Econ 13&14 Homework Questions

the SRAS curve will _______ if there is ________ A. shift to the right B. shift to the left C. not shift at all D. a technological change E. an decrease in unionization F. a quick adjustment in wage cost when prices increase

a, d

the SRAS curve will _______ if there is ________ A. shift to the right B. shift to the left C. not shift at all D. a increase in menu costs E. an increase in productivity F. a slow adjustment of an input price

a, e

the SRAS curve will _______ if there is ________ A. shift to the right B. shift to the left C. not shift at all D. a decrease in menu costs E. an increase in unionization F. an increase in the labor force and capital accumulation

a, f

the demand curve for an individual product slopes downward due to ___________ ___________ the more expensive product for cheaper goods

consumers substituting

As your actions and those of the other bank managers reduced the amount of loans made, we would expect that the money supply would end up _______

decreasing

Firms become more optimistic and increase their spending on machinery and equipment. Because this is a change in _______, it will cause a ________ the aggregate demand curve A. Net exports B. the price level C. government spending D. consumption E. investment F. shift to the right in G. movement along H. shift to the left in

e, f

Commodity money is a good used as ______ that also has value _________ of its use as _________

money, independent, money

fiat money is money such as _______ ________, that is authorized by a ________ ________ or governmental body and ________ have to be exchanged

paper currency, central bank, doesn't

The aggregate demand curve slopes downward due to the _________, the _______, and the _________

wealth effect, interest-rate effect, international-trade effect

If the required reserve ratio is 0.15, the maximum increase in checking account deposits that will result from an increase in bank reserves of $15,000 is $___

100,000

The United States is divided into ____ Federal Reserve Districts

12

One of the board members is appointed to a ____ year, renewable term as the chairman

4

The Federal Reserve Bank's Board of Governors consists of ____ members appointed by the president of the U.S. to 14-year, non-renewable terms

7

What relationship is shown by the aggregate supply curve? The short run aggregate supply curve shows the relationship in the short run between A. the price level and the quantity of real GDP supplied by firms B. the price level and the quantity of real GDP demanded by firms C. the price level and the quantity of capital goods: machines, factories and buildings, demanded by firms and households D. the price level and the quantity of real GDP demanded by households, firms and the government

A

a supply shock is A. a sudden increase in the price of an important natural resource, resulting in a leftward shift of the SRAS B. an increase in the rate of inflation as a result of expansionary fiscal policy, resulting in a leftward shift of the SRAS curve C. an increase in potential GDP caused by a government expenditure multiplier, resulting in a leftward shift of the AD curve D. an increase in both the inflation and the unemployment rates that may sometimes result in a rightward shift of the SRAS curve

A

an increase in the price level will cause a ___________ the aggregate demand curve A. movement up along B. rightward shift of C. leftward shift of D. movement down along

A

What relationship is show by the aggregate demand curve? A. the price level and the quantity of real GDP produced by firms B. the price level and the quantity of real GDP demanded by households, firms, and the government C. the price level and the quantity of GDP demanded by consumers D. the price level and the quantity of real GDO demanded by the private sector: households and firms

B

a faster income growth in other countries will cause a __________ the U.S. aggregate demand curve A. movement up along B. rightward shift of C. leftward shift of D. movement down along

B

an increase in government purchases will cause a ________ the aggregate demand curve A. movement up along B. rightward shift of C. leftward shift of D. movement down along

B

increases in the growth rate of domestic GDP compared to the growth rate of foreign GDP will make the aggregate demand curve shift to the A. right B. left

B

The aggregate demand curve slopes downward for all of the following reasons except: A. a lower price level decreases the rate of interest, which increases private investment and consumption B. a lower price level makes U.S. exports less expensive, thereby increasing net exports C. a lower price level makes imports from other countries less expensive, and U.S. citizens buy more imports D. a lower price level increases the real wealth of the households, thereby increasing household consumption

C

an increase in interest rates will cause a ________ the aggregate demand curve A. movement up along B. rightward shift of C. leftward shift of D. movement down along

