Econ Exam 5 6 7 8

What is the smallest possible increase in teh money supply that could result

1,000,000

If people hold deposit all their money into banks, and banks keep a 10% reseve ratio what is the quantity of money?

1/10% = 10 x 10,000 = 100,000

THe economy of auburnia has 10,000 1$ bills If people hold equal amounts of currency and demand deposits and bank maintains 100% reserves what is the quantity of money

10,000

Beleaguered state bank holds 120,000,000 in deposits and maintains a reserve ratio of 10% which also is the reserve req. If bsb lareget depositor withdraws 10,000,000 from her account one day how many dollars of cash reseves does BSB need to raise before the next morning?

9,000,000

If instead of taking a vacation this year, Melissa loans the money she would have spent on her vacation to her business so she can buy new tools a year earlier than she otherwise woul have, economists would consider this

Both saving and investment

The quantity theory of money was first developed by

David hume

What does the vertical axis measure

Interest rate

if you borrow $18,000 from a bank tob uy a new car for your pizza delivery business economists would consider this

Investment but not saving

What is the result?

Lower interest rates and less money saved and invested

Banks have reserve ratio of 20% and households deposit all cash into the banking system. How many dollars should the fed print in order to increase money supply by 20,000,000?

Money multiplier = 1 / reserve ratio. 1/20 = 5 . 20,000,000 /5 = 4,000,000

If the grocery store has a buy one get one free sale on potato chips, economists would consider this

Neither saving nor investment

If you use your $00 paycheck to buy stock in GM economists would call this

Saving but not investment

Suppose that buy requiring firms to comply with strict regulations, the bill increases confidence that savers have with the financial system, making them more likely to save their money there. Which curve shifts

THe saving curve shifts to the right

suppose that people expect inflation to equal 3% but instead prices rise by 5% which of teh following parties would be helped by this unexpectedly high inflation?

a homeowner with a fixed rate morgage

Hyperinflation is extremely rare in countries with independent central banks. This is because:

in countries with independent central banks, the decision to spend money on government projects is made by a separate decision maker than the decision to print money

which of the following is a reason firms pay efficiency wages?

job turnover is costly to the firm in the form of training costs

if one person wants something that someone else has, so the first person offers and the second person accepts a sum of money to purchase the thing, this is an example of using money as a

medium of exchange

The fed conducts a 1,000,000 open market purchase of gov bonds. the reserve req is 10% What is the largest possible increase in the money supply that could result?

money multiplier 1/10% = 10 x 1,000,000 = 10,000,000

It is sometimes suggested that the fed should try to achieve price stability: that is 0% inflation. If the velocity of money is constant does zero inflation mean the money supply should never change?

no, because MV = PY so if V does not change and we want P to not change M must change whenver Y does.

which of the following would decrease frictional unemployment?

providing more job training programs for fields with worker shortages

which of the following could decrease structural unemployment?

reducing the minimum wage

If the federal reserve goal is to decrease the money supply it would most likely

sell government bonds

if someone accepts payment in 2015 and then uses the money to buy something in 2018 this is an example of using money as a

store of value

list the three types of unemployment

structural frictional cyclical

if someone asks how much a car costs and is told $23,000 this is an exampleof using money as a

unit of account