ECON - Money Smartbook

Small denomination time deposits are part of which definition of the money supply? M1 Currency in circulation Retail money funds M2

M2

________ dichotomy refers to the idea that real variables are independent from nominal variables.

classical

The idea that real variables are independent from nominal variables is known as: classical dichotomy. nominal theory. real variables model. dynamic dichotomy.

classical dichotomy.

The majority of the Federal Reserve banks are in the _____ half of the country.

eastern

Because a bank may need to have only a fraction of deposits on hand, the rest to make ______ that earn interest which is used to cover the costs of running the bank and hopefully earn a(n) _____ .

loans profit

You can write a check to pay for goods and services. The check itself is: money. not money.

not money.

The number of times each dollar of the money supply is used to make purchases is known as the: nominal variables. velocity of money. real variables. money supply multiplier.

velocity of money.

The entity responsible for overseeing the monetary system for a nation is: the Congress or Parliament. the largest bank of the nation. the central bank. the President.

the central bank.

The ______ of ______ refers to the number of times, on average, each dollar of the money supply is used to make purchases in a given period.

velocity money

If the reserve requirement is 7% and we want to increase the money supply by $50 billion, how much does the Fed need to increase reserves? $3.5 billion $7 billion $14 billion $50 billion

$3.5 billion

The Board of Governors has ______ governors each serving a ______ -year term. (Use numerical responses.)

7 14

What is the price level in New Island, knowing the following? Money Supply = 2,000 V = 4 Y = 1,000 The price level is 16. 2. 4. 8.

8.

Suppose the Federal Reserve has set the reserve requirement at 12%. What is the money multiplier? 8.33 0.08 0.12 12.00

8.33

During the Great _________ , bank failures became commonplace throughout the country.

Depression

The least important function of the Board of Governors is participating in the Federal Open Market Committee. (True or False) True False

False

The Federal Reserve Bank is commonly known as the _______

Fed

The ______ manages the supply of currency. (Use one word for each blank)

Fed

The ________ serves as the bank for the federal government. (Enter a one-word short form that is specific to the US.)

Fed

The entity that oversees research into domestic and international financial conditions and investigates the health of the economy, the effect of banking laws, and other issues that consumers and businesses face is the: Federal Resource Board of Administrators. Federal Reserve Board of Governors. Financial Reserve Board of Governors. Federal Reserve Board of Presidents.

Federal Reserve Board of Governors.

Suppose the Federal Reserve decides to increase the money supply. Interest rates will decease and demand for bonds will decrease. Interest rates will increase and demand for bonds will decrease. Interest rates will increase and demand for bonds will increase. Interest rates will decrease and demand for bonds will increase.

Interest rates will decrease and demand for bonds will increase.

Suppose the Federal Reserve decides to increase the money supply. Describe the effect on the bond market. Interest rates will decease and demand for bonds will decrease. Interest rates will increase and demand for bonds will increase. Interest rates will decrease and demand for bonds will increase. Interest rates will increase and demand for bonds will decrease.

Interest rates will decrease and demand for bonds will increase.

Suppose that lenders expect the inflation rate to be 4%, but the actual inflation rate is 2%. Which of the following statements is true about the lower than expected inflation rate? Lenders and borrowers are both losers. Lenders and borrowers are both winners. Lenders are winners, while borrowers lose. Borrowers are winners, while lenders lose.

Lenders are winners, while borrowers lose.

Suppose that lenders expect the inflation rate to be 4%, but the actual inflation rate is 2%. Which of the following statements is true about the lower than expected inflation rate? Lenders are winners, while borrowers lose. Lenders and borrowers are both losers. Lenders and borrowers are both winners. Borrowers are winners, while lenders lose.

Lenders are winners, while borrowers lose.

If someone deposits money into a checking account: M1 decreases. M1 increases. the money supply is unchanged. the money supply increases.

M1 increases. the money supply increases.

A change in any one of the components of _______ will directly affect the money supply. (Put in the measure which is relatively broad.)

M2

Small denomination time deposits are part of which definition of the money supply? M2 Retail money funds M1 Currency in circulation

M2

______ represents the total supply of money in the United States from liquid forms like checkable deposits and currency to less liquid forms like small time deposits.

M2

Which of these serves as the bank to the federal government? All investment banks The Fed The U.S. Treasury The U.S. Mint

The Fed

Which of the following Federal Reserve policies will cause a reduction in the demand for bonds? The Fed increases money demand. The Fed increases money supply. The Fed decreases money demand. The Fed decreases money supply.

