of the federal reserve system consists of
seven members appointed by the president
An increase in the budget deficit that causes the government to increase its borrowing
shifts the supply of loanable funds to the right
An increase in the budget surplus
shifts the supply of loanable funds to the right and reduces the real interest rate
which of the following is an example of equity finance?
stock
to insulate the federal reserve from political pressure,
the board of governors are appointed to fourteen-year terms
if the government increases investment tax credits and reduces taxes on the return to saving at the same time,
the impact on the real interest rate is indeterminate
the discount rate
the interest rate the fed charges on loans to banks
investment is
the purchase of capital equipment and structure
if the fed engages in an open-market purchase, and at the same time, it raise reserve requirements,
we cannot be certain what will happen to the money supply