Econ Exam
Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. As a result of Kristy's deposit, Bank A can make a maximum loan of
$8000
Budget deficits occur when the government
Spends more than it has in tax revenue
Which of the following is NOT one of the physical properties that all types of money must possess?
Standardized quantity
A fractional reserve banking system is one in which banks hold less than 100 percent of ________ in reserves.
deposits
What is the current and original function of the Fed?
original: lender of last resort current: monetary policy
Dollar bills in the modern economy serve as money because
people have confidence that others will accept them as money.
Which of the following is not counted in M1?
time account balances
What will cause a rightward shift in aggregate demand curve?
faster income growth and increase in government purchases
The Fed was created in
1913
"Automatic Stabilizers" are government spending and taxes that change automatically with changes in
Business cycles
Assume the FOMC currently estimates the growth rate of Real GDP to be 1.5% per year, the unemployment rate to be 7.1%, and the inflation rate to be 1.0% per year. Which of the following Fed policies would the Fed likely engage in?
Buy bonds
What do the letters FOMC stand for
Federal Open Market Committee
Which of the following is (are) responsible for managing the money supply in the United States?
Federal Open Market Committee
The FOMC consists of the seven members of the ________, the president of the Federal Reserve Bank of New York, and ________.
Federal Reserve's Board of Governors; four presidents from the other 11 Federal Reserve banks
Which of the following is a potential macroeconomic problem from the US's current "fiscal time bomb" situation?
Higher future tax liabilities
All else equal, which of the following Fed actions would contract the money supply?
Increase the discount rate
Assume the FOMC currently estimates the growth rate of Real GDP to be 3.6% per year, the unemployment rate to be 5.1%, and the inflation rate to be 3.8% per year. Which of the following Fed policies would the Fed likely engage in?
Increase the discount rate
Which of the following is a monetary policy "target" of the Fed?
Interest rates
Who is the chair of the Fed?
Janet Yellen
Where was the Fed created?
Jekyll Island, GA
When the Fed engages in a contractionary monetary policy, which of the following is an outcome the Fed is hoping to achieve?
Lower levels of consumer spending
To calculate M2 you need to add
M1 and money market mutual fund shares and small demonstration timed deposits and savings account
In Chapter 16, the textbook refers to a potential "Time Bomb." According to the textbook, which of the following will most likely create this "Time Bomb?"
Medicare and Medicaid expenses
Which of the following is one of the most important benefits of money in an economy?
Money makes exchange easier, leading to more specialization and higher productivity.
Which of the following makes up the largest part of the US Federal Government's total expenditures?
Transfer payments
"Discretionary Fiscal Policy" is controlled by ________________.
US Congress
Which US government body is responsible for Fiscal Policy?
US Congress
The statement, "My iPhone is worth $300" represents money's function as
a unit of account
In economics, money is defined as
any asset people generally accept in exchange for goods and services.
In 1913, Congress established the Federal Reserve System with the intention of putting an end to
bank panics
The majority of power within the Federal Reserve lies with the
board of government
To calculate M1 you need to add
checking account deposits, travelers checks, currency
To increase the money supply, the Federal Reserve could
conduct an open market purchase of Treasury securities.
What will cause a movement up along the aggregate demand curve?
increase in price level?
What will cause a leftward shift in aggregate demand curve?
increase in state income taxes and interest rates
If a person withdraws $500 from his/her savings account and puts it in his/her checking account, then M1 will ________ and M2 will ________.
increase; not change
Fiat money has
little to no intrinsic value and is authorized by the central bank or governmental body.
"Fiat money" is best described as
money with value only as an exchange good
The federal funds rate is
one of the Fed's policy targets
The most important tool that the Federal Reserve uses to conduct monetary policy is
open market operations
Assume the FOMC currently estimates the growth rate of Real GDP to be 5.5% per year, the unemployment rate to be 5.1%, and the inflation rate to be 4.7% per year. Which of the following Fed policies would the Fed likely engage in?
sell bonds
A farm worker gets paid today in money, but plans to spend the money next week. This illustrates which function of money?
store of value