The Fed decreases money supply.

Which of the following statements is true concerning the Federal Reserve System? The Fed is completely independent of the government. The Fed is run by Congress, but independent of the president. The Fed is independent within the government. The Fed is a wholly run government agency.

The Fed is independent within the government.

Which entity controls the money supply? Commercial banks The U.S. Mint The Federal Government The Federal Reserve Bank

The Federal Reserve Bank

Which of the following statements is correct? The interest rate paid on loans is set by the Federal Reserve. The interest rate earned on savings is set by the Federal Reserve. The interest rate paid on loans is the same as the interest rate earned on savings. The interest rate paid on loans differs from the interest rate earned on savings.

The interest rate paid on loans differs from the interest rate earned on savings.

The reserves of a bank held as currency earn little to no interest. (True or False) True False

True

When you borrow money, you'll pay a certain interest rate; when you save, you'll earn a different interest rate. (True or False) True False

True

The money supply in an economy is largely determined by: the forces of supply and demand. judicial branch of government. the U.S. president. a central monetary authority.

a central monetary authority.

A change in demand for money can be shown as: A vertical money supply cure. a movement along the money demand curve. a vertical money demand curve. a shift in the money demand curve.

a shift in the money demand curve.

When used to transfer wealth from the present into the future, money is: the most valuable. a unit of account. a store of value. a medium of exchange.

a store of value.

The money supply is: a horizontal line at $100 billion. a downsloping line that starts at $100 billion. a vertical line at $100 billion. an upsloping line that starts at $100 billion.

a vertical line at $100 billion.

The money supply is: a horizontal line at $100 billion. a downsloping line that starts at $100 billion. an upsloping line that starts at $100 billion. a vertical line at $100 billion.

a vertical line at $100 billion.

If someone deposits money into a checking account, the bank's _______ increase. (Please answer in one word)

assests

Loans are a(n) ____ to a bank and a(n) _____ to the person who borrowed the money.

asset liability

Loans are a(n) ______ to a bank and a(n) ______ to the person who borrowed the money.

asset liability

When people save for future expenses, they typically choose a mix of different _____ that meets their needs and balances their tolerance for risk versus return.

assets

When people save for future expenses, they typically choose a mix of different ______ that meets their needs and balances their tolerance for risk versus return.

assets

If someone deposits money into a checking account, the bank's: assets and liabilities are unchanged. liabilities increase but assets are unchanged. assets increase but liabilities are unchanged. assets and liabilities both increase.

assets and liabilities both increase.

If someone deposits money into a checking account, the bank's: assets increase but liabilities are unchanged. liabilities increase but assets are unchanged. assets and liabilities are unchanged. assets and liabilities both increase.

assets and liabilities both increase.

Institutions can make small transfers (like Social Security payments, corporate payments to vendors, and payroll deposits) using: telephone transfers. automated clearinghouse services. courier services. wire transfers.

automated clearinghouse services.

______ are organizations that connect people with money to people who want it.

banks

______ can affect the money supply by increasing or decreasing the number of loans they make.

banks

_______ are businesses that provide financial services to the marketplace and try to make a profit along the way. (Use one word to answer.)

banks

With fractional reserve banking,: banks have to have deposits equal to loans. banks have to have deposits equal to reserves. banks have to keep a fraction of deposits on hand. banks have to have loans equal to reserves.

banks have to keep a fraction of deposits on hand.

The ______ the reserve requirement, the smaller the money multiplier.

bigger

If the inflation rate is higher than expected,: borrowers and lenders are both losers. lenders are winners and borrowers are losers. borrowers are winners and lenders are losers. borrowers and lenders are both winners.

borrowers are winners and lenders are losers.

The total demand for money is: vertical as a result of transaction demand. vertical as a result of asset demand. horizontal as a result of transaction demand. down-sloping as a result of asset demand. down-sloping as a result of transaction demand. horizontal as a result of asset demand.

down-sloping as a result of asset demand.

The mathematical identity that states that money supply times the velocity of money is equal to the price level times the real GDP is known as the ______ of ______ .

equation exchange

The rate of inflation expressed as a percent anticipated by market participants is the _____ inflation rate.

expected

_____ value is the nominal or dollar value of a security generally printed on the face (front) of the security.

face

_______ policy affects interest rates charged on loans and paid on savings, thereby influencing the price of goods services and resources.

monetary

The interest rate stated on a loan or other asset is the _____ interest rate.

nominal

When there is a recession, there is a decrease in _____ GDP and the transaction demand for money falls.

nominal

If a bond sells for more than the face value, it sells at a(n) _____

premium

The yield is equal to the net _____ earned divided by the amount invested.

profit

The money multiplier equals: reserve requirement/expenditure multiplier. marginal propensity to save/reserve requirement. 1/reserve requirement. 1/marginal propensity to save.

