Econ Chapt 28+29 Review

Consider two people who are currently out of work. Tim is not looking for work because there have been many job cuts where he lives, and he doesn't think it likely that he will find work. Bev is not currently looking for work, but she would like a job, and she has looked for work in the past. The Bureau of Labor Statistics considers

both Tim and Bev to be marginally attached workers.

The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the Tazian dollar. Aggregate banking statistics show that collectively the banks of Tazi hold $300 million of required reserves, $75 million of excess reserves, have issued $7,500 million of deposits, and hold $225 million of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank. Refer to Scenario 29-1. Suppose the Bank of Tazi loaned the banks of Tazi $10 million. Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same. By how much would the money supply change?

$200 million

Suppose the banking system currently has $400 billion in reserves, the reserve requirement is 8 percent, and excess reserves amount to $5 billion. What is the level of deposits?

$4,937.5 billion

Which list ranks assets from most to least liquid?

Currency, stocks, fine art

Octavia does not currently have a job, but she has applied for several jobs in the previous week. Eve is an unpaid stay-at-home mom who has not searched for work in recent years. Who does the Bureau of Labor Statistics count as "not in the labor force"?

Eve but not octavia

The banking system currently has $10 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 12.5 percent and at the same time buys $1 billion worth of bonds, then by how much does the money supply change?

It falls by $12 billion.

A bank has an 8 percent reserve requirement, $10,000 in deposits, and has loaned out all it can, given the reserve requirement.

It has $800 in reserves and $9,200 in loans

Minimum-wage laws are most likely to affect the wages paid to

teenagers

if banks increase their holdings of excess reserves

the money multiplier and the money supply decrease

Some frictional unemployment is inevitable because

there are changes in the demand for labor among different firms

Sheila is on a temporary layoff from her automobile factory job but has not looked for work in the last four weeks. The Bureau of Labor Statistics counts Sheila as

unemployed and in the labor force

In 2018 the Bureau of Labor Statistics reported that there were 57.4 million people over age 25 whose highest level of education was some college or an associate degree. Of these, 36.3 million were employed and 1.2 million were unemployed. What were the labor-force participation rate and the unemployment rate for this group?

65.3% and 3.2%

Matilda just graduated from college. In order to devote all her efforts to college, she didn't hold a job. She is going to tour around the country on her motorcycle for a month before she starts looking for work. Other things the same, the unemployment rate

and the labor-force participation rate are both unaffected

public policy

can reduce both frictional unemployment and the natural rate of unemployment

Over the past several decades, the difference between the labor-force participation rates of men and women in the U.S. has

gradually decreased

The existence of money leads to

greater specialization and to a higher standard of living

In the early 1900s, Henry Ford introduced a

high-wage policy, and this policy produced many of the effects predicted by efficiency-wage theory.

In a system of 100-percent-reserve banking,

banks do not influence the supply of money

the natural cycle of unemployment includes

both frictional and structural unemployment

when a firm pays an efficiency wage, it may

find that its workers quit less frequently

A bank which must hold 100 percent reserves opens in an economy that had no banks and a currency of $150. If customers deposit $50 into the bank, what is the value of the money supply?

$150

Suppose the Fed requires banks to hold 9 percent of their deposits as reserves. A bank has $18,000 of excess reserves and then sells the Fed a Treasury bill for $9,000. How much does this bank now have available to lend out if it decides to hold only required reserves?

$27,000

Which of the following will help to prevent bank runs?

100% reserve banking

Which of the following is included in both M1 and M2?

Currency, demand deposits, and other checkable deposits

Which of the following policies can the fed follow to increase the money supply?

Reduce the interest rate on reserves

Which of the following groups meets to discuss changes in the economy and determine monetary policy?

The Federal Open Market Committee

Who of the following is not included in the Bureau of Labor Statistics' "employed" category?

Those waiting to be recalled to a job from which they had been laid off

When the Fed sells government bonds, the money supply decreases. True or False?

True

David and Asher buy the same pair of sneakers, but each in the wrong size. David proposes a size swap with Asher. This is an example of

barter, since the sneakers in the correct size have intrinsic value to both David and Asher

In the 1990s Ireland made unemployment benefits less generous. This change would likely have reduced

both frictional unemployment and the natural rate of unemployment.

If the Fed raises the interest rate it pays on reserves, it will ________ the money supply by increasing ________.

decrease, excess reserves

Which of the following types of unemployment will exist even if the wage is at the competitive equilibrium?

frictional unemployment

Unions tend to increase the disparity in pay between insiders and outsiders by

increasing the wage in the unionized sector, which may create an increase in the supply of workers in the nonunionized sector.

The federal funds rate is the

interest rate at which banks lend reserves to each other overnight

If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

selling bonds. This selling would reduce reserves.