Econ

2 factors

1.) the feds cannot force households to deposit there assets into bank accounts.......less deposits=less loans=less amount of total money supply. 2.) the feds can't control the amount of loans banks choose to make out their excess reserves.........if banks hold more reserves than required= fewer loans made=less money supply

Mia puts money into a piggy bank so she can spend it later. What function of money does this illustrate? A. store of value B. medium of exchange C. unit of account D. None of the above is correct.

a

Most economists use the aggregate demand and aggregate supply (AD-AS) model primarily to analyze A. short-run fluctuations in the economy. B. the effects of macroeconomic policy on the prices of individual goods. C. the long-run effects of international trade policies. D. productivity and economic growth.

a

The position of the long-run aggregate supply curve A. is determined by the things that determine output in the classical model. B. is at the point where the unemployment rate is zero. C. shifts to the right when the price level increases. D. is at the point where the economy would cease to grow.

a

When the Fed conducts open-market purchases, A. it buys Treasury securities, which increases the money supply. B. it buys Treasury securities, which decreases the money supply. C. it borrows money from member banks, which increases the money supply. D. it lends money to member banks, which decreases the money supply.

a

Which of the following lists two things that both increase the money supply? A. the Fed buys bonds and lowers the discount rate B. the Fed buys bonds and raises the discount rate C. the Fed sells bonds and lowers the discount rate D. the Fed sells bonds and raises the discount rate.

a

Which of the following shifts short-run aggregate supply left? A. an increase in price expectations B. an increase in the actual price level C. a decrease in the money supply D. a decrease in the price of oil

a

An increase in the price level and a reduction in real output would result from A. a fall in stock prices. B. natural disasters such as hurricanes, floods, and droughts.. C. declining government expenditures. D. tax rebates.

b

Fiat money A. is worthless. B. has no intrinsic value. C. may be used as a medium of exchange, but it is not legal tender. D. performs all the functions of money except the unit-of-account function.

b

If nominal GDP is $400, real GDP is $200, and the money supply is $100, then A. the price level is 1/2 and velocity is 2. B. the price level is 1/2, and velocity is 4. C. the price level is 2, and velocity is 2. D. the price level is 2, and velocity does not change.

b

If the reserve ratio is 100 percent, then a new deposit of $500 into a bank account A. eventually increases the money supply by $500. B. leaves the size of the money supply unchanged. C. eventually decreases the size of the money supply by $500. D. None of the above is correct.

b

Last year, Tealandia produced 50,000 bags of green tea, and tea was the only good Tealandia produced. Each bag sold at 4 units each of Tealandia's currency, the Leaf. Tealandia's money supply was 40,000. What was the velocity of money in Tealandia? A. 20 B. 5 C. 1/20 D. 1/5

b

On a T-account for a bank, A. reserves and deposits are both assets. B. reserves are assets and deposits are liabilities. C. deposits are assets and reserves are liabilities. D. reserves and deposits are both liabilities.

b

Refer to the figure above. If the economy is initially in long-run equilibrium, then an adverse shift in short-run aggregate supply would move the economy from A. AtoB . B. CtoD. C. BtoA. D. DtoC.

b

The classical dichotomy and monetary neutrality are represented graphically by A. an upward-sloping long-run aggregate-supply curve. B. a vertical long-run aggregate-supply curve. C. an upward-sloping short-run aggregate-curve. D. a downward-sloping aggregate-demand curve.

b

The classical model is appropriate for analysis of the economy in the A. long run, since evidence indicates that money is not neutral in the long run. B. long run, since real and nominal variables are essentially determined separately in the long run. C. short run, provided money is not neutral. D. short run, provided real and nominal variables are highly intertwined.

b

When the Federal Reserve sells assets from its portfolio to the public with the intent of changing the money supply, A. those assets are government bonds and the Fed's reason for selling them is to increase the money supply. B. those assets are government bonds and the Fed's reason for selling them is to decrease the money supply. C. those assets are items that are included in M2 and the Fed's reason for selling them is to increase the money supply. D. those assets are items that are included in M2 and the Fed's reason for selling them is to decrease the money supply.

b

Which list ranks assets from most to least liquid? A. currency, fine art, stocks B. currency, stocks, fine art C. fine art, currency, stocks D. fine art, stocks, currency

b

A sale of government bonds by the Fed worth $120 million, with a 20% reserve requirement ratio will potentially A. increase the money supply by $ 600 B. increase the money supply by $ 480. C. decrease the money supply by $ 600. D. decrease the money supply by $ 480.

c

According to classical macroeconomic theory, including in particular the theory of monetary neutrality, changes in the money supply affect A. real GDP and the price level. B. real GDP but not the price level. C. the price level, but not real GDP. D. neither the price level nor real GDP.

c

According to the "interest-rate effect" explanation of the Aggregate Demand curve, other things the same, when the price level falls, interest rates A. rise, so firms increase investment. B. rise, so firms decrease investment. C. fall, so firms increase investment. D. fall, so firms decrease investment.

c

An economic contraction caused by a shift in aggregate demand causes prices to A. rise in the short run, and rise even more in the long run. B. rise in the short run, and fall back to their original level in the long run. C. fall in the short run, and fall even more in the long run. D. fall in the short run, and rise back to their original level in the long run.

c

If Y and V are constant, and M doubles, the quantity equation implies that the price level A. more than doubles. B. changes but less than doubles. C. doubles. D. does not change

c

If the reserve ratio for all banks is 8 percent, then an initial deposit of $4,500 can create up to A. $4,500 of total money supply. B. $48, 913 of total money supply. C. $56,250 of total money supply. D. $75,000 of total money supply.

c

Other things the same, when the price level falls, interest rates A. rise, so firms increase investment. B. rise, so firms decrease investment. C. fall, so firms increase investment. D. fall, so firms decrease investment.

c

Refer to the figure above. An increase in the money supply would move the economy from C to A. B in the short run and the long run. B. D in the short run and the long run. C. B in the short run and A in the long run. D. D in the short run and C in the long run.

c

Suppose banks desire to hold no excess reserves. If the reserve requirement is 15 percent and if a bank receives a new deposit of $10, then this bank A. must increase its required reserves by $10. B. will initially see its total reserves increase by $15. C. will be able to make new loans of up to $8.50. D. All of the above are correct.

c

The existence of money leads to A. greater specialization in production, but not to a higher standard of living. B. a higher standard of living, but not to greater specialization. C. greater specialization and to a higher standard of living. D. neither greater specialization nor to a higher standardof living.

c

The supply of money is determined by A. the price level. B. the Treasury and Congressional Budget Office. C. the Federal Reserve System. D. the demand for money.

c

If M = 3,000, P = 2, and Y = 12,000, what is velocity? A. 1/2 B. 2 C. 4 D. 8

d

If the price level rises above what was expected and nominal wages are fixed, then A. production becomes less profitable so firms will hire fewer workers. B. production becomes less profitable so firms will hire more workers. C. production becomes more profitable so firms will hire fewer workers. D. production become more profitable so firms will hire more workers.

d

If the reserve ratio is 10 percent, banks do not hold excess reserves, and people hold only deposits and no currency, when the Fed sells $10 million dollars of bonds to the public, bank reserves A. increase by $1 million and the money supply eventually increases by $10 million. B. increase by $10 million and the money supply eventually increases by $100 million. C. decrease by $1 million and the money supply eventually increases by $10 million. D. decrease by $10 million and the money supply eventually decreases by $100 million.

d

The model of aggregate demand and aggregate supply explains the relationship between A. the price and quantity of a particular good. B. unemployment and output. C. wages and employment. D. real GDP and the price level.

d