Econ exam 2

Liquidity is the term that has which of these meanings? a. A measure of the ease with which one asset can be converted into another asset, usually money b. A measure of the ease with which one can use money to purchase goods c. A measure of the ease with which one can borrow money d. A measure of the ease in which one can get out of debt to become a lender

a. A measure of the ease with which one asset can be converted into another asset, usually money

In the early days of the Fed, the discount rate, the rate at which the regional Federal Reserve banks would lend to commercial banks, was determined by the a. regional Federal Reserve banks. b. board of governors. c. secretary of the treasury. d. Federal Reserve bank of New York.

a. regional Federal Reserve banks.

Which of these statements best describes the function of banks as part of the aggregate economy? a. Banks take deposits and make loans. b. Banks create or reduce the amount of money available in the economy c. Banks reduce moral hazard. d. Banks lend money to those business firms most in need of it.

b. Banks create or reduce the amount of money available in the economy

Following the Great Depression, the power of the Fed shifted to the a. New York Federal Reserve Bank. b. Federal Open Market Committee. c. board of governors of the Federal Reserve. d. secretary of the treasury.

b. Federal Open Market Committee.

The board of governors of the Federal Reserve has three primary responsibilities, which are a. oversight of the printing of money, commercial bank regulation, and the operations of the Fed. b. the operations of the Fed, commercial bank regulation, and monetary policy. c. monetary policy, fiscal policy, and the operations of the Fed. d. maintenance of the gold standard, the operations of the Fed, and monetary policy.

b. the operations of the Fed, commercial bank regulation, and monetary policy.

If the required reserve ratio is 3%, an initial demand deposit made in a bank of $100,000 can result in an expansion in the money supply of a. $1,300,000. b. $3,000,000. c. $3.333.000. d. $3,500,000.

c. $3.333.000.

Until the implementation of the Financial Services Act of 2012, the United Kingdom had a three-part framework for regulation of its financial system, consisting of the Bank of England, the Treasury Department, and which other entity? a. The House of Lords b. The House of Commons c. The Financial Services Authority (FSA) d. The Financial Policy Committee (FPC)

c. The Financial Services Authority (FSA)

Imagine that Roland goes to his bank and deposits $10,000 in cash into his savings account. The bank, wanting to use those funds to generate revenue for itself, will look to make a loan with this cash. An important determinant of how much of that $10,000 the bank can lend is the a. interest rate the bank is paying Roland on his deposit balance. b. bank's net worth. c. required reserve ratio. d. interest rate the bank will charge on the loan that it makes.

c. required reserve ratio.

Which of these is currently true for the chair of the Federal Reserve? a. The chair position is a term of just two years and is nonrenewable. b. The chair position requires a background in economics or finance; the four-year term is renewable. c. The chair position requires a background in banking or finance; the two-year term is nonrenewable. d. The chair position has no formal qualifications; the four-year term is renewable.

d. The chair position has no formal qualifications; the four-year term is renewable.

Petra has an automobile accident and finds that as a result her auto insurance premium will increase by 25%. This is an example of an adjustable premium that insurance companies often use as a mechanism to combat a. short-sightedness. b. adverse selection. c. free-riders. d. moral hazard.

d. moral hazard.