econ final
The money multiplier = ______.
1/reserve ratio (requirement)
The labor force is 300 million, there are 270 million employed people. 20 million have stopped looking for work. All of these people are working-age non-institutionalized adults. What is the unemployment rate? No percent sign needed.
10
Steven Manley buys his handsome self a $10,000 bond sold at a 6% yield. However, if the market interest rate decreases to 4%, the value of the bond increases to $___. (no comma necessary)
15000
Steven Manley buys cake mix for $5, bakes a delicious German Chocolate cake, sells it to a market down the street for $22, and then the market sells it for $38. How much value did Steven Manley add? No dollar sign needed.
17
The money multiplier is _______ if the required reserve ratio is 5%.
20
What is the marginal tax rate for 2014 for $65,000 of taxable income for a single person? Bracket Rate $0 - $9,075 10% $9,075 - $36,900 15% $36,900 - $89,350 25% $89,350 - $186,350 28%
25
If an initial new deposit is $2000 and the required reserve ratio is 5 percent, or 1/20, the total new money that can be created by the cycle of new loans is $ ___.
38000
With an MPS of .25, an initial increase of taxes of $10 billion leads to a total decrease of $___billion in income.
40
The top 1% of American income-earners pay ____ of all federal income taxes.
40%
If $1 was worth 100 cents in 1983 (the base year), then $1 is worth ____ cents in 2015 when the CPI is 234. (round to nearest whole number)
43
Steven Manley deposits $1,100,000 into Wells Fargo. The reserve ratio is .20, and legal reserves are $300,000. Wells Fargo can loan out $___ of Mr. (Very) Manley's deposit. (no commaneeded)
80000
If the required reserve ratio is 10 percent, or 1/10, a $10,000 new deposit can trigger a maximum increase in the money supply of $___.
90000
Which of the following shifts the supply curve of popcorn to the left?
A decrease in the number of popcorn providers
In the market for cell phones, which of the following shifts the demand curve to the right?
An increase in the price of land-line phone service
Economics can be defined as a study of:
How individuals and society try to make the best use of scarce resources
Producing a combination of goods represented by a point inside the PPC is:
Inefficient and attainable
Check all of the following that are characteristic of Keynesian theory.
John Maynard Keynes "The General Theory" in 1936 need for government intervention
Steven Manley deposits $98,756 (chump change for him) of cash into a CD at his local bank. Check each of the following that apply.
M2 does not change M1 decreases
When there is a shortage:
Price is lower than the equilibrium price
A production possibilities curve for two goods is usually bowed outward because:
Resources are not equally suited to produce each of the two products being analyzed.
A private good is _______ in consumption and _________.
Rival; exclusionary
If the required reserve ratio is increased from 10 percent to 12 percent and there is a $10,000 new deposit, the maximum increase in the money supply will be:
Selected Answer: between $10,000 and $100,000
Total expansion of MS = ___. (hint: the relevant wording in the book is not precise)
Selected Answer: initial change in ER * money multiplier
Which of the following is not a determinant of demand?
Steven Manley's cat
Purchasing power is defined as:
The ability to let you buy things you want to buy.
Check all of the following that apply to fiscal policy.
advocates expansionary policies in recessions advocates for contractionary policies in overheated economies sometimes can lead to a larger budget deficit
Check each of the following that apply to the Classical theory.
became popular in America in 1776
If the required reserve ratio is increased from 10 percent to 12 percent and there is a $10,000 new deposit, the maximum increase in the money supply will be:
between $10,000 and $100,000
Check each of the following characteristics of money.
can be created "out of thin air" by banks M1 includes currency and checkable deposits M2 includes M1 plus money market mutual funds and small time deposits is created when banks make loans
Check each of the following functions of the Federal Reserve.
can change the reserve ratio
Check all of the following that are advantages of fiscal policy.
can target specific groups or different parts of the economy may alleviate the economic problem
Check each of the following tools of the Federal Reserve.
change interest rates change the reserve ratio conduct open-market operations
Check each of the appropriate Fed policies during a recession.
decrease reserve ratio decrease interest rates buy securities
Check each of the following tools of the Federal Reserve.
