macro final

Savings deposits are included in ______

M2 but not M1

Which of the following statements is NOT correct?

Relative-price variability costs are costs incurred by people trying to protect themselves from the effects of inflation

Which of the following results if the U.S. removes an import quota on computer components?

U.S. exports and U.S. imports both increase

In early 2008, the central bank of Zimbabwe announced the inflation rate in that country had reached 24,000 percent, which of the following statements is NOT correct?

Zimbabwe may experience extreme low level of nominal interest rate and households are afraid to save in local banks, they prefer to change for US dollars.

Other things the same, if the exchange rate changes from .8 euros per dollar to .9 euros per dollar, the dollar _______

appreciates so U.S. goods become more expensive relative to foreign goods

The members of the Federal Reserve's Board of Governors ______

are appointed by the president of the U.S. and confirmed by the U.S. Senate

Which of the following groups is largely responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system?

the regional Federal Reserve Banks

The shoeleather cost of inflation refers to ______

the waste of resources used to maintain lower money holdings.

If the exchange rate is .60 British pounds = $1, a cup of coffee that costs 3 pounds costs _______

$5

If the exchange rate is .70 euro per dollar, the price of an MP3 player in Paris is 150 euros and the price of an MP3 player in the U.S. is $150, then what is the real exchange rate?

.70 French MP3 players per U.S. MP3 player

See the table below and answer the following questions: First National Bank Assets Liabilities and Owners' Equity Reserves $1,200 Deposits $9,000 Loans $8,000 Debt $800 Short-term securities $800 Capital (owners' equity) $200 1. The required reserve ratio is 12 percent. Which of the following is true? ______ 2. This bank's leverage ratio is ______

1. This banks reserve ratio is 13.3 percent. Its excess reserves are $120. 2. 50

See the figure below. On the graph, MS represents the money supply and MD represents money demand. The usual quantities are measured along the axes. 1. What quantity is measured along the vertical axis? 2. If the relevant money-supply curve is the one labeled MS1, then the equilibrium price level is ______ 3. If the relevant money-supply curve is the one labeled MS2, then ______ 4. Suppose the relevant money-supply curve is the one labeled MS1; also suppose the economy's real GDP is 30,000 for the year. If the money market is in equilibrium, then the velocity of money is approximately ______ 5. Which of the following events could explain a shift of the money-supply curve from MS1 to MS2? 6. At the end of 2009 the relevant money-supply curve was the one labeled MS1. At the end of 2010 the relevant money-supply curve was the one labeled MS2. Assuming the economy is always in equilibrium, what was the economy's approximate inflation rate for 2010?

1. the value of money 2. 2 and the equilibrium value of money is 0.5. 3. A. when the money market is in equilibrium, one dollar purchases about one-third of a basket of goods and services. 4. 3.0 5. an open-market purchase of bonds by the Federal Reserve 6. 50 percent

Sam deposits $20,000 in the First National Bank, the reserve ratio is 12%, then he withdraws all the money(principal without interest) and deposits in the Second National Bank, and then withdraws and deposits again. Suppose this process continues and all the banks' reserve ratios are all 12%, how much money supply is generated through all the banking systems?________ (Hint: Use geometric sequence to compute the MS, i.e. Sn=a1(1-qn)/(1-q), where Sn is the sum of the sequence, a1 is the first item, q is the multiplier, n is the number of process)

166,667

If the price level increased from 120 to 130, then what was the inflation rate?

8.3 percent

Which of the following does the Federal Reserve not do?

It makes loans to any qualified business that requests one

John and Jane decide to go on a vacation. As a result, they withdraw $2,500 from their savings account to purchase $2,500 worth of traveler's checks. As a result of these changes, ______

M1 increases by $2,500 and M2 stays the same

Exchange rates are 100 yen per dollar, 0.8 euro per dollar, and 12 pesos per dollar. A bottle of beer in New York costs 6 dollars, 500 yen in Tokyo, 6 euro in Munich, and 84 pesos in Cancun. Where is the most expensive and the cheapest beer, in that order?

Munich, Tokyo

When deciding how much to save, people care most about ______, and inflation will ______ people's incentive to save

after-tax real interest rates, discourage

A bank loans Kellie's Print Shop $350,000 to remodel a building near campus to use as a new store. On their respective balance sheets, this loan is ______

an asset for the bank and a liability for Kellie's Print Shop. The loan increases the money supply

If you go to the bank and notice that the nominal exchange rate changes from , then the dollar has _______

appreciated. Other things the same, the appreciation would make Americans more likely to travel to Japan.