1/reserve requirement.

Suppose the reserve requirement is 20 percent. For every $100 on deposit, the bank needs to hold $ _____ as reserves. (Add only a number; the dollar sign has been provided for you.)

20

Assume the reserve requirement is 10%. Brian deposits a check for $2,500 at his bank. Required reserves are $ _____ . (Add only a number; the dollar sign has been provided for you.)

25

Assume the reserve requirement is 10%. Brian deposits a check for $2,500 at his bank. Required reserves are $ ______. (Add only a number; the dollar sign has been provided for you.)

25

Today, the the Federal Deposit Insurance Corporation insures accounts up to $ _____ . (Provide an amount; the dollar sign has already been provided for you.)

250,000

What is the velocity of money in New Island, knowing the following? Money Supply = 5,000 P= 6 Y= 2,500 The velocity of money is: 12. 6. 2. 3.

3

If the reserve requirement is 10% and we want to increase the money supply by $50 billion, the Fed will need to increase reserves by $ _____ billion. (Enter only a number; the dollar sign has been provided for you.)

5

Suppose that the real interest rate equals 2% and the expected rate of inflation equals 3%. Under these conditions, the nominal interest rate equals __%. (Just enter a number; the $ sign has already been provided for you.) -1 1 -5 5

5

Suppose that the real interest rate equals 2% and the expected rate of inflation equals 3%. Under these conditions, the nominal interest rate equals __%. (Just enter a number; the $ sign has already been provided for you.) 5 -1 -5 1

5

Suppose the reserve requirement is 5 percent. For every $100 on deposit, the bank needs to hold $ ______ as reserves. (Add only a number; the dollar sign has been provided for you.)

5

Andy deposits $100 of currency in his checking account. What effect does this transaction have on M1? Currency decreases, while checkable deposits and M1 increase. Currency decreases, checkable deposits increase, and M1 remains constant. Checkable deposits, currency, and M1 all increase. Checkable deposits decrease, while currency and M1 remain constant.

Currency decreases, checkable deposits increase, and M1 remains constant.

The entity that determines and implements the nation's monetary policy and controls the money supply to promote stable prices and economic growth in the U.S. economy is the: Federal Open Market Committee. Federal Open Money Committee. Financial Open market Committee. Financial Open Money Committee.

Federal Open Market Committee.

The entity that determines and implements the nation's monetary policy and controls the money supply to promote stable prices and economic growth in the U.S. economy is the: Financial Open Money Committee. Financial Open Market Committee. Federal Open Market Committee. Federal Open Money Committee.

Federal Open Market Committee.

The entity that oversees research into domestic and international financial conditions and investigates the health of the economy, the effect of banking laws, and other issues that consumers and businesses face is the: Federal Reserve Board of Governors. Federal Resource Board of Presidents. Financial Reserve Board of Governors. Federal Reserve Board of Administrators.

Federal Reserve Board of Governors.

Which of the following statements is correct? The interest rate paid on loans is set by the Federal Reserve. The interest rate paid on loans is the same as the interest rate earned on savings. The interest rate earned on savings is set by the Federal Reserve. The interest rate paid on loans differs from the interest rate earned on savings.

The interest rate paid on loans differs from the interest rate earned on savings.

__________ in an economy is largely determined by a central monetary authority. The amount of loans The amount of taxes The money supply The money demand

The money supply

If the Federal Reserve adopts a policy of lowering interest rates, some people: will want to save more at the lower interest rates. can afford to make loans to their friends. can stay in homes that they might otherwise have had to sell. can chose to refinance their loans. will continue to buy new homes despite the weak economy. can borrow more from the Federal Reserve.

can chose to refinance their loans. can stay in homes that they might otherwise have had to sell. will continue to buy new homes despite the weak economy.

A change in interest rate will: change the nominal GDP level. change the supply of money. cause a movement along the money demand curve. shift the money demand curve.

cause a movement along the money demand curve.

