ECO 231 Final Exam (Macro)- part 6

U.S. treasury deposits at the federal reserve banks are

A liability of the Federal Reserve Banks and an asset for the U.S. Treasury

when a tariff or quota on a product is removed, this policy action

Benefits consumers of the product

In a world with two products, wheat (w) and coffee (c), nation Alpha produces wheat and nation Beta produces coffee. Nation Alpha prefers an exchange rate of 1W=2C and nation Beta prefers an exchange rate of 1W=1C. The exchange rate preferred by nation:

Beta will prevail if world demand for coffee is great relative to its supply

which is an example of a nontariff barrier (NTB)?

Box-by-box inspection requirements for imported fruit.

the federal reserve alters the amount of the nation's money supply by

Manipulating the size of excess reserves held by commercial banks

employing all its available resources, Nation Alpha can produce either 800 units of chemicals or 1,600 units of clothing. Nation Beta can produce either 200 units of chemicals or 800 units of clothing

Nation Alpha has a comparative advantage in producing chemicals

the law of increasing opportunity costs limits international specialization (T/F)

TRUE

research studies indicate that

U.S. consumers lose more from tariffs than U.S. producers gain.

a high tariff on imported good X might reduce domestic employment in industry Y if

X is an input used domestically in producing Y.

other things equal, which of the following would increase the federal funds rate?

a decline in excess reserves in the banking system

a tariff can be described as

a excise tac on an imported good

the increased-domestic-emplyment argument for tariff protection holds that

an increase in tariffs will increase net exports and stimulate domestic employment

which of the following statements if false?

as a percentage of GDP, U.S. exports are the highest among the industrially advanced nations

if severe demand-pull inflation was occurring in the economy, proper government policies would involve a government

budget surplus, the sale of securities in the open market, a higher discount rate, and higher reserve requirements

the united states' most important trading partner quantitatively is

canada

assume the legal reserve ratio is 25% and the fourth national bank borrows $10000 from the federal reserve bank in its district. as a result,

commercial bank reserves are increased by $10000

an expansionary monetary policy may be less effective than a restrictive monetary policy because

commercial banks may not be able to find loan customers

tariffs and quotas are costly to consumers because

consumers have to switch to higher-priced domestic goods

Assume the reserve ratio is 25 percent and Federal Reserve Banks buy $4 million of U.S. securities from the public, which deposits this amount into checking accounts. As a result of these transactions, the supply of money is:

directly increased by $4 million and the money-creating potential of the commercial banking system is increased by an additional $12 million.

suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the U.S. while the world price if $4.00 a bushel. assuming no transportation costs, the U.S. will

export wheat

in recent years, the U.S. has

exported more services abroad than it has imported.

a nation's export supply curve is downsloping, and its import demand curve is upsloping (T/F)

false

in terms of trade volume in the past many years, China has been the largest trading partner of the U.S. (T/F)

false

the percentage of the U.S. domestic output that is derived from international trade is higher than that for any other industrially advanced nation (T/F)

false

when the fed raises interest rates on excess reserves, they are attempting to encourage bank lending (T/F)

false

the collateral used for repos and reverse repose are

government bonds

the fed's attempt to normalize monetary policy by increasing the interest on excess reserves rate

has been frustrated by nonbank financial firms lending to banks

Critics of the World Trade Organization (WTO) say that liberalized world trade does all of the following except:

helps developing nations escape from poverty.

when the fed lends money to a commercial bank, the bank

increases its reserves and enhances its ability to extend credit to bank customers

when the federal reserve acts to tighten money and credit in the economy, it is trying to reduce

inflation rate

the price of government bonds and the interest rate received by a bond buyer are

inversely related

prime interest rate

is influenced by fed policies that change the money supply

which of the following is not a major achievements of the EU?

it established a common fiscal policy among its member nations

in the theory of comparative advantage, a good should be produced in that nation where

its cost is least in terms of alternative goods that might otherwise be produced.

the current (2016) chairperson of the board of governors of the federal reserve system is

janet yellen

If the Fed were to reduce the legal reserve ratio, we would expect:

lower interest rates, an expanded GDP, and a higher rate of inflation

in which of the following situations is it certain that the quantity of money demanded by the public will decrease

nominal GDP decreases and the interest rate increases

the commercial banking system borrows from the federal reserve banks. as a result, the checkable deposits

of commercial banks are unchanged, but their reserves increase.

beginning in 2008, the Fed was allowed

pay interest on reserves deposited at Fed banks.

if, in the market for money, the quantity for money demanded exceeds the money supply, the interest rate will

rise, causing households and businesses to hold less money

a nation's import demand curve for a specific product

shows the amount of the product it will import at prices below its domestic price.

in effect, tariffs on imports are

subsidies for domestic producers

the production possibilities for country C are either 6000 bushels of soybeans or 10000 bushels of wheat. the production possibilities for country Y are either 2000 bushels of soybeans or 4000 bushels of wheat. which of the following is true?

the domestic opportunity cost of wheat production is lower in country Y

open-market operations refer to

the purchase or sale of government securities, as well as collateralized money loans, by the Fed.

The job of the Fed in limiting the supply of money may be made more complex if commercial banks initially have substantial excess reserves. (T/F)

true

among the principal exports of the U.S. are agricultural products (T/F)

true

changes in the interest rate are more likely to affect investment spending than consumer spending (T/F)

true

economists prefer free trade to tariffs and prefer tariffs to import quotas

true

in a repo (or repurchase agreement), if the fed buys securities from firm A with an agreement that firm A will buy back the securities from the fed on the following day, then the fed is acting as the lender and firm A the borrower (T/F)

true

international trade based on the principle of comparative advantage creates a more efficient allocation of world economic resources (T/F)

true

other things equal, an expansionary monetary policy will shift the economy's aggregate demand curve to the right

true

reverse repos are used to offset the fed's inability to stop nonbanks from lending to banks (T/F)

true

the reserves of commercial banks are assets to commercial banks and liabilities of the federal reserve system (T/F)

true