old exam questions

the demand for money that arises when there are short term emergencies such as natural disasters is called the a. transactions demand for money b. liquidity demand for money c. opportunity cost demand for money d. speculative demand for money

b

the supply of money in the US is determined primarily by a. decision made by the federal reserve and the US treasury b. actions of the fed reserve and banking system c. consumers and the banking system d. demand for money in the economy

b

the voting members of the federal open market committee are all of the members of the board of governors and a. all of the presidents of the 12 federal reseve banks b. all of the members of the board of governors and five of the presidents of the 12 federal reserve banks c. the presidents of the 12 federal reserve banks and three members of the board of governors d. only the members of the board of governors

b

list factors that were major contributors to the onset of the great recession

- collapse of the housing bubble -deregulation of investment banking so that investment banks didnt hvae to hold reserves -increased international linkages in financial markets thanks to securitization, technological advances -fiscal policy that encouraged home ownership - monetary policy that kept borrowing rates low

what is a liquidity trap and list 2 pieces of data that we've seen in class that might suggest that the US economy is in one

- interest rates are as low as they can go - no possible role for monetary policy to lower rates - federal funds rate is already near zero - borrowing rates are just covering inflation - excess reserves are very high

list 2 bankers bank functions that the federal reserve provides to private banks

- the fed makes loans to private banks - fed holds reserves for private banks - fed clears checks for private banks

suppose diego deposits $4000 in his bank. if the reserve ratio is 10 percent, this will lead to a maximum increase of _______ in checking account balances throughout all banks

40,000

recall the application. Securitization refers to a. the fed insurance received by home buyers to protect them from declining home values b. the practice of purchasing loans, repackaging them, and selling them to the financial markets c. the stocks and bonds used as collateral when one financial institution sells mortgages to another financial institution d. the process used by the federal reserve to insure home builders against bank failures

B

as interest rates fall, the a. price of bonds rises b. price of bonds fall c. face value of bonds fall d. promised payments of bonds fall

a

if the FOMC targets a lower federal funds rate, one would expect a. stock prices to immediately rise b. long run stock prices to fall c. yields on old bonds to immediately rise d. secondary market bond prices to immediately fall

a

the decrease the level of output in the short run, the fed should a. conduct an open market sale b. lower the discount rate c. lower the target federal funds rate d. conduct an open market purchase

a

the economic theory that emphasizes the role of difficulties in coordinating economic affairs as a cause of economic fluctuations is known as a. keynesian economics b. supply side economics c. real business cycle theory d. classical economics

a

which of the following would lead to an eventual change in the total money supply? a. a customer's cash withdrawal from an ATM b. a customer moves funds from her checking account to her savings account c. using a credit card to purchase a new television d. depositing a paycheck in a bank

a

loans are an example of a banks

assets

based on the model of the money market, when real GDP increases, the equilibrium interest rate should a. stay the same b. increase c. decrease d. do a little dance

b

after the financial crisis of 2008, the Fed a. directly lowered interest rates on all loans b. directly lowered interest rates on mortgage-backed securities c. changed the composition of its assets to include mortgage-backed securities d. all of the above

c

decreased investment spending in the economy would be a possible result of a. decrease in interest rates b. an open market purchase of bonds by the fed c. an open market sale of bonds by the fed d. an increase in the money supply

c

if increases in defnse spending by the gov "crowd out" private investment spending, this will lead to a. higher levels of real income and wages in the future b. no effets on real income and wages in the future c. lower levels of real income and wages in the future d. higher levels of real income and lower levels of wages in the future

c

members of the federal reserve board of governors a. are appointed to 4 year terms b. are confirmed by the house of reps c. are members of the federal open market committee d. all of the above

c

the US unemployment rate is falling. if the initiaully high levels of unemployment were the result of keynesian recession, then we would currently expect to see a. both WR and I to increase b. WR increase, I decrease c. WR decrease, I increase d. WR and I decrease

c

the great recession affects current policy choices because a. it contributed to capital deepening b. automatic stabilizers dont function during recessions c. federal debt levels got so high d. the fed as exhausted its ability to purchase bonds on the open market

c

following the great depression, the likelihood of "runs on banks has been greatly reduced by the creation of... a. federal reserve system b. m2 c. deposit insurance d. all of the above

c. deposit insurance

during the housing boom, overeager lenders made loans to very risky borrowers a. this reduced the ability of lenders to securitize their mortgagees, and so they stopped lending, which led to a rise in housing prices b. this alerted financial regulators to the problems in the financial industry, which caused them to put a halt to such lending c. this caused the federal reserve to raise its target federal funds rate in an effort to reduce the amount of lending in the housing market, which put an end to the housing boom and led to a fall in housing prices d. this is economically sensible if the loans are well-diversified, posing little chance of causing a decline in housing prices

d

the federal funds rate is the interest rate that a. the fed charges to banks that borrow from it b. banks charge the Fed for using their reserves c. the fed pays on bank reserves d. banks charge each other for borrowed money

d

the appreciation of the dollar will make US goods _____ to foreigners and make imports ______ for US residents - more expensive or less expensive?

more expensive, cheapter