When a check _______ and money is transferred out of a checking account, it is the transfer of funds that constitutes the actual payment for the good and service.

clears

Many factors contributed to the severity of the Great Depression, but an important one was the: collapse of the banking sector. dust storms. catastrophic floods. election of Hebert Hoover.

collapse of the banking sector.

Many factors contributed to the severity of the Great Depression, but an important one was the: election of Hebert Hoover. collapse of the banking sector. dust storms. catastrophic floods.

collapse of the banking sector.

Bonds are certificates of _____ that usually specify a dollar amount to be repaid plus interest at some future date.

debt

If the money supply decreases, while prices and velocity remain constant, real GDP will: fluctuate based on the reserve requirement ratio. remain constant. increase. decrease.

decrease

When there is a recession, there is a(n) (increase/decrease) in nominal GDP and the transaction demand for money falls.

decrease

Withdrawals and reduced lending _____ the money supply.

decrease

During the Great Depression, the money multiplier greatly __, resulting in a(n) __ in the money supply. increased; increase increased; decrease decreased; decrease

decreased; decrease

At each round of the money-creation process, banks must hold on to some portion of the increase in reserves and can lend out the rest. Every time this lending cycle occurs, the increase in loans ______ . (Use one word for the blank.)

decreases

Changes in the price level, changes in real GDP, and uncertainty about the future are all considered determinants of money _____

demand

Changes in the price level, changes in real GDP, and uncertainty about the future are all considered determinants of money ______ .

demand

A decrease in the money ______ ,all else equal, causes the interest rate to fall.

demanded

The actual interest rate the buyer of the bond earns: changes annually. changes semi-annually. depends on how much the buyer paid relative to the face value. is fixed.

depends on how much the buyer paid relative to the face value.

The actual interest rate the buyer of the bond earns: changes semi-annually. is fixed. depends on how much the buyer paid relative to the face value. changes annually.

depends on how much the buyer paid relative to the face value.

Changes in the price level changes in real GDP and uncertainty about the future are all considered: monetary policy tools. determinants of money supply. determinants of money demand. fiscal policy tools.

determinants of money demand.

The interest rate we earn on a savings account: is set by the Federal Reserve Banks. differs from the interest rate we pay on loans. is identical to the interest rate we pay on loans. is fixed across all commercial banks.

differs from the interest rate we pay on loans.

The interest rate at which banks can borrow money directly from the Federal Reserve is called the: prime rate. federal funds rate. discount rate. reserve requirement.

discount rate.

Total money demand is: downsloping as a result of asset demand. vertical as a result of asset demand. downsloping as a result of transaction demand. vertical as a result of transaction demand.

downsloping as a result of asset demand.

Total money demand is: downsloping as a result of transaction demand. vertical as a result of transaction demand. downsloping as a result of asset demand. vertical as a result of asset demand.

downsloping as a result of asset demand.

In a world with no inflation, the nominal interest rate is ____ to the real interest rate.

equal

The primary entity charged with supervision and regulation of member banks to prevent banking panics or disruptions is called the ______ ______ bank.

federal reserve

The supply of money in an economy is largely determined by a central monetary authority. In the United States, that authority is the _____ _____ bank.

federal reserve

Banks can create money by making use of: fractional reserve banking. government authorized printing facilities. fractional reserve printing. frictional reserve banking.

fractional reserve banking.

A surplus is a situation in which the quantity supplied is ______ than the quantity demanded at the current market price.

greater

A real interest rate is negative whenever the inflation rate is _____ than the nominal interest rate that was set on a loan.

higher

A(n) _____ in the money supply raises bond prices.

increase

If you believe that the Federal Reserve will soon _____ the money supply, you will want to buy bonds because you believe they will increase in value.

increase

When an individual deposits a check at the local bank, the bank's reserves _______ . The bank can use most of those reserves to make _____ . (Use one word for each of the blanks.)

increase loans

During the 1970s, inflation ______ faster than the nominal interest rate meaning real interest rates were ____ (positive/negative).

increased negative

When the year 2000 approached, the Federal Reserve: decreased both currency and reserves in the months before the New Year. increased both currency and reserves in the months before the New Year. increased currency but reduced reserves in the months before the New Year. decreased currency but increased reserves in the months before the New Year.

increased both currency and reserves in the months before the New Year.

hen the year 2000 approached, the Federal Reserve: decreased both currency and reserves in the months before the New Year. increased both currency and reserves in the months before the New Year. decreased currency but increased reserves in the months before the New Year. increased currency but reduced reserves in the months before the New Year.

increased both currency and reserves in the months before the New Year.

