econ 11
To increase its assets to $4 trillion, the Fed used ______.
large-scale open market operations called quantitative easing
By increasing the required reserve ratio, the Fed forces banks to hold a _______ quantity of monetary base and the interest rate _______.
larger; rises
By lowering the interest rate, the Fed makes it _______ costly for the banks to borrow monetary base and the interest rate _______.
less; falls
The house with the lower price is the _______, and the jacket with the lower price is the _______.
$ 16,000 house in 1935; $ 60 jacket in 2015
The table shows the quantities of the goods Suzie bought and the prices she paid during two consecutive weeks. Suzie's CPI market basket contains the goods she bought in Week 1. (screenshot of weeks)
$37.50 divided by $98.25) times 100, which is 38.2 percent of the CPI market basket. The value of Suzie's CPI in Week 2 is= 93.25/98.25 * 100= 94.9 Suzie's inflation rate in Week 2 is= [(94.9-100)] / (100)] * 100= -5.1
Calculate the CPI market basket and the percentage of the average household budget spent on juice in the reference base year. In 2015, the average household spent $64 on juice and $35 on cloth. The price of juice was $4 a bottle, and the price of cloth was $5 a yard. In 2016, the price of juice is $3 a bottle and the price of cloth is $6 a yard
64/4= 16 bottles of juice 35/5= 7 yards of cloth 64+35= 99 64/99= 64.6% on juice
Suppose that at the end of December 2009, the monetary base in the United States was $735 billion, banks' reserves at the Fed were $10 billion, and Federal Reserve notes were $700 billion. Calculate the quantity of coins.
735-700-10= 25
The inflation rate is the percentage change in the _____ from one year to the next. Deflation is a situation in which the _____ is _____ and the inflation rate is _____.
price level; price level; falling; negative
A medium of exchange is an object that is generally accepted in return for _____. Barter is the direct exchange of goods and services for _____, which _____ a double coincidence of wants.
goods and services; other goods and services; requires
An open market operation is the purchase or sale of _____ - _____ - by the _____ in the open market.
government securities; U.S. Treasury bills and bonds; New York Fed
Falling oil prices pushed the CPI down 0.1 percent in December 2015. Energy prices fell 2.4 percent and the price of gasoline fell by 3.9 percent. Source: Los Angeles Times, January 20, 2016 Given the further information that the weight on energy prices in the CPI is 8 percent, by how much would the CPI have changed in December 2015 if energy prices had not changed? If energy prices had not changed, the CPI in December 2015 would have _______.
increased by 0.09 percent
The Fed uses its policy tools to _______.
influence the interest rate and regulate the amount of money circulating in the United States by adjusting the reserves of the banking system
These three measures of the price level give different inflation rates because each measure _______.
is based on the prices of different baskets of goods and services
The Fed's chief executive is ______ and the Fed's main policy tools are ______.
the Chairman of the Board of Governors; required reserve ratios, discount rate, and open market operations. In unusual times, extraordinary crisis measures are an additional tool
The CPI bias arises from all of the following items except _______.
the goods and services bought by poor people
The PCE price index is an average of the current prices of _____ included in the consumption expenditure component of GDP, expressed as a percentage of _____ year prices.
the goods and services; base
When the nominal interest rate equals zero, the real interest rate equals _______.
the negative of the inflation rate
As people use mobile wallets to make purchases, currency _______ disappear because _______.
will not; currency is used in the underground economy
Credit cards and debit cards _______ disappear because _______.
will not; mobile wallets are digitized credit cards and debit cards
The reference base period is a period for which the _____ is defined to equal _____. Currently, the reference base period is 1982-1984.
CPI; 100
Which of the following is money?
Charlie's checking account deposit at the Bank of America.
The nominal interest rate is the dollar amount of interest expressed as a percentage of the amount _____. The real interest rate is the goods and services forgone in interest, expressed as a percentage of the amount _____ and calculated as the nominal interest rate minus the _____.
loaned; loaned; inflation rate
Suppose that banks had deposits at the central bank of $ 7 billion, deposits of $ 500 billion, no excess reserves, and a desired reserve ratio of 3 percent. What is the amount of currency in the banks?
(0.03 * $ 500 ) - $ 7 billion = $ 8 billion.
Calculate the inflation rates in 2013 and 2014. Did the CPI rise or fall in 2014? Did the inflation rate increase or decrease in 2014? year . cpi 2012 . 112 2013 . 114 2014 . 117
(114-112/114) * 100)= 1.8 (117-114/117) * 100)= 2.6 increase; increase
In Canada, the reference base period for the CPI is 2002. By 2014, prices had risen by 25.2 percent since the base period. The inflation rate in Canada in 2015 was 1.1 percent. Calculate the CPI in Canada in 2015.
1.1/100= .011 100+25.2= 125.2 (0.011 * 125.2) + 125.2 = 126.5772
In Brazil, the reference base period for the CPI is 2000. By 2005, prices had risen by 51 percent since the base period. The inflation rate in Brazil in 2006 was 10 percent, and in 2007, the inflation rate was 9 percent. Calculate the CPI in Brazil in 2006 and 2007. Brazil's CPI in 2008 was 173. Did Brazil's inflation rate increase or decrease in 2008?
10/100= .1 100+51= 151 (0.1 * 151) + 151= 166.1 166.1 * 1.09 = 181.0. decreased
When the price level is rising at _______ and the real interest rate is 1 percent a year, the nominal interest rate is 3 percent a year.
