Macroeconomics , Exam 2
store value
If Jack Sparrow buries a chest of gold bullion on a deserted island and plans to come back later, then the gold is functioning as a ?
$800
If a perpetuity bond has an interest payment of $80 and your required yield id 10% the most you would be willing to pay for the bond is
$2,552.56
If a person borrows $2,000 at 5% interest and never makes any payment, how much will the loan balance be after five years
Structural unemployment
If a product becomes obsolete and the workers who produced that product will need additional training to find new jobs, then they are experiencing
fall by $300, but its liabilities rise by $300
If abigail withdraws $300 cash from her checking account, then her bank's assets
inflation is very low
If actual unemployment is at its natural rate
the actual multiplier will fall
If banks increase excess reserves to increase their ability to absorb a higher rate of defaults
125
If nominal GDP in 2014 is $20,000 billion while real GDP is $16,000 billion, then the GDP deflator in 2014 . . . 20,000/16,000
Deflation
If the cost of a typical market basket in 2019 is 400 and the cost of a typical market basket in 2020 is 390, the economy is undergoing?
2.4%
If the current year's consumer price index is 214 and last year's was 209, then the rate of inflation is:
The federal funds rate will fall
If the federal reserve decides to increase the money supply :
$5,000
If the reserve requirement is 10%, a withdrawal of $500 leads to a potential decrease in the money supply of
$1.2 million
If the reserve requirement is 2.5% and a bank initially receives $30,000 in deposits from the fed, then the maximum amount of money that the banking system can create is
$51,818
If your salary was $50,000 last year and this year you receive a cost of living increase tied to the consumer price index, what will your salary be, assuming the CPI has risen from 110 to 114?
quickly,easily,reliably an asset can be converted
Liquidty refers to
Federal Open Market Commitee
Main policymaking arm of the fed is the
open market operations
Main tool pf monetary policy
sell government bonds, raise reserve requirements, raise the discount rate
Monetary policy actions that are consistent with one another
increases in personal taxes
Monetary policy doesn't involve
Imported Mangoes
NOT included in the GDP deflator
investors; downward sloping
The demand curve for loanable funds represents
Income
The principal determinant in the keynesian model
Discount Rate
The rate regional Federal Reserve banks charge depository institutions to borrow reserves
inflation & unemployment
The twin perils of the modern macroeconomy
only when you make withdrawals
Traditional Individual Retirement accounts are taxed
an increase in the government deficit
What would cause the supply of loanable funds curve to shift leftward ?
reducing transaction costs
When a financial institution provides a standardized financial product such as a mortgage, it is
increases; decreasing
When the Fed buys bonds, its demand __________ the price of bonds, ________ nominal interest rates
Interest rates will rise
When the Fed does finally begin to reduce bond purchases
Discouraged workers
Workers who want to work but have been frustrated by the inability to find work and have stopped searching are known as
Increases in the supply of food
Would NOT lead to higher to higher prices
increases the ability of banks to make loans
a lower reserve requirement
there will be an excess supply of funds
if the market rate is 3% (graph problem)
fall;rise,fall,or stay the same
in the market for loanable funds the real interest rate will
o.1o
the banks reserve ratio is (graph question)
Government that balances its budget
the effect of an increase in government spending on aggregate expenditures
a teaser rate
An interest rate that is low only for a short time is called
full employment
Basic goal of the Federal Reserve System
M2 includes M1
Is correct
Core Inflation
removing food and energy from the consumer price index
Information, implementation, decision (all the correct)
The Fed's monetary policies, like fiscal policy, are subject to _______ lags
fell by about 1%
Arlina got 5% raise while the rate of inflation was 6%. Arlina's standard of living :
the quantity demanded for loanable funds rises
As the real interest rate falls
falls $875
Assume initially that market interest rates are 7% and the bondholder is receiving a $70 coupon payment per year on a bond with a face value of $1,000. If market interest rates rise 8%, the bond price ?
Wage rates would fall
Economist believed this would happen if the product markets accrued surpluses
Imports
Excluded from the GDP deflator index that includes prices
The chairman and vice-chairman of the board of Governors
Federal reserve system correct ?
a standard value
Following is not a function of money
by guaranteeing a high rate of return for all lenders
Not a way financial institutions reduce risks
Full employment
Occurs if cyclical unemployment is zero
government securities
Open market operations involve the purchase and sale of
disinflation
Reduction in the rate of inflation
$6,000
Summit deposits $1,500 cash into his checking account. The reserve requirement is 25%. How much money can the banking system create?
$375
Summit deposits $1,500 cash into his checking account. The reserve requirement is 25%. What is the change in his bank's required reserves ?
6.4%
Suppose a one-year bond with a face value of $200 is sold for $188. What is the bond's yield
Creditors gain at debtors' expense
Suppose that anticipated inflation is 4% for the coming year, with loan contracts set at 7% in the expectation of a 3% return after inflation. if the actual inflation rate at the end of the year is 2 %:
