econ final

sumit deposits 1500 cash into his checking account. the reserve requirement is 25%. How many dollars worth of loans can the banking system create?

$4,500

M1 for June 2010 was

1.737.4 billion

the _____ oversees the main tool of monetary policy

Federal open market committee

It takes Melissa eight hours to produce a bushel of corn and two hours to wash and polish a car. It takes Greg six hours to produce a bushel of corn and one hour to wash and polish a car.

Greg has a comparative advantage in washing cars

the demand for loanable funds is downward sloping because

as interest rates fall, businesses find more projects to be profitable and thus want to borrow more

the us economy is currently experiencing high unempolyment and low inflation. To lessen the unemployment problem the Fed could:

buy bonds, enable banks to lend more, increase money supply, stimulated spending, and create jobs.

a higher interest rate _____ consumption, investment, and _______, which ______ aggregate demand

decreases; imports; decreases

the twin goals of monetary policy are

economic growth with low unemployment and stable prices with moderate long-term interest rates

suppose the Fed increases required reserves from 10% to 20% of deposits. Assuming that banks are fully loanded up, the money supply will ____ and the value of the money multiplier will ____ to _____

fall, fall. 5

suppose a perpetuity bond with a face value of 1000 has a coupon rate of 8%. if interest rates rise to 12%, the price of the bond:

falls to 880

open market operations involve the purchase and sale of

government securities

if the dollar depreciates relative to the yaun, then american exports to china will

increase

which economists believe that fiscal policy is ineffective, while monetary policy is effective?

monetarists

which country has its own national currency

nicaragua

keynesian theory

states that open market operations and an increase in the money supply lead people to buy bonds, causing bond prices to rise and interest rates to fall, and increase the investment component of aggregate demand.

if the infant industry argument is used to justify protecting an industry that has already matured, then

stockholders lose because the firms in that industry cannon compete with other firms.

the Federal Reserve will keep the inflation rate constant, regardless of evolving economic conditions, if it is using

the Taylor rule