During the 1970s, inflation __ faster than the nominal interest rate, meaning real interest rates were __. increased; positive decreased; negative increased; negative decreased; positive

increased; negative

As the interest rate (increases/decreases), people demand a lower quantity of money and choose to hold (more/less) bonds and other interest-earning assets.

increases more

The money supply is a vertical line because it is: dependent on unknown prices of goods and services. independent of known prices of goods and services. sensitive to interest rates. independent of the interest rate.

independent of the interest rate.

The money supply is a vertical line because it is: sensitive to interest rates. dependent on unknown prices of goods and services. independent of known prices of goods and services. independent of the interest rate.

independent of the interest rate.

At each round of the money-creation process, banks must hold on to some portion of the increase in reserves (required reserves) and can lend out the rest. Every time this lending cycle occurs, the increase in loans becomes smaller and smaller. Both of these processes are mathematically expressed as an: inverse exponential series. inverse geometric series. exponential ratio series. infinite geometric series.

infinite geometric series.

Because the Federal Reserve fixes the money supply at a particular amount, changes in the _____ rate do not cause a change in the quantity of money supplied.

interest

Because the Federal Reserve fixes the money supply at a particular amount, changes in the ______ rate do not cause a change in the quantity of money supplied.

interest

Because the Federal Reserve fixes the money supply at a particular amount, changes in the rate do not cause a change in the ______ quantity of money supplied.

interest

The ____ rate is the payment made to agents that lend or save money expressed as an annual percentage of the monetary amount lent or saved.

interest

The demand and supply for money interact to determine the ______ rate.

interest

The equilibrium price of money is the ______ rate.

interest

The money market is similar to all other markets in this respect, but slightly different in that the price of money is the _____ rate.

interest

You decide to buy your first home and must borrow some of the money from a bank. How much the loan will cost you depends upon the _____ rate.

interest

You decide to buy your first home and must borrow some of the money from a bank. How much the loan will cost you depends upon the ______ rate.

interest

_____ is the payment made to agents that lend or save money. (Please add only one word for the blank)

interest

Banks play a crucial role in determining _____ rates and the _____ supply.

interest money

Banks play a crucial role in determining ______ rates and the ______ supply.

interest money

We graph the demand for money with the _____ rate on the vertical axis and the quantity of ____ on the horizontal axis.

interest money

The yield on a bond is: interest payment/bond cost. bond cost/interest payment. interest payment/interest rate. bond cost/interest rate.

interest payment/bond cost.

Knowing how much money an economy has matters because it helps determine: employment and prices. productivity and employment. interest rates and employment. interest rates and prices.

interest rates and prices.

The interest rate used to determine the coupon payments: is fixed. changes annually. depends on how much the buyer paid relative to the face value. changes semi-annually.

is fixed.

The interest rate: is constant across banks. is usually called the real interest rate. changes once per year. is the price of money.

is the price of money.

A shortage is a situation in which the quantity supplied is _______ than the quantity demanded at the current market price.

less

The actual money multiplier tends to be ______ than the one predicted by the money multiplier equation.

less

When people hold money in a mutual fund, they give up _______ for a higher interest rate.

liquidity

________ describes how easy it is to convert any asset, like a savings account, into currency you could keep in your pocket.

liquidity

An increase in the money supply adds -risk, -return assets to the economy.

low low

A shortage is a situation in which the quantity supplied is ______ than the quantity demanded at the current market price.

lower

When the year 2000 approached, the Federal Reserve was concerned that people would: make large deposits of currency into banks. make large withdrawals of currency from banks. refuse to use currency for transactions. only use currency for transactions.

make large withdrawals of currency from banks.

Banks can influence the money supply by printing money changing interest rates. conducting fiscal policy making loans

making loans

Banks can influence the money supply by: making loans. printing money. conducting fiscal policy. changing interest rates.

making loans.

Nominal variables are variables that are measured in: employment units while real variables are measured by money. monetary units while real variables are measured in numerical units. numerical units while real variables are measured in monetary units. units of output while real variables are measured in prices.

monetary units while real variables are measured in numerical units.

