Econ test 4

To increase the money supply, the Fed could

decrease the reserve requirement.

In a fractional-reserve banking system, an increase in reserve requirements

decreases both the money multiplier and the money supply.

Other things the same if reserve requirements are decreased, the reserve ratio

decreases, the money multiplier increases, and the money supply increases.

Which of the following is included in both M1 and M2?

demand deposits

Bank regulators impose capital requirements in order to

ensure banks can pay off depositors.

If the public decides to hold less currency and more deposits in banks, bank reserves

increase and the money supply eventually increases.

Suppose that roofers are not unionized. If roofers unionize, then the supply of labor in other sectors of the economy will

increase, reducing wages in industries that are not unionized.

When a bank loans out $1,000, the money supply

increases

Which of the following is not a tool of monetary policy?

increasing the government budget deficit

fractional-reserve banking system, a bank

keeps only a fraction of its deposits in reserve.

how to find labor force rate

labor force / adult population

If the discount rate is raised then banks borrow

less from the Fed so reserves decrease.

As opposed to a payments system based on barter, a payments system based on money

makes trades less costly.

When there is a reserve requirement, banks

may hold more than, but not less than, the required quantity of reserves.

Suppose banks decide to hold fewer excess reserves relative to deposits. Other things the same, this action will cause the

money supply to rise. To reduce the impact of this the Fed could sell Treasury bonds

The slope of the demand for loanable funds curve represents the

negative relation between the real interest rate and investment.

Lucy quit her job because she was unhappy at work. Genevieve was fired because she frequently surfed the Internet rather than working on her assigned tasks. Who is eligible for unemployment insurance benefits?

neither

Minimum-wage laws and unions are similar to each other but different from efficiency wages in that minimum-wage law and unions

prevent firms from lowering wages in the presence of a surplus of workers.

In a closed economy, what does (T - G) represent?

public

The Fed wants to increase the quantity of funds available through the Term Auction Facility. The Fed sets the

quantity of borrowing, and money supply increases

what gives you reserve ratio

reserves / money supply

To decrease the money supply, the Fed can

sell government bonds or increase the discount rate.

If the Federal Open Market Committee decides to decrease the money supply, it will

sell government bonds.

To decrease the money supply, the Fed could

sell government bonds. b. increase the discount rate. c. increase the reserve requirement. d. All of the above are correct

Efficiency wages contribute to

structural unemployment and the natural rate of unemployment.

The Fed's control of the money supply is not precise because

the amount of money in the economy depends in part on the behavior of depositors and bankers.

Reserve requirements are regulations concerning

the amount of reserves banks must hold against deposits.

Which of the following can banks use to borrow from the Federal Reserve?

the discount window or the term auction facility

Today, bank runs are not a major problem for the U.S. banking system because

the federal government now guarantees the safety of deposits at most banks.

Economists use the term "money" to refer to

those types of wealth that are regularly accepted by sellers in exchange for goods and services.

how to find unemployment rate

unemployed / labor force (employed+unemployed)

The measure of the money stock called M1 includes

wealth held by people in their checking accounts.

If the reserve requirement is 5 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $10, then this bank

will be able to make new loans up to a maximum of $9.50.

If the reserve ratio is 5 percent, then $600 of additional reserves can create up to

$12,000 of new money.

The manager of the bank where you work tells you that the bank has $300 million in deposits and $255 million dollars in loans. If the reserve requirement is 8.5 percent, how much is the bank holding in excess reserves?

$19.5 million

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to

$45,600

If a bank that desires to hold no excess reserves and has just enough reserves to meet the required reserve ratio of 15 percent receives a deposit of $600, it has a

$510 increase in excess reserves and a $90 increase in required reserves.

what gives you money multiplier

1 / reserve ratio

In Ugoland, the money supply is $8 million and reserves are $1 million. Assuming that people hold only deposits and no currency, and that banks hold no excess reserves, then the reserve requirement is

12.5 percent

The manager of the bank where you work tells you that your bank has $10 million in excess reserves. She also tells you that the bank has $400 million in deposits and $375 million dollars in loans. Given this information you find that the reserve requirement must be

15/400

If the inflation rate is 2 percent and the real interest rate is 7 percent, then the nominal interest rate is

9%

Which of the following policies is NOT in the Fed's monetary toolbox?

Issuing a bank run

The banking system currently has $200 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 4 percent. If the Fed raises the reserve requirement to 10 percent and at the same time buys $50 billion worth of bonds, then by how much does the money supply change?

It falls by $2,500 billion

whats in m2

M1 + savings deposits + money market funds + certificates of deposit + other time deposits

Which of the following policies can the Fed follow to increase the money supply?

Reduce the interest rate on reserves

Which of the following is not correct?

Unemployment insurance decreases frictional unemployment.

The reported unemployment rate should be viewed as

a useful but imperfect measure of joblessness.

Efficiency wages, minimum-wage laws, and unions all keep wages

above the equilibrium level, causing a surplus of labor.

If the demand for loanable funds shifts to the left, then the equilibrium interest rate

and quantity of loanable funds falls.

what is in m1

coins and currency in circulation + checkable (demand) deposit + traveler's checks.

Which list ranks assets from most to least liquid?

currency, stocks, fine art

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

decrease by $25.5 million and the money supply eventually decreases by $170 million

If the reserve ratio is 15 percent, and banks do not hold excess reserves, and people hold only deposits and no currency, then when the Fed sells $25.5 million worth of bonds to the public, bank reserves

decrease by $25.5 million and the money supply eventually decreases by $170 million.