macro unit 3

Which of these accurately describes the federal funds rate? The interest rate on government bonds The interest rate that banks pay on long-term savings The interest rate on personal loans The interest rate that banks charge state governments The interest rate that banks charge each other for overnight loans

The interest rate that banks charge each other for overnight loans

Which of the following form of money is NOT correctly linked with the measure category of money it is included in? - Currency - M2 - Savings Accounts - M1 - Short Term CDs - M2 - Demand Deposits - M1 - Coins - M2

Saving accounts- M1

A contraction in the money supply will most likely change the nominal interest rate and aggregate demand in which of the following ways in the short run?

A

Which of the following actions by the Federal Reserve increases the money supply? Buying government bonds Increasing the discount rate Selling government bonds Increasing the reserve requirement Increasing the federal funds rate

Buying government bonds

In the short run, which of the following would occur to bond prices and interest rates if a central bank bought bonds through open market operations?

C

Assume that a country's government increases borrowing. What will most likely happen to the prices of previsously issued bonds and the price level in the short run?

D

Assume that Linda deposits in her checking account the $1,000 cash she was keeping at home for an emergency. If the required reserve ratio is 0.20, what is the maximum change in the money supply from her deposit? $1,250 $4,000 $2,000 $1,000 $5,000

$4,000

Assume that the reserve requirement is 20 percent. Heather deposits $10 million in cash into her checking account at First Bank. The deposit will initially increase excess reserves at First Bank by $2 million $10 million $1 million $200 million $8 million

$8 milion

Assume that the required reserve ratio is 10 percent, banks keep no excess reserves and borrowers deposit all loans made by banks. Suppose you have saved $100 in cash at home and decide to deposit it in your checking account. As a result of your deposit, the money supply can increase by a maximum of $800 $1100 $1200 $900 $1000

$900

Assume that the reserve requirement is 10 percent. Marwa deposits $1 million in cash into her checking account at First Bank. The deposit will initially increase excess reserves at First Bank by $100,000 $900,000 $10 million $9 million $1 million

$900,000

Which of the following will cause an increase in the equilibrium real interest rate? The purchase of government bonds by the central bank An increase in national saving A decrease in the government budget deficit An increase in government budget surplus An increase in government borrowing

An increase in government borrowing

If Americans suddenly decided to hold more cash, which of the following would likely result to nominal interest rates and investment demand?

B

Based upon the balance sheets above for the three banks, which of the following is true if the reserve requirement is 10%

Bank B can increase its loans by $40

The balance sheet above is for Orland Park National Bank. Assume the rr is 20%. A local resident deposits $10,000 they've been holding at home into the bank. If Orland National Bank loaned out all the money that it could, what is the maximum increase this deposit could have upon the entire banking system? Reserves: 10,000 Demand Deposits: 50k rr: 10,000. Owners Equity: 10k er: 0 loans: 25k securities 25k

D

With an upward sloping aggregate supply curve, an increase in the money supply will affect the price level and real GDP in the short run in which of the following ways?

D

To counter a recession, the central bank might pursue which of the following actions? -Decreasing reserve requirements and increasing the discount rate -Decreasing the capital gains tax and selling securities on the open market -Increasing capital gains tax and selling securities on the open market -Increasing reserve requirements and selling securities on the open market -Decreasing the discount rate and buying securities on the open market

Decreasing the discount rate and buying securities on the open market

In the short run, an expansionary monetary policy would most likely result in which of the following changes in the price level and real GDP?

E

Of the following, the most liquid asset is currency savings deposits demand deposits mutual funds time deposits

currency

Which of the following is most likely to occur when the Federal Reserve buys government bonds on the open market? The discount rate will increase Interest rates will decrease The government's debt will decrease Investment demand will decrease The demand for money will decrease

Interest rates will decrease

Which of the following is true of the opportunity cost of holding cash? It is equal to the price level It is represented by the value of the dollar It is zero It increases as the interest rate rises It decreases as price level rises

It increases as the interest rate rises

When the central bank sells government bonds on the open market, which of the following will most likely increase? Nominal interest rates Money supply The reserve requirement Price of bonds Bank reserves

Nominal interest rates

Which of the following will lead to an increase in the money supply? A decrease in income tax rates An increase in the discount rate Open-market purchases of bonds by the central bank A decrease in government spending Increased borrowing by the federal government by issuing new bonds

Open-market purchases of bonds by the central bank

Which of the following results when the Federal Reserve sells bonds to commercial banks? -The money supply decreases -The required reserve ratio increases because of decreasing excess reserves -The public increases its cash holdings -The total assets held by commercial banks will eventually increase -The discount rate increases

The money supply decreases

In the United States, which event would have caused the shift of the money supply curve from S1 to S2 in the money market shown above? -An increase in the required reserve ratio -The purchase of government bonds on the open market by the Federal Reserve -A tax cut enacted by Congress -A short-run increase in output, employment and income -An increase in general price level in the US

The purchase of government bonds on the open market by the Federal Reserve

Which of the following is true above the balance sheet for the above bank? They have $2,000 in securities and the reserve requirement is 20% They have $4,000 in securities and the reserve requirement is 10% They have $2,000 in securities and the reserve requirement is 25% The reserve requirement is 5% They have $4,000 in securities and the reserve requirement is 20%

They have $2,000 in securities and the reserve requirement is 20%

In the short run, a tight (contractionary) monetary policy tends to cause an increase in the interest rate and an increase in private investment a decrease in the interest rate and an increase in private investment an increase in the interest rate and a decrease in private investment a decrease in the interest rate and a decrease in prices a decrease in prices and an increase in private investment

an increase in the interest rate and a decrease in private investment

Assume that the reserve requirement for demand deposits is 20 percent, that banks hold no excess reserves, and that the public holds no currency. If the central bank sells $10,000 worth of government securities to commerical banks, the total money supply will decrease by $50,000 increase by $10,000 not change increase by $50,000 decrease by $10,000

decrease by $50,000

The amount of money that the public wants to hold in the form of cash will decrease if interest rates increase increase if the price level decreases increase if interest rates increase decrease if the price level remains constant be unaffected by any change in interest rate or price level

decrease if interest rates increase

crowding out is most likely to occur with which of the following changes? Increase in budget surplus Decrease in the trade deficit Decrease in government spending Increase in budget deficit Decrease in the real interest rate

increase in budget deficit

According to the quantity theory of money, the quantity of money is related negatively to the nominal interest rate positiviely to the velocity of money negatively to the price level positively to the nominal gross domestric product positively to the unemployment rate

positiviely to the velocity of money

When the Federal Reserve increases the money supply to stimulate aggregate demand, workers believe that this action will cause inflation in the future and ask for higher wages to offset the expected increase in inflation. This is an example of adaptive expectations rational expectations the velocity of money the money multiplier the real balance effect

rational expectations

If the velocity of money is constant and the economy is producing at it's maximum level of output, a doubling of the money supply would most likely result in a doubling of real interest rates real output the price level nominal interest rates the unemployment rate

the price level