Currently _______ remains less than half of M1, but comprises twice the share of M1 as it did in 1960.

money

Since credit cards are not used as a medium of exchange, they cannot be considered as ________ .

money

Since we can't use stocks and bonds for daily transactions, people hold some of their savings as _____ instead of putting it all in stocks or bonds.

money

The _____ market is a market in which the demand for and supply of money determine an interest rate or opportunity cost of holding money balances.

money

The _____ market is a market in which the demand for and supply of money determine an interest rate or opportunity cost of holding money balances. factor product labor money

money

The _____ market is a market in which the demand for and supply of money determine an interest rate or opportunity cost of holding money balances. labor factor money product

money

The ______ market is a market in which the demand for and supply of money determine an interest rate or opportunity cost of holding money balances.

money

The overall change in the money supply given an initial change in reserves depends on the _____ multiplier.

money

Using ______ as a means of exchange in our economy makes it easier for people to make transactions with each other.

money

_____ is good for storing wealth, but the interest rate it earns is usually low.

money

______ is good for storing wealth, but the interest rate it earns is usually low.

money

_______ is any item that both buyers and sellers will accept in exchange for goods and services. (Use the term mentioned in the definition.)

money

_______ makes specialization and trade easier.

money

________ facilitates trade between buyers and sellers and makes specialization more possible which helps make the economy more productive.

money

______ in active circulation includes money in everyone's pockets and is part of ______

money M1

A deposit account that accepts deposits and purchases bonds and commercial debt that pay interest is a: mutual insurance funds. money market mutual funds. money market CDs.

money market mutual funds.

A money market is a market in which: the federal government determines an interest rate. money supply and demand determine an interest rate. the central monetary authority determines an interest rate. the Federal Reserve Bank determines an interest rate.

money supply and demand determine an interest rate.

A money market is a market in which: the federal government determines an interest rate. the central monetary authority determines an interest rate. the Federal Reserve Bank determines an interest rate. money supply and demand determine an interest rate.

money supply and demand determine an interest rate.

If a bond sells for _____ than the face value, the interest rate the bond pays falls.

more

If you pay _____ to acquire an asset, your return on that asset will decrease.

more

If you pay ______ to acquire an asset, your return on that asset will decrease.

more

A real interest rate is _____ whenever the inflation rate exceeds the nominal interest rate that was set on a loan.

negative

Because the asset demand for money is sensitive to the prevailing interest rate, it is a _____ -sloping line.

negative

If the price level increases, but the level of output remains the same from one year to the next,: both nominal and real GDP will increase. real GDP will increase, but nominal GDP will remain the same. both nominal and real GDP will remain the same. nominal GDP will increase, but real GDP will remain the same.

nominal GDP will increase, but real GDP will remain the same.

The coins and paper money you use to buy goods and services can be printed: by banks and other agents of the federal government. only by the federal government. only once per year. by the U.S. Department of Commerce.

only by the federal government.

The interest rate is the _______ cost of holding money because the alternative to holding money is to hold a financial asset like a bond that pays interest.

opportunity

Because you forgo interest earnings when you hold money, the interest rate is the: price of holding money. opportunity cost of investing money. opportunity cost of holding money. rate of return on borrowed money.

opportunity cost of holding money.

_____ loans are a modern-day application of usury laws which limit the interest rate than can be charged on a loan.

payday

_____ loans have fallen under much scrutiny because of high interest rates and fees charged on loans.

payday

Interest is the: amount of funds that a person saves from their income. total value of all saving. expected value of future saving. payment made to agents that lend or save money.

payment made to agents that lend or save money.

Interest is the: payment made to agents that lend or save money. amount of funds that a person saves from their income. expected value of future saving. total value of all saving.

payment made to agents that lend or save money.

Interest is the: total value of all saving. amount of funds that a person saves from their income. expected value of future saving. payment made to agents that lend or save money.

payment made to agents that lend or save money.

Interest is the: total value of all saving. expected value of future saving. payment made to agents that lend or save money. amount of funds that a person saves from their income.

payment made to agents that lend or save money.

In order to conduct daily transactions and have a stable asset for future purchases,: people invest their savings in real estate ventures. people keep all of their savings in stocks and bonds. people hold some of their savings as money. businesses keep all of their savings in stocks and bonds.

people hold some of their savings as money.

When the money supply changes,: inflation will occur. people will rebalance their savings to maintain the level of risk versus return they prefer. people will reduce their spending to reduce risk. people will increase their spending to reduce risk. deflation will occur.

people will rebalance their savings to maintain the level of risk versus return they prefer.