Which of the following lists is included in what economists call "money"?

cash

When prisoners use cigarettes or some other good as money, cigarettes become ______

commodity money and function as a unit of account.

The primary difference between commodity money and fiat money is that ______

commodity money has intrinsic value but fiat money does not.

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

currency, demand deposits, other checkable deposits SO ALL OF THE ABOVE

The Fed increases the reserve requirement

decreases money supply

According to purchasing-power parity, inflation in the U.S. causes the dollar to ______

depreciate relative to currencies of countries that have lower inflation rates

If the nominal exchange rate e is home currency per foreign currency, the domestic price is P, and the foreign price is P*, then the real exchange rate is defined as _______

e(P*/P)

The _____ the demand curve that passes through a given point, the greater the price elasticity of demand

flatter

If U.S. net exports are negative, then net capital outflow is _______

negative, so American assets bought by foreigners are greater than foreign assets bought by Americans

In the open-economy macroeconomic model, the supply of dollars in the market for foreign-currency exchange comes from ______

net capital outflow

If a country raises its budget deficit, then its ______

net capital outflow and net exports fall

Which of the following would tend to shift the supply of dollars in the market for foreign-currency exchange in the open-economy macroeconomic model to the right?

the expected rate of return on U.S. assets falls

According to purchasing-power parity, which of the following necessarily equals the ratio of the foreign price level divided by the domestic price level?

the nominal exchange rate, but not the real exchange rate

In equilibrium a country has a net capital outflow of $200 billion and domestic investment of $150 billion. What is the quantity of loanable funds demanded?

$350 billion

A bank's reserve ratio is 5 percent and the bank has $2,280 in reserve. Its deposits amount to _____

$45,600

You put money into an account and earn a real interest rate of 5 percent. Inflation is 2 percent, and your marginal tax rate is 35 percent. What is your after-tax real rate of interest?

2.55 percent

If the reserve ratio is 4 percent, then the money multiplier is ______

25

Which of the following is included in the supply of U.S. dollars in the market for foreign-currency exchange in the open-economy macroeconomic model?

a U.S. tire maker wants to build a new factory in China

The law of one price states that ______

a good must sell at the same price at all locations

You bought some shares of stock and, over the next year, the price per share increased by 5 percent, as did the price level. Before taxes, you experienced _______

a nominal gain, but no real gain, and you paid taxes on the nominal gain.

In a system of 100-percent-reserve banking, ______

banks do not influence the supply of money

The confidence you have that a retailer will accept dollars in exchange for goods is based primarily on money ______

being a medium of exchange

The FOMC increases the target for the federal funds rate

decrease money supply

The discount rate that the Fed makes loans to the banks serving as reserves increases

decrease money supply

Deflation ______

decreases incomes and reduces the ability of debtors to pay off their debts

Jim transfers money from his money market account to his savings account. This action ______

has no effect on M1 or M2

Wealth is redistributed from debtors to creditors when inflation was expected to be _______

high and it turns out to be low

Shoeleather costs arise when higher inflation rates induce people to ______

hold less money

The Fed decreases the interest rate it pays on reserves

increase money supply

The Fed buys government bonds in open-market operations

increases money supply

You are the CEO of a U.S. firm considering building a factory in Chile. If the dollar appreciates relative to the Chilean peso, then other things the same, _______

it takes fewer dollars to build the factory. By itself building the factory increases U.S. net capital outflow.

The costs of changing price tags and price listings are known as ______

menu costs

Other things the same, the real exchange rate between American and French goods would be lower if ______

prices of French goods were higher, or the number of euros a dollar purchased was lower

If the real exchange rate between the U.S. and Argentina is 1, then ______

purchasing-power parity holds, and the amount of dollars needed to buy goods in the U.S. is the same as the amount needed to buy enough Argentinean bolivars to buy the same goods in Argentina.

Other things the same, a decrease in the interest rate _______

raises domestic investment which raises the quantity of loanable funds demanded

The Federal Reserve ______

serves as a lender of last resort

Which of the following costs is NOT the cost of deflation?

shoeleather costs

Dollar bills, rare paintings, and emerald necklaces are all ______

stores of value

Which group within the Federal Reserve System meets to discuss changes in the economy and determine monetary policy?

the FOMC

During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1.5 percent, but people had been expecting 1 percent . This difference between actual and expected inflation _______

transferred wealth from you to the borrower and caused your after-tax real interest rate to be 0.5 percentage points lower than what you had expected

GDP is defined as the

value of all final goods and services produced within a country in a given period of time