Macroeconomics Final Exam Part 4

Suppose that the reserve ratio is 6%, and applies only to checkable-deposits. A bank has non-checkable time deposits of $300 million, checkable deposits of $100 million, and reserves of $8 million. What are the excess reserves of this bank?

$6 million

Michelle transfers $4,000 from her savings account to her checking account. What effect is this change likely to have on M1 and M2?

M1 increases and M2 stays the same

The relative importance of various asset items on a commercial bank's balance sheet reflects a bank's pursuit of which two conflicting goals?

liquidity and profits

Only two resources, capital and labor, are used in an economy to produce an output of 600 million units. If the total cost of capital resources is $300 million and the total cost of labor resources is $100 million, then the per-unit production costs in this economy are

$0.67

A commercial bank has actual reserves of $1 million and checkable-deposit liabilities of $9 million, and the required reserve ratio is 10%. The excess reserves of the bank are

$100,000

The Norfolk Bank has $18,000 in excess reserves and the reserve ratio is 20 percent. How much checkable deposits and reserves does this bank hold?

$140,000 in checkable-deposit liabilities and $46,000 in reserves

Answer the question based on the following balance sheet for the First National Bank. Assume the reserve ratio is 15% Assets) reserves: 50,000 loans: 75,000 securities: 25,000 property: 100,000 liabilities+net worth) checkable deposits: 120,000 stock shares: 130,000 refer to the data above. if a check for $20,000 is drawn and cleared against this bank, it will then have excess reserves of

$15,000

If the average level of nominal income in a nation is $44,000 and the price level index is 175, the average real income would be about

$25,143

The unemployment rate in an economy is 7.5 percent. The total people;ation of the economy is 250 million and the size of the civilian labor force is 180 million. The number of employed workers intros economy Is

166.5 million

A nation has a population of 260 million people. Of these, 60 million are retired, in the military, institutionalized, or under 16 years old. There are 188 million who are employed and 12 million who are unemployed. What is the unemployment rate?

6 percent

Money supplyM1 does not include the currency held by

commercial banks

Refer to the graph above. What combination would most likely cause a shift from AD1 to AD2?

a decrease in taxes and an increase in government spending

what is one significant characteristic of fractional reserve banking?

banks can create money through lending their reserves

The effect of an increase in the government budget deficit on the equilibrium level of GDP is essentially the same as a(n)

decrease in savings

The more progressive the tax system, the

greater is the built-in stability for the economy

If the crowding out effect is at its maximum strength, it follows that an increase in government spending would

not affect aggregate demand and GDP

the crowding out effect from government borrowing to finance the public debt is reduced when

public investment complements private investments

With mild demand-pull inflation, the economy's output level would tend to be

pulled up by the increase in total spending

When a bank's loans are written off, it means that the bank's

reserves shrink, whereas its debt remains the same

If the economy is to have significant built-in stability, then when real GDP increases, the tax revenues should

rise proportionately more than the change in GDP

The higher the rate of unemployment

the larger the GDP gap

when bankers hold excess reserves

the money creating potential of the banking system decreases

When cash is withdrawn from a checkable-deposit account at a bank

the money supply M1 does not change but its composition changes

general sources of shocks that can cause business cycles include the following, except

unemployment jumps and production drop

The following is budget information for a hypothetical economy. All data are in billions of dollars (government spending) (tax revenue) (GDP) Year 1: $800. 825. 4000 Year 2: 850. 850 4200 Year 3: 900 875. 4350 Year 4: 950 900. 4500 Year 5: 1000 925. 4600 refer to the above table. In which year is there a budget surplus?

year 1