Macro

Which of the actions by the Fed is considered tight money policy?

Selling bonds in the open market

In the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by

Selling bonds. This selling would reduce the money supply

If the economy were encountering rapid growth and inflation, appropriate monetary policies would call for:

Selling government securities, raising the reserve ratio, and raising the discount rate

What is not correct of unemployment?

Unemployment rate is computed using the number of unemployment insurance claims filled

Anna says price of her dress was $100. Which function of money is being emphasized here?

Unit of account

In a system of fractional-reserve banking, even without action by the central bank, the money supply declines if households chose to hold ___ currency or if banks chose to hold ____ excess reserves

more, more

Most important functions of a commercial bank include

-Accepting deposits -Making loans

The tools of monetary policy include

-Conducting open market operations -Changing discount rate -Changing reserve ratio -Paying interest on member banks' reserves at the Fed

Fractional reserve banking: Suppose your instructor deposits $5,000 in cash in her account at Commerce Bank. As a result, we can conclude that

-M1 supply will not change immediately -Composition of M1 will change immediately

Unemployment insurance

-May improve ability of the economy to math workers with appropriate jobs -Reduces the job search efforts of the unemployed -Increases the amount of frictional unemployment in the economy

Official unemployment statistics:

-Overstate unemployment when people lie about their job search activities -Understate unemployment because "discouraged workers" are not counted as unemployed -Understate unemployment because part time employees are counted as fully employed

The goal of full employment means

-Reducing the cyclical component of unemployment rate to zero -Reducing the difference between actual and natural unemployment to zero

Suppose the adult population is 115 million. If 80 million people are employed and 5 million are unemployed, then

30 million are not in the labor force

The Federal Funds rate is currently in the range of

0%-0.25%

Suppose a country had an adult population of about 25 million, a labor-force population of 60% and an unemployment rate of 6%. How many people were unemployed?

0.9 Million

Which statement is correct? In the special case of the 100-percent reserve ratio banking the money multiplier is

1 and banks do not create money

At any meeting of the Federal Open Market Committee, that committee's voting members consist of

5 Federal Reserve regional bank presidents and all the members of the Board of Governors

The Federal Open Market Committee consists of

7 Governors and 5 Federal Reserve bank presidents

When employers pay efficiency wages, they pay wages

Above the equilibrium to increase productivity

Which is true: Fed refers to Federal Reserve System, Fed was instituted in 1913, and FDIC was instituted in 1933

All are true

On the balance sheet of a commercial bank, loans granted to customers appears on

Asset side

On the balance sheet of the Federal Reserve, US government bonds appear on

Asset side

The Federal Funds market is in the market in which:

Banks borrow reserves from one another on an overnight basis

Which creates unemployment by keeping wages above the equilibrium level?

Both efficiency wages and labor unions

The natural unemployment rate includes

Both frictional and structural unemployment

The money supply increases when the Fed

Buys bonds. The increase will be larger, the smaller is the reserve ratio

When conducting an open-market purchase, the Fed

Buys government bonds. And in doing on increases the money supply

Monetary Policy

Can be described either in terms of the money supply or in terms of the interest rate

The most important function of the Federal Reserve is to:

Control the money supply of the economy

If the natural unemployment rate is 5.2% and the actual rate of unemployment is 5.7%, then by definition there is

Cyclical unemployment amounting to 0.5 percent of the labor force

The Fed can reduce the federal funds rate by

Increasing the money supply. To increase money supply it could buy bonds

US Department of Treasury keeps an account at the Fed to carry out its day to day operations. On the balance sheet of the Fed, US treasury deposits will appear on

Liability side

The money supply includes all of the following EXCEPT:

Lines of credit accessible with credit cards

Small time deposits are included in

M2 definition of money

The unemployment rate is calculated by

The BLS on a monthly basis

The discount rate is the interest rate

The Fed charges on loans granted to Commercial banks

What is correct of the Fed?

The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms

Of the three tools of monetary control, the most frequently used is

The open market operations

Chloe takes currency from her wallet and deposits it into her checking account. If the bank adds the entire amount to reserves, the money supply ____, but if the bank lends out some of the reserves, the money supply ___

is unchanged, increases