C

an increase in state income taxes will cause a ________ the aggregate demand curve A. movement up along B. rightward shift of C. leftward shift of D. movement down along

C

how does an increase in the price level affect the quantity of real GDP supplied in the long-run? A. in the long run, an increase in the price level increase inflation, which will decrease real GDP B. in the long run. an increase in the price level will increase real GDP C. changes in the price level do not affect the level of GDP in the long run D. in the long-run, an increase in the price level decrease inflation, which will decrease real GDP

C

long-run equilibrium is represented by which points? A. all points on the graph B. points below the LRAS line C. points on the LRAS line

C

the long-run aggregate supply curve is vertical because in the long run A. changes in the price level affect potential GDP via other variables, such as the size of the labor force, capital stock, and technology B. the price level does not change, but potential GDP changes its value C. changes in the price level do not affect potential GDP, as potential GDP depends on the size of the labor force, capital stock, and technology D. changes in the size of the labor force, capital stock, and technology affect the price level but not potential GDP

C

which of the following would cause a decrease in aggregate demand? A. a decrease in taxes B. a decrease in interest rates through monetary policy C. a decrease in government spending D. a depreciation in the U.S. dollar relative to foreign currencies E. all of the above

C

which of the following would cause a decrease in real GDP and, if large enough, a recession? A. a reduction in consumer confidence that causes short-run aggregate supply to fall B. an increase in interest rates that causes short-run aggregate supply to fall C. an increase in government purchases that causes aggregate demand to rise D. an increase in interest rates that causes aggregate demand to fall

D

A decrease in the reserve requirement ________ bank reserves and ________ the money supply. A. increase, increase B.decrease, decrease C. decrease, increase D. increase, decreases

a

Distinguish among money, income, and wealth A. a person's money is the currency held and the checking account balance, income is the earning and wealth is equal to value of assets minus all debts B. a person's money is the currency held and the earning from work, income is equal to the bank balance and wealth is equal to the profit from investment C. a person's money is the currency in the pocket, income is the earning and wealth is equal to asset value D. a person's money is the currency play all bank accounts owned, income is equal to the earning from work and wealth is equal to the profit from investment

a

Economies where goods and services are traded directly for other goods and services are called ________ economies A. barter B. trade C. seigniorage D. direct

a

If the reserve requirement ratio (RR) is 0.20, the simple deposit multiplier is A. 5 B. 20 C. 10 D. 2

a

Suppose a bank has $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent. If the Federal Reserve reduces the required reserve ratio to 8 percent, then the bank can make a maximum loan of A. $2 million B. $0 C. $10 million D. $8 million

a

The central bank of a country controls the money supply, which equals the currency held by A. the public plus their checking account balances B. banks C. the public D. the public plus their checking and saving account balances

a

The real-world money multiplier A. is smaller than the simple deposits multiplier because banks keep excess reserves and households hold excess cash B. is larger than the simple deposit multiplier because banks have no excess reserves and households do not deposit checks C. equals the simple deposit multiplier because banks keep no excess reserves and households do not hold excess cash D. cannot measure the expansion in the money supply when banks have to call back their loans because reserves are lost

a

The seven members of the Board of Governors of the Federal Reserve are appointed by A. the President B. the Treasury Department C. the Congress D. leaders in the banking industry E. the Governors of the States

a

The three main monetary policy tools used by the Federal Reserve to manage the money supply are A. open market operations, discount policy, and reserve requirements B. open market operations, the exchange rate of the dollar against foreign currencies, and government purchases C. interest rates, tac rates, and government spending. D. tax rates, government purchases, and government transfer payments

a

To increase the money supply, the Federal Reserve could A. conduct an open market purchase of Treasury securities B. raise the discount rate C. lower transfer payments D. decrease income taxes

a

an increase in the working population will cause the long-run aggregate supply curve to A. shift to the right B. movement along a stationary LRAS curve

a

more capital accumulation will cause the long-run aggregate supply curve to A. shift to the right B. movement along a stationary LRAS curve

