final questions review macro

Which of the following "backs" the value of money in the United States?

The acceptability of it as a medium of exchange

Most financial assets other than money function as

a store of value, but not a unit of account nor a medium of exchange

When the Fed decreases the discount rate, banks will

borrow more from the Fed and lend more to the public. The money supply increases.

When conducting an open-market purchase, the Fed

buys government bonds, and in so doing increases the money supply.

Frank recently lost his job as the computer manufacturing company he works for recently downsized after poor sales and poor performance of the economy during the last year.

cyclical unemployment

An increase in the MPC

increases the multiplier, so that changes in government expenditures have a smaller effect on aggregate demand.

The Fed can reduce the federal funds rate by

increasing the money supply. To increase the money supply it could buy bonds.

The federal funds rate is the

interest rate at which banks lend reserves to each other overnight.

A newspaper headline reads: "Fed Cuts Federal Funds Rate for Fifth Time This Year." This headline indicates that the Federal Reserve is most likely trying to:

Ease monetary policy

The primary reason commercial banks must keep required reserves on deposit at Fed is to:

Ensure that depositors can withdraw their money if they wish to and Allow the Fed to control the amount of bank lending

The United States is experiencing a recession and Congress decides to adopt an expansionary fiscal policy to stimulate the economy. In this case, the crowding-out effect suggest that:

Investment increases, thus decreasing aggregate demand and partially offsetting the fiscal policy

The Federal Reserve can increase aggregate demand by:

Reducing the discount rate

In the 19th century, when crop failures often led to bank runs, banks would make relatively fewer loans and hold relatively more excess reserves. By itself, these actions by the banks should have

decreased the money multiplier and increased the money supply.

In a fractional-reserve banking system, an increase in reserve requirements

decreases both the money multiplier and the money supply.

Julie just recently graduated from college and is spending the summer traveling before she begins a job with a consulting firm in the fall.

frictional unemployment

Susan recently left her marketing job at a local bank because she found that finance interests her more. She is currently looking for a job as a financial consultant

frictional unemployment

Under a fractional-reserve banking system, banks

generally lend out a majority of the funds deposited.

Which of the following adjust to bring aggregate supply and demand into balance?

government expenditures and taxes

Tom recently lost his job as the steel manufacturing firm he worked for moved their plant overseas. The other steel plants in the nation have been also been following this trend.

structural unemployment

The discount rate is

the interest rate the Fed charges banks.

When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply,

those assets are government bonds and the Fed's reason for selling them is to decrease the money supply.