Macroeconomic Final (Chap 14-17)

Stealth bank holds deposits of $200 million. It holds reserves of $15 million. It has purchased government bonds worth $75 million. The current value of its loans, if sold at market value, is $130 million. What is the value of the Stealth bank's liabilities?

$200 Million

Stealth bank has deposits of $600 million. It holds reserves of $30 million and government bonds worth $80 million. If the bank sells its loans at market value of $400 million, what will its total assets equal?

$510 Million

At the beginning of 2009, a government had a total debt of $540 billion dollars. It ended 2009 with a $6 billion dollar budget surplus. In 2010, its budget surplus reached $8 billion dollars. What is the total debt of the government equal to at the end of 2010?

$540 Billion

Which of the following is the percentage of annual US government spending allocated to foreign aid?

1%

A government annually collects $320 billion in tax revenue and allocates $42 billion to education spending. What percentage of this government's budget is spent on education?

13.12%

The people in an economy have $10 million in money. There is only one bank that all the people deposit their money in and it holds 5% of the deposits as reserves. What is the money multiplier in this economy?

20

Stealth bank has deposits of $700 million. It holds reserves of $20 million and has purchased government bonds worth $350 million. The bank's loans, if sold at current market value, would be worth $600 million. What does Stealth bank's net worth equal?

270 Million

The ___________________ is the institution designed to control the quantity of money in the economy and also to oversee the:

Central Bank; safety and stability of the banking system.

______________________ that require the depositor to commit to leaving their funds in the bank for a certain period of time, in exchange for a higher rate of interest are also called ________________.

Certificates of deposit; time deposits

Which of the following terms is considered to be a narrow definition of the money supply that includes, among other things, currency?

M1

Which category of the money supply would you be contributing to if you invest in money market funds?

M2

Central Bank policy requires Northern Bank to hold 10% of its deposits as reserves. Northern Bank policy prevents it from holding excess reserves. If the central bank purchases $30 million in bonds from Northern Bank what will be the result?

Northern's loan assets increase by $30 million

If the U.S. dollar weakens, which of the following parties will benefit?

U.S firms selling in Europe

The most commonly traded currency in foreign exchange markets is the:

US dollar

A depreciating U.S. dollar is ________________ because it is worth ___________ in terms of other currencies.

Weakening; less

What do the economies of Greece, Ireland and Germany all share?

a common currency

In macroeconomics, ___________________________ describes a situation in which two people each want to exchange some good or service that the other can provide.

a double coincidence of wants

Which of the following events would cause interest rates to increase?

a higher discount rate

Banks typically come under financial stress because of:

a widespread decline in the value of their assets.

Movements in exchange rates can have a powerful effect on incentives to export and import, and thus on ________________ in the economy as a whole.

aggregate demand

Which of the following is considered to be a relatively weak tool of monetary policy?

altering the discount rate

One of the following groups is not participating in the foreign exchange markets. Which one?

an Iowa travel firm that arranges vacation tours for local seniors to Hawaii

Which of the following would function as a store of value, and also provide a medium of exchange, and unit of account?

an estate

The federal government levies _____________________________ on people who pass assets ____________________________, either after death or during life.

an estate and gift tax; to the next generation

The government can use _____________ in the form of ____________________ to increase the level of aggregate demand in the economy.

an expansionary fiscal policy; an increase in government spending

Which of the following is a valid criticism of the use of money as a store of value in modern economies?

annual inflationary loss of buying power

_____________________ are a form of tax and spending rules that can affect aggregate demand in the economy without any additional change in legislation.

automatic stabilizers

If an economy moves into a recession, causing that country to produce less than potential GDP, then:

automatic stabilizers will cause tax revenue to decrease and government spending to increase.

A ______________________ means that government spending and taxes are equal.

balanced budget

The Central Bank has raised its reserve requirements from 10% to 12%. If Southern Bank finds that it is not holding enough in reserves to meet the higher requirements, then it will likely:

borrow for the short term from the central bank.

If the central bank increases the amount of reserves banks are required to hold to 20%, then:

both the money multiplier and supply of money in the economy will decrease.