a

Banks can make additional loans when required reserves are A. greater than total reserves B. less than total reserves C. less than total loans D. less than total deposits

b

If a person withdraws $500 from his/her checking account and holds it as currency, the M1 will _____ and M2 will ______ A. decrease, decrease B. not change, not change C. not change; increase D. decrease; increase E. increase, increase

b

If whole tomatoes were money, which of the following functions of money would deb the hardest for tomatoes to satisfy? A. certificate of gold B. store of value C. medium of exchange D. nut of account

b

Money is an imperfect standard of deferred payment because _______ causes the value of money to decrease over time A. dollars B. inflation C. velocity D. reserves

b

Open market operations refer to the purchase or sale of _____ to control the money supply. A. corporate bonds and stocks by the U.S. Treasury B. U.S. Treasury securities by the Federal Reserve C. discord and advances by the Federal Reserve D. U.S. Treasury securities by the U.S. Treasury E. corporate bonds and stocks by the Federal Reserve

b

Suppose that you are a bank manager, and the Federal Reserve raises the required reserve ratio from 19 percent to 12 percent. What actions would you need to take? A. you would have to charge less for your loans because rates are now at 12% B. you would have to reduce loans to make up for the necessary increase in reserves C. you would need to make loans to match the new reserve requirement D. none of the above

b

Suppose the reserve requirement is 15%. What is the effect on total checkable deposits in the economy if bank reserves increase by $40 billion? A. $3 billion increase B. $267 billion increase C. $600 billion increase D. $40 billion increase

b

The required reserves of a bank equal its ______ the required reserve ratio A. loans divided by B. deposits multiplied by C. loans multiplied by D. deposits divided by

b

Which of the following is not one of the policy tools the Fed uses to control the money supply? A. reserve requirements B. moral suasion C. discount policy D. open market operations

b

a change in the price level will cause the long-run aggregate supply curve to A. shift to the right B. movement along a stationary LRAS curve

b

the position of the long-run aggregate supply (LRAS) curve is determined by A. consumption, investment, government purchases, and net exports B. the number of workers, the amount of capital, and the available technology C. the price level and aggregate demand D. the price level, the available technology, and "sticky" prices

b

which of the following scenarios would lead to a reduction in real GDP and may even causes a recession? A. a recession in a foreign trading pertness' country causing aggregate supply to fall B. a reduction in the growth rate in foreign countries compared to the United States that causes aggregate demand to fall C. a reduction in taxes causing aggregate demand to fall D. an increase in oil prices that cases short-run aggregate supply to increase

b

why do most depositors seem to be unworried that banks loan out most of the deposits they receive? A. the banks always make good solid loans with their funds B. the FDIC insures deposits up to $250,000 C. the government of the United States is a Constitutional Republic D. the federal reserve helps control the money supply

b

The U.S. economy experiences 4 percent inflation. Because this is a change in _______, it will cause a ________ the aggregate demand curve A. Net exports B. the price level C. government spending D. consumption E. investment F. shift to the right in G. movement along H. shift to the left in

b,g

A baseball fan with a Mike Trout baseball card wants to trade it for a Miguel Cabrera baseball card, but everyone the fan knows who has a Cabrera card doesn't want a Trout card. Economists characterize this problem as a failure of the A. irrational exuberance doctrine B. market clearing mechanism C. principle of a double condense of wants D. theory of comparative advantage

c

A decrease in the discount rate ________ bank reserves and _________ the money supply if banks respond appropriately to the change in the rate A. decrease, increase B. increase, decreases C. increase, increase D. decrease, decrease

c

Banks can continue to make loans until their A. actual reserves equal their excess reserves B. actual reserves equal their checking account balances C. actual reserves equal their required reserves D. excess reserves equal their required reserves

c

If you took a $20 bill to the Treasury Department or Federal Reserve bank, with what type of "lawful money" is he government likely to redeem it? A. treasury bonds, bills, or notes B. any foreign currency you choose C. with another reserve note of equal value d. gold or silver

c

Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. Refer to the scenario above. As a result of Kristy's deposit, Bank A's can makes a maximum loan of A. $50,000 B. $2,000 C. $8,000 D. $10,00

