Macroeco Ch 13-14

A bank is legally required to hold a fraction of its ___ as ___

deposits; required reserves

The portion of ___ that a bank does not loan out or spend on securities is known as ___

deposits; reserves

2. Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20% As a result of Kristy's deposit, Bank A's reserves immediately increase by

$10,000

Suppose you withdraw $500 from your checking account deposit and bury it in a jar in your backyard. If the required reserve ratio is 10 percent, checking account deposits in the banking system as a whole could drop up to a maximum of

$5,000

1. Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. As a result of Kristy's deposit, Bank A excess reserves increase by

$8,000

Suppose a bank has $100,000 in checking account deposits with no excess reserves and the required reserve ratio is 10%. If the Federal Reserve raises the required reserve ratio to 12%, then the bank will now have excess reserves of

-2,000

As the recession persisted into 2009, the unemployment rate in the United States rose to ____, the highest rate since the recession of 2001-2002 and the second highest since the Great Depression

9.3 percent

Suppose the economy is at point C. If gov't spending decreases in the economy, where will the eventual long-run equilibrium be?

A

At the beginning of the recession of 2007-2009, real GDP in the United States was ____ potential GDP, and in June 2009, real GDP was ___ potential GDP.

Above; below

Suppose you withdraw $1,000 in cash from your checking account. Draw a T-account to show the effect of this transaction on your bank's balance sheet

Assets: Reserves $-1,000 Liabilities: Deposits -$1,000

German luxury car exports were hurt in 2009 as a result of the recession. How would this decrease in exports have affected Germany's demand curve.

The aggregate demand curve would have shifted to the left

Which of the following best describes how banks create money?

Banks create checking account deposits when making loans from excess reserves

Why do banks create money? Do they create money to help the Federal Reserve control the money supply or is there a more basic reason?

Banks create money to make a profit. Banks create money when they make loans. The loans take the form of checking account deposits. Asking why banks create money is the same as asking why they make loans

The Fed has more control over open market operations as compared to discount policy

True

T/F: If bankers become more uncertain regarding future deposits and withdraws and choose to hold more excess reserves against deposits, the money multiplier will increase

False

T/F: Your checking account balance is included in your bank's assets

False

an increase in government spending will result in an increase in the price level and an increase in real GDP in the long run

False

The Federal Open Market committee consists of seven members of the ___, the president of the Federal Reserve Bank of New York, and

Federal Reserve's Board of Governors; four presidents from the other 11 Federal Reserve banks

Ceteris paribus, a decrease in the expected future price level would be represented by a movement from

SRAS1 to SRAS2

Which of the following would cause the short-run aggregate supply curve to shift to the left

an increase in inflation expectations

A good can serve as money only if

citizens accept the good as a means of payment for transactions and debts

Silver is an example of a

commodity money

To increase the money supply, the Federal Reserve could

conduct an open market purchase of Treasury securities

Which of the following is NOT counted in M1

credit card balances

Deflation will

increase the quantity of real GDP demanded

The purchase of Treasury securities by the Federal Reserve will, in general,

increase the quantity of reserves held by banks

Last week, 13 Mexican pesos could purchase one U.S. dollar. This week, it takes 11 Mexican pesos to purchase one U.S. dollar. This change in the value of the dollar will ___ exports from the United States to Mexico and ___ U.S. aggregate demand

increase; decrease

Suppose there has been an increase in investment. As a result, real GDP will ___ in the short run, and ___ in the long run.

increase; decrease to its initial value

Which of the following information about fiat money is false? Fiat money

is backed by gold

An increase in the price level will

move the economy up along a stationary aggregate demand curve

If you transfer all of your currency to your checking account, then initially, M1 will ___ and M2 will ___

not change; not change

Dollar bills in the modern economy serve as money because

people have confidence that others will accept them as money

If workers leave a country to seek out better opportunities in another country, then this will

shift the short-run aggregate supply curve of the original country to the left

The Federal Reserve was esablished in 1913 to

stop bank panics by acting as a lender of last resort

In response to the destructive bank panics of the Great Depression, future bank panics are designed to be prevented by

the establishment of the Federal Deposit Insurance Corporation

If technological change occurs in the economy

the long-run aggregate supply will shift to the right