A ______________________ is created each time the federal government spends more than it collects in taxes in a given year.

budget deficit

If the state of Washington's government collects $75 billion in tax revenues in 2013 and total spending in the same year is $74.8 billion, the result will be a:

budget surplus

A central bank that wants to increase the quantity of money in the economy will:

buy bonds in open market operations

A typical ____________________________ fiscal policy allows government to decrease the level of aggregate demand, through increases in taxes.

contractionary

he process of banks making loans in financial capital markets is intimately tied to the:

creation of money

Which of the following would be classified in the M1 category of the money supply?

demand deposits

________________________ are a form of deposits held in banks that are available by making a cash withdrawal or writing a check.

demand deposits

A central bank must be concerned about whether a large and unexpected ___________________________ will drive most of the country's existing banks into bankruptcy.

exchange rate depreciation

If a central bank focuses on preventing either high inflation or deep recession by using low and reasonably steady interest rate policy, then:

exchange rate will have less reason to vary

Assume that laws have been passed that require the federal government to run a balanced budget. During a recession, the government will want to implement _____________________, but may be unable to do so because such a policy would ____________________________.

expansionary fiscal policy; lead to a budget deficit

Regardless of the outcome in the long run, ______________________ always has the effect of stimulating the economy in the short run.

expansionary monetary policy

When the Federal Reserve announces that it is implementing a new interest rate policy, the ____________________ will be affected?

federal funds rate

If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would the most popular answer likely be?

fighting inflation

In modern economies, _____________________ receive money from savers and provide funds to borrowers.

financial intermediaries

Which of the following terms is used to describe the set of policies that relate to government spending, taxation, and borrowing?

fiscal policy

If a Central Bank decides it needs to decrease both the aggregate demand and the money supply, then it will:

follow tight monetary policy.

When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is:

following an expansionary monetary policy.

People or firms use one currency to purchase another currency at the _______________________.

foreign exchange market

The _____________________________ is the largest market in the world economy.

foreign exchange market

If a country's GDP decreases, but its debt increases during that year, then the country's debt to GDP ratio for the year will _______________ in proportion to the magnitude of the changes.

increase

In an economy with _______________, money loses some buying power each year, but it remains money.

inflation

The current level of US government accumulated debt, when measured in nominal dollars:

is higher than it has ever been

Currently, the US government accumulated debt to GDP ratio:

is lower than its historical high point

When banks hold excess reserves because they don't see good lending opportunities:

it negatively affects expansionary monetary policy

___________________________ will often cause monetary policy to be considered counterproductive because it makes it hard for the central bank to know when the policy will take effect?

long and variable time lags

In modern economies, credit cards are a _________________ because of their wide acceptance as a method of payment for both goods and services.

medium of exchange

Which of the following is omitted in a barter transaction?

money

________________ serves society in three functions: medium of exchange, unit of account, and store of value.

money

Which of the following is a traditional tool used by the Fed during recessions?

open market operations

A __________________________ policy will cause a greater share of income to be collected from those with high incomes than from those with lower incomes.

progressive tax

A ________________________________ is calculated as a flat percentage of income earned, regardless of level of income.

proportional tax

A central bank that desires to reduce the quantity of money in the economy can:

raise the reserve requirement

Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank?

reserve requirements

__________are funds that the bank keeps on hand that are not loaned out or invested in bonds.

reserves

The market in which loans are bought and sold is called the:

secondary loan market

The time lag for monetary policy is typically ________________ the time lag for fiscal policy.

shorter than

When a country's economy is producing at a level that exceeds its potential GDP, the standardized employment budget will show a __________________ than the actual budget.

smaller deficit

Lance paid $175,000 for his house in 2003 and sold it for $325,000 in 2006. What function did the house serve during the time Lance owned it?

store of value

Why do banks use a T-account?

the T-account separates assets on the left from liabilities on the right

If a nation merges its currency with another nation to create a single currency, what must it give up?

the ability to determine its own nationally-oriented monetary policy

If 112 Japanese yen purchased $1.00 U.S. in 2008 and 83 Japanese yen purchased $1.00 U.S. in 2009, then:

the dollar depreciated against the yen.

Which of the following institutions oversees the safety and stability of the U.S. banking system?

the federal reserve

According to the basic quantity equation of money, if price and output fall while velocity increases, then:

the quantity of money will fall

Exchange rates are an effective way to analyze the price of one currency in terms of another currency with _________________________.

the tools of demand an supply

A ______________________ monetary policy can be used to decrease aggregate demand because it _____________ exports and _________________ imports .

tight; stimulates; reduces

The money multiplier is equal to the _______________ in the economy divided by the original _________________.

total money; quantity of money

In macroeconomics, a _______________ describes the common way in which market values are measured in an economy.

unit of account