c

Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. Refer to the scenario above. As a result of Kristy's deposit, Bank A's excess reserves increase by A. $50,000 B. $2,000 C. $8,000 D. $10,00

c

In economics, money is defined as A. the total amount of salary, interest, and rental income earned during a year B. the total value of one;s assets in current princes C. any asset people generally accept in exchange for goods and services D. the total value of one's asset s minus the total value of one's debts, in current prices

c

In response to the destructive bank panics of the Great Depression, future bank panics are designed to be prevented by A. the Federal Reserve System conducting open market operations B. increasing the required reserve ratio to 100% C. the establishment of the Federal Deposit Insurance Corporation D. the Federal Reserve System acting as a lender of last resort E. establishing a fractional reeve system of banking

c

Look carefully at the following list a. the coins in your pocket b. the funds in your checking account c. the funds in your savings account d. the traveler's check that you have left over from a trip e. your citibank platinum mastercard Which of the following are NOT included in the M1 definition of the money supply? A. a & b B. b & e C. c & e D. d & e

c

Suppose that you deposit $2,000 in your bank and the required reserve is 10 percent. The maximum loan your bank can made as a direct result of your deposit is A. $20,000 B. $2,000 C. $1,800 D. $200

c

The main tool the Federal Reserve uses to conduct monetary policy is A. setting reserve requirements B. discount policy C. open market operations D. check clearing E. acting as the lender of last resort

c

The major shortcoming of a barter economy is A. that money loses value from inflation B. that goods and services are not traded C. the requirement of a double coincidence of wants D. the requirement of specialization and exchange

c

When money is acting as a store of value, it allows an individual to A. measure the value of goods and services in the economy B. exchange goods for other goods and services in the economy C. transfer dollars, and therefore purchasing power, into the future D. trade money for goods and services in the economy

c

Which of the following best explains the difference between commodity money and fiat money? A. commodity money has no value except as money, whereas fiat money has value independent of its use as money. B. commodity money is usually authorized by the central bank, whereas fiat money has to be exchanged for gold by the central bank C. fiat money has no value except as money, whereas commodity money has value independent of its use as money D. all money is commodity money, as it has to be exchanged for gold by the central bank

c

Which of the following is NOT a correct statement about M2? A. M2 is a broader definition of money compared to M1 and currency B. M2 includes savings accounts, small-denoination time deposits, and money market mutual funds C. M2 is the best definition of money as a medium of exchange D. M2 includes all of the assets in M1

c

Which of the following is included in M2 but not M1? A. checking account deposits at banks B. traveler's checks C. money market deposit accounts in banks D. currency

c

You earn $500 a month, currently have $200 in currency, $100 in your checking account, $2,000 in your savings accounts, $3,000 worth of liquid assets and $1,000 if debt. You have A. money = $2,300, annual income = $6,000, and wealth =$5,000 B. money = $200, annual income = $500, and wealth = $4,300 C. money = $300, annual income = $6,000, and wealth =$4,300 D. money = $300, annual income = $6,000, and wealth =$5,000

c

banks use deposits to make consumer loans to households and commercial loans to businesses. banks will loan out every penny of their deposits in order to make a profit. A. True. Any money that is left over after a and loans money to businesses and households will be loaned to other banks. B. False. In reality, banks are rarely able to find borrowers for all of their deposits. C. False. Banks must hold a fraction of their deposits as vault cash or with the Federal Reserve D. True. Deposits that sit in a bank as vault cash no interest

c

Stagflation is a

combination of inflation and recession

Bank reserves include A. vault cash and loans to bank customers B. customer checking accounts and vault cash C. deposits with the Federal Reserve and holdings of securities D. vault cash and deposits with the Federal Reserve E. loans to bank customers and deposits with the Federal Reserve

d

How do the banks "create money"? A. when there is a decrease in checking account deposits, bank lose reserves and reduce their loans, and the money supply expands B. banks buy bonds in the open market and gain reserves; this excess reserve holding increases the money supply C. banks sell bonds in the open market and lose reserves; the excess cash holding by households increases the money supply D. when there is an incase in checking account deposits, bank gain reserves and make new loans, and the money supply expands