The Federal Open Market Committee includes the Board of Governors, the ______ of the New York Fed, and _____ Federal Reserve bank presidents from other district banks who serve on a rotating basis. (Use one word for each blank)

president 4

The interest rate is the __ of borrowing money. asset demand price transaction demand profit margin

price

The ______ interest rate is adjusted for inflation.

real

The inflation-adjusted interest rate is the _____ interest rate.

real

The nominal interest rate minus the inflation rate is the _____ interest rate.

real

A reserve ______ specifies the fraction of checkable deposits that a bank must keep on hand.

requirement

When a bank makes a loan, in its accounting records, the bank replaces the _____ with a(n) _____ .

reserve loan

To make sure banks meet the daily needs of customers, the Federal Reserve enforces a: minimum deposit level. reserve requirement. strict rate of interest. maximum withdrawal level.

reserve requirement.

To make sure banks meet the daily needs of customers, the Federal Reserve enforces a: minimum deposit level. strict rate of interest. reserve requirement. maximum withdrawal level.

reserve requirement.

When a bank makes a loan, it hands over some of its _______ to the person who borrowed the money.

reserves

If most of the depositors want to withdraw their funds from a bank all at once, it is called a bank ______.

run

The government created the Federal Deposit Insurance Corporation to prevent bank ______ and to provide depositors with greater confidence.

runs

If you believe that the Federal Reserve will soon decrease the money supply, you will want to _____ bonds because you believe they will _____ in value

sell decrease

A change in the demand for money will: cause a movement along the money demand curve. shift the money demand curve. change the nominal GDP level. change the supply of money.

shift the money demand curve.

Suppose the Federal Reserve decreases the money supply by $40 billion. The new money supply will: shift to the left by $40 billion. shift up by $40 billion. shift down by $40 billion. shift to the right by $40 billion.

shift to the left by $40 billion.

Suppose the equilibrium interest rate is 13%, but the usury law prohibits charging more than 10%. In this case, a(n) _____ will arise.

shortage

A relatively ______ fraction of the money in an economy is issued by the Federal Reserve; the rest is created by _______ .

small banks

An increase in the money ______ ,all else equal, causes the interest rate to fall.

supply

The _____ of money is equal to a fixed quantity.

supply

The money __ in an economy is largely determined by a central monetary authority. demand supply

supply

A(n) ______ is a situation in which the quantity supplied is greater than the quantity demanded at the current market price.

surplus

The national banking system is overseen by: the Board of Governors located in Philadelphia PA. Congress located in Washington D.C. the Board of Governors located in Washington D.C. the General Accounting Office located in Washington D.C.

the Board of Governors located in Washington D.C.

Directing monetary policy and supervising member banks is done by: the White House Council of Economic Advisors. the Federal Deposit Insurance Corporation (FDIC). the Federal Reserve. the U.S. Department of the Treasury.

the Federal Reserve.

The Fed operates independently within the government, but not independent of it because new members are appointed by: Congress and must have all actions confirmed by Congress. the President of the United States and confirmed by the Senate. the President of the United States and must have all actions confirmed by the President. Senate and must have all actions confirmed by the President of the United States.

the President of the United States and confirmed by the Senate.

When an individual deposits a check at the local bank,: the bank's reserves decrease. the bank's reserves increase. the bank's rate increase. the bank's rate decrease.

the bank's reserves increase.

The institutions that largely influence money supply are: the U.S Treasury and banks. the U.S. Mint and the Fed. the U.S. senate and banks. the banks and the Fed.

the banks and the Fed.

One way to solve for the money multiplier is to divide: the reserve requirement by the overall change in the money supply. the initial change in reserves by the reserve requirement. the overall change in the money supply by the reserve requirement. the reserve requirement by the initial change in reserves. the overall change in the money supply by the initial change in reserves. the initial change in reserves by the overall change in the money supply.

the overall change in the money supply by the initial change in reserves.

We construct the _____ demand for money by adding the transaction and asset demands at each ____ rate.

total interest

We construct the _____ demand for money by adding the transaction and asset demands at each _____ rate.

total interest

We construct the ______ demand for money by adding the transaction and asset demands at each ______ rate.

total interest

_____ money demand is determined by how much money people are going to spend in a given time period.

transaction

_____ money demand is the demand for money to be used to purchase goods and services.

transaction

_______ demand depends on how much output people buy which is based on their incomes;

transaction

The demand for money comes from two sources: _______ demand and ____ demand.

transaction asset

Real interest rates can be negative. (True or False) True False

true

The first types of money were most likely seeds, grains, or shells. True False

true

_____ can be defined as lending that unfairly enriches the lender like charging an excessive rate of interest. (Remember enter only one word in the blank.)

usury

The nominal interest rate equals the real interest rate: when the inflation rate exceeds the real interest rate. when the inflation rate is less than the nominal interest rate. when there is no inflation. when the inflation rate exceeds the nominal interest rate.

when there is no inflation.