2 percent a year
If nominal GDP increases by 5 percent a year and the GDP price index rises by 2 percent a year, then real GDP increases by _______.
3 percent a year
In 2015, the year of the Consumer Expenditure Survey and also the reference base year, the average household spent $20 on juice and $25 on cloth. The price of juice in 2015 was $2 a bottle, and the price of cloth was $5 a yard. In 2016, juice is $5 a bottle and cloth is $4 a yard. Calculate the CPI in 2016 and the inflation rate between 2015 and 2016.
CPI= 5+2= 7 7/45= 155.6 inflation rate= 55.6 %.
a. The credit available on your VISA card b. Frequent flier miles c. Commemorative medals d. An IOU signed by the director of the U.S. postal service e. Upper A commercial bank checkable deposit f. Upper A $ 100 Amazon.com gift certificate g. Store coupons for any grocery item
Item e is money. Items c, g, a, f, b, and d are not money.
Sandy takes $400 from his savings account and deposits the $400 in his small time deposit.
M1 does not change and M2 does not change.
What is the Fed and what is the FOMC?
The Fed regulates financial institutions and markets and the FOMC is the Fed's main policy dash making committee. The Fed regulates financial institutions and markets and the FOMC meets approximately every six weeks to review the state of the economy
The GDP price index is an average of the current prices of _____ included in the GDP, expressed as a percentage of base year prices.
all the goods and services
What is money? Would you classify any of the following items as money?
any commodity or token that is generally accepted as a means of payment
a. A credit card b. A checkable deposit at the Bank of America c. A roll of quarters d. Upper A Rembrandt painting e. The copper used to produce pennies f. Ancient Roman coins g. GM bonds
b and c; a, d, e, f, and g
The Federal Reserve System (the Fed) is the _____ of the United States.
central bank
As people use mobile wallets to make purchases, most of M1 will be _______.
checkable deposits
In the United States today, money includes ______.
coins in parking meters and the funds in a student's checking account
Veronica transfers $1,000 from her checking account at the Bank of Arkansas to her money market fund.
decreases by $ 1,000; does not change
The Federal Open Market Committee is the Fed's _____ committee.
main policy making
What are the three vital functions that money performs? Which of the following items perform some but not all of these functions, and which perform all of these functions? Which of the items are money?
medium of exchange, unit of account, and store of value
The real interest rate exceeds the nominal interest rate when the inflation rate is _______.
negative
Currency consists of _____.
notes (dollar bills) and coins
The CPI that uses the 2015 basket _______ the inflation rate in 2016.
overstates the inflation rate in 2016
Falling oil prices pushed the CPI down 0.1 percent in December 2015. Energy prices fell 2.4 percent and the price of gasoline fell by 3.9 percent. Source: Los Angeles Times, January 20, 2016 Given that energy prices are 8 percent of the CPI basket, by what percentage did the prices of other items in the CPI basket change?
risen by less than the fall in energy prices
A means of payment is a method of _____ a debt.
settling
A cost of living index is a measure of the change in the amount of money that people need to spend to achieve a given _____.
standard of living
On the basis of these price observations, commodity substitution and outlet substitution might have occurred when consumers bought more ______ in July because they had become relatively ______ expensive.
steak and bread; less bananas and lettuce; more
The BLS reported that the CPI in July 2010 was 226. This news tells you that _______.
the prices of consumption goods and services have risen, on average, by 126 percent since the base year
The Fed's policy tools include ______.
the required reserve ratio, discount rate, and open market operations
The CPI measures the average prices paid by _______ for _______.
urban consumers; a fixed basket of consumption goods and services
M2 consists of _____ plus _____ and _____ deposits, _____, and other deposits.
M1; savings deposits; small time; money market funds
The core inflation rate is the annual percentage change in the _____ price index _____ the prices of food and energy.
PCE; excluding
The Consumer Price Index is a measure of the _____ of the prices paid by _____ consumers for a fixed market basket of consumption goods and services.
average; urban
Reserves consist of the currency in the _____ plus the balance on its _____ account at _____.
bank's vaults; reserve; a Federal Reserve Bank
The monetary base is the sum of _______.
coins, Federal Reserve notes, and banks' reserves at the Fed
The monetary base is the sum of _____, _____, and _____ at the Fed.
coins; Federal Reserve notes; banks' reserves
When the Fed sells securities in the open market, the monetary base _______ and the interest rate _______.
decreases; rises
The United States experienced _______ in December 2015 because _______.
deflation; the CPI decreased
A commodity substitution bias _______ when the CPI is calculated in 2016 using the 2015 basket.
exists; people switch from the relatively more expensive scallops to the relatively less expensive shrimp
The nominal wage rate is the average _____ wage rate measured in _____ dollars. The real wage rate is the average _____ wage rate measured in the dollars of _____ year.
hourly; current; hourly; a reference base
M1 consists of currency held by _____ and _____, _____, and _____ owned by individuals and businesses.
individuals; businesses; traveler's checks; checkable deposits
The federal funds rate is the _____ rate on _____ loans.
interest; interbank
Fiat money are objects that are _____ because the law decrees or orders them to be _____.
money; money
Of the items measured in the news clip, _______ has the highest weight in the CPI and _______ has the lowest weight in the CPI.
rents; medical care