Macro Final Exam

Sumit deposits $1,500 cash into his checking account. The reserve requirement is 25%. What is the change in his bank's required reserves?

$1,125

Suppose that a bonds total interest payments are $400 and its yield is 5%. How much is this bonds price?

$8,000

Assume the reserve requirement is 10% and all banks are fully loaded up. If a new deposit of $10,000 is made into Bank X, with this deposit of Bank X can make new loans of

$9,000

What is the yield on a bond sold for $1,850 and paying $25.50 in interest annually?

1.38%

money multiplier=

1/r

Civil Adult Population

16 & older, not in the military, institutionalized, and prison.

Using the equation of exchange, if the money supply is $4 trillion, the price level is 2, and the level of output (real GDP) is $6 trillion, then the velocity of money is ___.

3

Using the equation of exchange, if the money supply is $4 trillion, the price level is 2, and the level of output (real GDP) is $6 trillion, then the velocity of money is:

3

If the reserve requirement ratio is 20%, the money multiplier is

5

The ____ is the central bank of the United States

Federal Reserve System

Which of the following is NOT a policy tool of the Federal Reserve?

Fiscal Policy

Required Reserves

Initial deposit x r

excess reserves (amount to loan out)

Initial deposit-required reserves

Yield

Interest Payment/Price of bond

Yolanda took $5,000 from her checking account and put the money in her savings account at the same bank. Based on that information, which of these is true?

M1 went down by $5,000 but M2 was unchanged.

Which of the following is the LEAST liquid?

Picasso painting

In the equation of exchange, if M = $1.5 trillion, V = 7, and P = 1.05, then:

Q=$10 trillion

If households decide to save a larger portion of their income because they fear job loss due to a recession, the loanable funds supply curve will shift from ___ to___, and the new equilibrium will be at point____.

S0;S1;b

Which action is the Fed most likely to take to curb inflation (decrease AD)?

The fed will sell securities in the open market

What are the primary functions of money?

Unit of account, medium of exchange, and store of value

unemployment rate

[unemployed/labor force]x100

The use of money as a medium of exchange helps reduce the inefficiencies inherent in:

a barter economy

Which of the following will increase aggregate demand

a decrease in taxes

Which is NOT one of the three basic functions of money

a means to collect taxes

Which one of the following will cause the supply of loanable funds curve to shift leftward?

an increase in the government deficit

Which one of the following will cause the demand of loanable funds curve to shift rightward?

businesses are more confident in the future of the economy?

Quantitative easing refers to the process whereby the Federal Reserve:

buys securities to stimulate the economy

M1 includes

cash, demand deposits, and other checkable deposits

In the short run, changes in the money supply will NOT change output according to:

classical economists

In times of economic downturn the Fed will engage in ____ monetary policy by ____ bonds.

expansionary; buying

Assume initially that market interest rates are 7% and the bondholder is receiving a $70 coupon payment per year on a bond with a face value of $1,000. If market interest rates rise to 8%, the bond price:

falls to $875

Institutions that acquire funds from savers and then lend those funds to borrows are

finanial intermediaries

In the counteracting a negative supply shock, the Fed could achieve _____ monetary policy

full employment but not price stability; expansionary

Assume the reserve requirement is 20% and the federal open market committee buys a $10,000 bond. The money supply

increases by a maximum of $500,000

Monetary policy involves all of these except

increases in personal taxes

a lower reserve requirement

increases the ability of

Which of the following measures is an example of an expansionary fiscal policy?

increasing unemployment compensation

Total deposits

initial deposit x 1/r

Price of Bond

interest payment/yield or interest rate

The financial panic and credit freeze in late 2008 pointed to the Fed's important role as a:

lender of a last resort

Generally, economists believe that monetary policy should focus on price stability in the _____ run and output or income in the _____ run.

long;short

In a liquidity trap:

monetary policy is ineffective in changing income and output.

The main tool of monetary policy is

open market operations

the main tool of monetary policy is

open market operations

Tight monetary policy refers to the Federal Reserve

raising interest rates, usually to fight inflation

Financial Institutions

reduce information costs, reduce transaction costs, and diversify assets.

r=

reserve requirement

A reduction in the interest rate causes consumption and investment to _____, which shifts the aggregate demand curve _____.

rise; rightward

When the fed wants to decrease the money supply. it will

sell bonds

If the fed wants to raise the interest rate, it will ______ bonds, which ____bond.

sell; lowers

All of these are considered monetary policy lags except

speculation lag

If there is a general rise in fear of the financial system:

the actual multiplier will fall

When the long-run aggregate supply curve is drawn as a vertical line, the theorist is assuming that

the economy tends to full employment in the long run

When the long-run aggregate supply curve is drawn as a vertical line, the theorist is assuming that:

the economy tends to move toward full employment in the ling run

In the equation of exchange, if M=$2 trillion, P=1.5, and Q=$8 trillion

the velocity of money (V)=6

Which one of the following will cause the supply of loanable funds curve to shift rightward?

workers fear that unemployment will increase