decreases the reserve ratio in recessions decreases interest rates in recession
Check each of the following that apply to the Classical theory.
economy reverts back to full employment level of Real GDP Say's Law popularity diminished during the 1930's was followed by President Reagan
Bowed-out PPCs obtain their shape due to constant opportunity costs.
false
Imports are an injection in the Keynesian bathtub.
false
In the labor market, supply is provided by the employer.
false
Paper money is actually circulating debt of the FDIC and has little intrinsic value.
false
The Fed loans money to commercial banks at the Federal Funds interest rate.
false
The Federal Reserve has never allowed the US to experience a financial panic or depression.
false
The interest rate charged by the Fed when a bank borrows reserves from the Fed is called the Federal Funds rate.
false
Check each of the following characteristics of money.
gets its value from its purchasing power can be divided into M1 and M2 based on liquidity
Check each of the following that applies to the Federal Reserve.
has a Board of Governors consisting of 7 members each member of the Board serves 14 year staggered terms each member of the Board is nominated by President and confirmed by the Senate
Check each of the following that applies to the Federal Reserve.
has no presidential or congressional oversight quasi-private and quasi-public the FOMC is responsible for conducting open-market operations
Which of the following may contribute to cost-push inflation? Multiple answers possible.
higher minimum wage laws increasing resource costs wage-price spiral monopoly power
Check each of the following that applies to the bank bailout in 2008.
it was called "TARP", the Troubled Asset Relief Program. it was an example of fiscal policy set by Congress and President Bush it can be argued that it helped stop further bank collapses
Check each of the following that applies to the bank bailout in 2008.
it was not President Bush's first inclination regarding how to respond to the banking crisis was needed because the banks were thought to be "too big to fail" was a better example of socialism than capitalism
Check each of the following that are minor controls of the Fed used in a recession.
lower margin requirements Lowering credit controls encouraging banks to make more loans
Check each of the following regarding the Fed's response to the financial crisis in 2008.
lowered interest rate QE1 QE2 QE3
Check each of the following characteristics of money.
medium of exchange can be anything that people will accept as payment for goods or service is a unit of account
Assets = liabilities + ____
none of these
Check each of the following characteristics of money.
rare has anti-counterfeit measures is portable can exist electronically serves as a store of value
Which of the following does not count in the unemployment rate?
seasonal unemployment
Check each of the following tools of the Federal Reserve in an overheated economy.
sells securities raises interest rates
Check each of the following that are advantages of monetary policy.
speed and flexibility equal impact across citizens with regard to income, location, or politics
Check each of the following that are disadvantages of monetary policy.
the Fed is more effective at controlling inflation that stimulating growth out of a recession contractionary monetary policy can help the government crowd out the private sector by increasing interest rates Fed policy can have an unequal impact across industries, such as construction. The Fed is not effective at controlling the velocity of money
Check each of the following related to the Quantity Theory of Money.
the equation of exchange is M*V = P*Q Monetarists argue that fiscal (and monetary for that matter) policy are weak due to the crowding-out effect Monetarists such as Milton Friedman argue that the Fed should grow the MS at the same rate as potential increases in real GDP
Check each of the following regarding the reserve ratio (or requirment).
the most powerful tool of the Fed has a "double impact" because it changes excess reserves and the money multiplier is the minimum percentage of depositor funds that must be retained by commercial banks in legal reserves (vault cash or stored at the Fed)
Bond prices and interest rates are inversely related to each other.
true
Commercial banks loan each other money at the federal funds interest rate.
true
If the Fed increases the discount rate banks will borrow more reserves, make more loans, and the money supply will grow faster.
true
Lowering tax rates can sometimes lead to an increase in tax revenue.
true
Minimum wage laws result in a surplus of potential employees who are not working or work fewer hours.
true
Monetarism is a revised form of the classical theory proposing the appropriate growth of the money supply is equal to the growth rate of Real GDP.
true
One of the reasons the Federal Reserve was created was to help the US avoid financial panics and depressions.
true
The interest rate charged by one bank when another bank borrows reserves from that bank is called the Federal Funds rate.
true