d

Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. Refer to the scenario above. As a result of Kristy's deposit, Bank A's required reserves increase by A. $50,000 B. $2,000 C. $8,000 D. $10,00

d

Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. Refer to the scenario above. As a result of Kristy's deposit, Bank A's reserves immediately increase by A. $50,000 B. $2,000 C. $8,000 D. $10,00

d

Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. Refer to the scenario above. As a result of Kristy's deposit, checking accounts deposits in the banking system as a whole (including the original deposit) could eventually increase up to a maximum of A. $100,000 B. $8,000 C. $10,000 D. $50,00

d

Suppose you have $2000 in currency in a shoebox in your closet. One day, you decide to deposit the money in a checking account. How will this action affect the M1 and M2 definitions of the money supply? A. both M1 and M2 will increase by $2000 B. M1 will increase and M2 will decrease C. M1 will decrease and M2 will increase D. both M1 and M2 will remain unchanged

d

The M2 definition of the money supply includes A. savings accounts, mutual funds, small time deposits, and credit cards B. M1, savings accounts, mutual funds, and credit cards C. M1, savings accounts, small time deposits, money markets, and credit cards D. M1, savings accounts, small time deposits, and money markets

d

The U.S. dollar can best be described as A. commodity money B. reserve money C. commodity-backed money D. fiat money

d

The formula for the simple deposit multiplier is A. simple deposit multiplier = (1-RR)/RR B. simple deposit multiplier = 1/1-RR C. simple deposit multiplier = -RR/1-RR D. simple deposit multiplier = 1/RR

d

The sale of Treasury securities by the Federal Reserve will, in general, A. increase the quantity of reserves held by banks B. ot change the money supply C. ot change the quantity of reserves held by banks D. decrease the quantity of reserves held by banks

d

Which of the following assets is most liquid? A. stock B. bond C. savings account D. money

d

Which of the following best describes how banks create money? A. banks charge fees for providing financial advice B. banks charge higher interest rates on loan than they pay on deposits C. banks make loans from reserves D. banks create checking account deposits when making loans from excess reserves

d

Which of the following is a monetary policy tool used by the Federal Reserve Bank? A. increasing the reserve requirement from 10 percent to 12.5 percent B. decreasing the rate at which banks can borrow money from the Federal Reserve C. buying $500 million worth of government securities, such as Treasury bills D. all of the above

d

Which of the following is not a function of the Federal Reserve System of the "Fed"? A. acting as a banker's bank B. acting as a lender of the last resort C. performing check clearing services D. insuring deposits in the banking system E. taking actions to control the money supply

d

Which tool is the most important? A. the fed conducts monetary policy principally through discount policy B. the fed conduct monetary policy principally by changing he reserve requirement C. the fed conducts monetary policy principally by tax cuts and government spending increases D. the fed conduct monetary policy principally through open market operations

d

aggregate demand (AD) is comprised of expenditure components that include: A. consumption, government spending, exports, and labor B. consumption, investment, exports, and taxes C. government spending, taxes, exports, and labor D. government spending, consumption, investment, and net exports

d

which of the following would causes an increase in the price level? A. a reduction in personal income taxes that reduces aggregate demand B. an increase in government purchases that decreases short-run aggregate supply C. an increase in the exchange rate of the dollar in relation to foreign currencies that decreases short-run aggregate supply D. an increase in government purchases that increases aggregate demand

d

The federal government increases taxes in an attempt to reduce a budget deficit. Because this is a change in _______, it will cause a ________ the aggregate demand curve A. Net exports B. the price level C. government spending D. consumption E. investment F. shift to the right in G. movement along H. shift to the left in

d,h

If you move $100 from your savings account to your checking accounts, then M1 will ______ and M2 will ______

increase by $100, remain the same

Stagflation occurs when

inflation rises and GDP falls

The federal reserve;s narrowest definition of the money supply is

m1