Macroeconomics Final

The U.S. Federal Reserve, the Bank of England, the Bank of Japan, and the ECB are all: 1. central banks 2. large commercial banks 3. investment banks 4. a combination of savings and loans and credit unions

central banks

Included in M1 are: 1. checkable bank deposits 2. savings deposits 3. U.S. Treasury bills 4. demand deposits, savings deposits, and U.S. Treasury bills

checkable deposits

Which of the following assets is the most liquid? 1. checkable bank deposits 2. currency 3. stocks 4. money market mutual funds

currency

The Fed's main liabilities are: 1. currency and bank reserves 2. facilities of the 12 district banks 3. corporate stocks and bonds 3. U.S. Treasury Bills

currency and bank reserves

When banks borrow from and lend reserves to each other, they are participating in the _____ market 1. subprime mortgage 2. long-term capital 3. money 4. federal funds

federal funds

loans of reserves from one bank to another are made in the _______ market 1. commodity 2. foreign exchange 3. stock 4. federal funds

federal funds

The U.S. dollar is defined as: 1. fiat money, because it was established as money by an act of law 2. faith money, because we trust the gov't to defend its value 3. commodity-backed money, because it is convertible to gold 4. commodity money, because it is widely used to buy commodities

fiat money, because it was established as money by an act of law

The Federal Reserve Bank of the U.S. is 1. a purely private central bank. 2. a purely public central bank. 3. part of the U.S. government. 4. not exactly part of the U.S. government but not really a private institution either.

not exactly part of the U.S. government but not really a private institution either

capital requirements for banks serve all of the following purposes except: 1. to reduce a bank owner's incentive for excessive risk taking 2. to offset the change in incentives caused by deposit insurance 3. to put to use the excess of a bank's assets over its deposits and other liabilites 4. to reduce deposits

to reduce deposits

Suppose your grandma sends you $100 for your birthday and you deposit it in your checking account. The reserve ratio is 10%. Based upon this deposit, the bank's reserves have increased by _____ and the bank's checkable deposits have increased by _____. 1. $100; $100 2. $100; $90 3. $90; $100 4. $10; $100

$100; $100

M2 is: Currency in circulation: $500 Money market funds: $550 Time deposits: $800 Savings deposits: $1,110 Checkable bank deposits: $380 Traveler's checks: $15 American Express gift cards: $25

$3,355 billion

Suppose a bank gets a new deposit of $100 cash and it has a 20% required reserve ratio. If the bank lends the maximum amount of money allowed, then the checkable deposits (including the original deposit) increased by: 1. $20 2. $100 3. $ 500 4. $1,000

$500

First National Bank has $80 million in checkable deposits, $15 million in deposits with the Federal Reserve, $5 million cash in the bank vault, and $5 million in government bonds. The bank has liabilities of: 1. $105 million 2. $95 million 3. $80 million 4. $100 million

$80 million

The Federal Reserve System was established 1. 1913 2. 1971 3. 1857 4. 1873

1913

How many members are there on the Federal Reserve Board of Governors?

7

Which of the following is a function of the Federal Reserve system? I. conducting fiscal policy II. examining and supervising commercial banks in the Fed regions III. evaluating corporate mergers

II only

U.S. Treasury Bills are 1. liability of the U.S. government but an asset to the Federal Reserve. 2. asset of the U.S. government but a liability to the Federal Reserve. 3. part of the net worth of the U.S. government. 4. liability to both the U.S. government and the Federal Reserve.

Liability of the U.S. gov't but an asset to the Federal Reserve

A bank run can break a bank because: 1. borrowers default on their loans, and the bank's assets without facing a large financial loss 2. banks cannot quicly convert illiquid loans to liquid assets without facing a large financial loss 3. depositors' panic spreads to borrowers, who want to take additional loans from the bank 4. the bank's reserves kept with the federal reserve are in the form of illiquid u.s. treasury bonds

banks cannot quickly convert illiquid loans to liquid assets without facing a large financial loss

Which of the following would not fit the economist's definition of money? 1. currency 2. checkable bank deposits 3. coins 4. bonds

bonds

If the Fed conducts an open-market sale, bank reserves ________ and the money supply is likely to _________ 1. increase; increase 2. increase; decrease 3. decrease; increase 4. decrease; decrease

decrease; decrease

The guarantee by the FDIC to reimburse bank customers up to $250,000 per deposit in the event of bank problems is called: 1. fractional reserve banking 2. reserve requirements 3. discount rate 4. deposit insurance

deposit insurance

Suppose the Federal Reserve buys $50 million in Treasury bills from commercial banks. If the reserve ratio is 10%, the monetary supply might eventually _____ by _____. 1. increase; $500 million 2. increase; $450 million 3. decrease; $450 million 4. decrease; $500 million

increase; $500 million

To __________ the money supply, the Federal Reserve could _________ 1. decrease; lower the reserve requirements 2. increase; lower the discount rate 3. increase; conduct open-market sales 4. decrease; lower the federal funds rate

increase; lower the discount rate

In the 19th century before the Civil War, most commodity-backed money in the U.S. was: 1. issued by the Treasury Department 2. issued by the Federal Reserve and redeemable for gold coins 3. issued by private banks and redeemable for silver coins 4. borrowed from banks in Europe

issued by private banks and redeemable for silver coins

Banks create money when they 1. make loans 2. take deposits 3. hold excess reserves 4. pay withdrawals to depositors

make loans

When a bank deposit is withdrawn and kept as currency, bank reserves decrease and the: 1. Monetary base decreases 2. Monetary base does not change 3. Monetary base increases 4. Money supply decreases

monetary base does not change

The double coincidence of wants problem can be solved by: 1. more resources 2. more production 3. money 4. economic growth

money

The major tools of monetary policy available to the Federal Reserve System include: 1. reserve requirements, margin regulations, and moral suasion. 2. reserve requirements, open-market operations, and the discount rate. 3. open-market operations, margin regulations, and moral suasion. 4. the discount rate, margin regulations, and moral suasion.

reserve requirements, open-market operations, and the discount rate

the existence of banks 1. results in the money supply being larger than the amount of currency in circulation 2. inhibits the creation of money 3. makes the money supply equal to the amount of currency in circulation 4. results in the money supply being less than the amount of currency in circulation

results in the money supply being larger than the amount of currency in circulation

money is anything that: 1. serves as a medium of exchange for goods and services 2. can be converted to silver with relatively little loss in value 3. can be converted to gold with relatively little loss in value 4. is traded in the stock market

serves as a medium of exchange for goods and services

Decisions about monetary policy are made by: 1. the president and Congress. 2. the President's Council of Economic Advisers. 3. the Federal Open Market Committee 4. representatives of banks that are members of the Federal Reserve System

the Federal Open Market Committee

Bank runs in the U.S. during the 1930s damaged the economy because 1. capital requirements prevented bank managers from taking additional lending risks 2. the reserve ratio was set too high 3. the Federal Reserve system did not exist at the time 4. the loss of confidence at one bank quckly extended to other banks

the loss of confidence at one bank quickly extended to other banks

Holding everything else constant, if the required reserve ratio falls: 1. the money multiplier increases 2. the $1 loan can lead to a smaller change in the money supply than before in the required reserve ratio can 3. the amount of excess reserves falls also 4. the money multiplier decreases

the money multiplier increases

"Tuition at State University this year is $8,000." Which function of money does this statement best illustrate? 1. store of value 2. medium of exchange 3. unit of account 4. means of deferred payment

unit of account

When a person makes price comparisons among products, money is being used mainly as a(n): 1. unit of account 2. expander of economic activity 3. medium of exchange 4. checkable deposit

unit of account