Institutions can transfer large amounts of money in a timely and efficient way using: wire transfers. telephone transfers. checks. automated clearinghouse services.

wire transfers.

We graph the supply of money with the interest rate on the _____ axis and the quantity of money on the ______ axis.

y x

Bond costs and bond ______ always move in opposite directions.

yields

Suppose you are able to repair cars, but unable to fix plumbing. When you traded your neighbor car repair for plumbing services, you benefited less than your neighbor. you benefited more than your neighbor. you exchanged currency. you engaged in barter.

you engaged in barter.

The Federal Reserve System consists of _____ Federal Reserve Banks in ______ geographic regions or districts. (The answers should be in the numerical format)

12 12

President Woodrow Wilson signed the Federal Reserve Act in _____ (Add only the year for the answer do not add the whole date. Please do not name any place as the answer).

1913

_____ reserves held at the Fed earn very little interest.

Excess

Deposits that automatically transfer money balances from savings accounts to checking accounts are part of which definition of the money supply? M M1 M2 M3

M1

______ consists of the most liquid forms of money.

M1

________ (one word) contains funds you have in your bank checking account as travelers' checks and the currency in circulation in the economy.

M1

Which of the following is a primary role of the Federal Reserve? Advising the president on economic policies. Conducting fiscal policy. Providing banking services to the federal government. Providing banking services to large corporations.

Providing banking services to the federal government.

Which of the following is the primary entity charged with supervision and regulation of member banks to prevent banking panics or disruptions? The U.S. Senate The Federal Reserve Bank The President of the U.S. The U.S. Treasury

The Federal Reserve Bank

Knowing how much money an economy has matters because it helps determine interest rates and prices. (True or False) True False

True

Most of the money in the economy is not currency. (True or False) True False

True

The Federal Reserve Chair is so powerful that statements made can affect stocks halfway around the world. False True

True

Which president signed the Federal Reserve Act in 1913? Abraham Lincoln Woodrow Wilson Theodore Roosevelt James Hancock

Woodrow Wilson

In many professional sports leagues, one team is not allowed simply to purchase a player from another team, so they have to trade which requires: a double coincidence of wants. a lot of money. professional negotiators. free agency.

a double coincidence of wants.

When used as an asset that is commonly used to facilitate trade between buyers and sellers, money is: a unit of account. a medium of exchange. the most valuable. a store of value.

a medium of exchange.

Credit card purchases: come out of the M2 definition of the money supply. are the same as debit card purchases. are actually loans that we must repay later. come out of the M1 definition of the money supply.

are actually loans that we must repay later.

During the 1990s, after the fall of the Soviet Union, Russian companies devoted many hours at considerable expense to find partners who followed the _______ system.

barter

Debit card purchases: are actually loans that we must repay later. are not connected to the money supply. come out of checkable deposits. are the same as credit card purchases.

come out of checkable deposits.

The ______ rate is the interest rate at which banks can borrow money directly from the Federal Reserve.

discount

_______ reserves are equal to total reserves minus required reserves.

excess

If the money supply increases, while prices and velocity remain constant, real GDP will: increase. fluctuate based on the reserve requirement ratio. remain constant. decrease.

increase.

The Fed operates: independently within the government, but not independent of it. dependently outside the government. independently outside the government, but not independent of it. dependently within the government.

independently within the government, but not independent of it.

Monetary policy affects ______ rates charged on loans and paid on savings.

interest

Banks can influence the money supply by conducting fiscal policy making loans changing interest rates. printing money

making loans

_______ reserves are equal to deposits times the reserve requirement.

required

The Federal Reserve commonly called the Fed: monitors international transactions. tracks the money supply. controls spending and taxes. is the international governing body.

tracks the money supply.

If you lived in a world without money, you would be forced to ______ for the goods and services you wanted.

trade

_______ checks can be immediately exchanged for currency.

travelers

The number of times each dollar of the money supply is used to make purchases is known as the: velocity of money. nominal variables. money supply multiplier. real variables.

velocity of money.

Institutions can transfer large amounts of money in a timely and efficient way using: automated clearinghouse services. telephone transfers. wire transfers. checks.

wire transfers.