Macro Exam 3

The main policymaking arm of the Fed is the: A- Federal Open Market Committee B- Council of Economic Advisers C- Money Committee D- Beige Book Committee

A- Federal Open Market Committee

Which of the following is correct? A- The Federal Reserve has 12 regional banks. The Board of Governors has 14 members, each serving a 7-year term. B- The Federal Reserve has 14 regional banks. The board of Governors has 12 members, each serving a 7-year term. C- The federal reserve has 12 regional banks. The board of governors has seven members, each serving a 14-year term. D- The federal reserve has 14 regional banks. The board of governors has seven members, each serving a 12- year term.

B- The Federal Reserve has 14 regional banks. The board of Governors has 12 members, each serving a 7-year term.

Which of the following is the LEAST liquid? A- money in a savings account B- a Picasso painting C- a US treasury bond D- $100 in cash

B- a Picasso painting

Banks: A- cannot create money B- create money by making loans using the deposits of their customers C- create money by printing it D- create money by getting curency from the US Bureau of Engraving and Printing and handling it out to favored clients

B- create money by making loans using the deposits of their customers

An individual bank can, at most, lend out al of its: A- checkable deposts B- excess reserves C- reserves D- deposits

B- excess reserves

Assume that the reserve requirement is 20%. A bank has $20 billion in demand deposits. How much money does the bank have to keep in the reserves? A- $20 billion B- $10 billion C- $4 billion D- $2 billion

C- $4 billion

If the reserve requirement is 1.25%, the potential money multiplier is: A- 0.0125 B- 1.25 C- 80 D- 125

C- 80

SKIP THIS QUESTION Sumit deposits $1500 cash into his checking account. The reserve requirement is 25%. How much money can the banking system create? A- $1500 B- 0 C- $1,125 D- $6,000

Told to bubble E since none of those answers are right

Sumit deposits $1500 cash into his checking account. The reserve requirement is 25%. What is the change in his bank's excess reserves? A- $1500 B- $375 C- $1,125 D- 0

C- $1,125

If the reserve requirement is 2.5%, the potential money multiplier is: A- 0.025 B- 2.5 C- 4 D- 40

D- 40

#20 Graph on Test

B

Suppose a bank has $1 million in deposits, a reserve requirement of 10%, and bank reserves of $300,000. The bank has excess reserves of: A- $50,000 B- $100,000 C- $200,000 D- $300,000

C- $200,000

Thelma grew some carrots in her garden. She needs a winter coat. John has an extra coat he doesnt need but would like to bake some carrot cake. The two find each other and make an exchange. This situation is called the: A- double coincidence of wants B- unequal value of exchange C- timely exchange D- coincidental exchange

A- double coincidence of wants

The idea that banks hold only a portion of deposits and lend the rest out is called the: A- fractional reserve banking system B- partial banking system C- double-entry bookkeepin system D- loan- maximization system

A- fractional reserve banking system

A lower reserve requirement: A- increases the ability of banks to make loans B- further limits deposit creation C- lowers the money multiplier D- restricts the borrowing capability of borrowers

A- increases the ability of banks to make loans

Money: A- is anything that is accepted in exchange for other goods and services or for payment of debt. B- is anything that is backed by precious metal C- is currency D- has to have an intrinsic value

A- is anything that is accepted in exchange for other goods and services or for payment of debt.

Suppose the economy enters a recession and income falls more than the demand for loanable funds. In this case the supply of loanable funds shifts _____________ and the equilibrium interest rate __________. A- left; rises B- right; rises C- left; falls D- right; falls

A- left; rises

The supply curve for loanable funds is: A- positively sloped B- negatively sloped C- horizontal D- vertical

A- positively sloped

If Zachary deposits $500 cash into his checking account, then his bank's assets: A- rise by $500, and its liabilities rise by $500 B- rise by $500, but its liabilities do not change C- do not change, but its liabilities rise by $500 D- rise by $500, and its liabilities fall by $500

A- rise by $500, and its liabilities rise by $500

When money is used to measure and compare the value of goods and services, it is used as a: A- unit of account B- store of value C- medium of exchange D-means of payment

A- unit of account

What are the primary functions of money? A- unit of account, medium of exchange, store of value B- unit of liquidity, medium of exchange, store of value C- unit of exchange, medium of account, store of value D- unit of account, medium of exchange, store of liquidity

A- unit of account, medium of exchange, store of value

All of the following are included in the definition of M2 EXCEPT: A) coins B) large time deposits C- savings deposits D- demand deposits

B) large time deposits

If the potential money multiplier is 4, then the reserve requirement is: A- 4 B- .25 C- .2 D- .1

B- .25

Which is an example of money being used as a unit of account? A- A customers buys a burger, fries, and medium diet cola for $6.95 B- A restaurant's profits for the week of October 3 to October 10 are $1250 C- a customer recieves $3.05 in change and returns the next day to make another puchase. D- a restaurant sells a large ice cream sundae and charges the customer's debit card

B- A restaurant's profits for the week of October 3 to October 10 are $1250

Yolanda took $5000 from her checking account and put the money in her savings account at the same bank A- Both M1 and M2 were reduced by $5000 B- M1 went down by $5000 but M2 was unchanged C- Neither M1 nor M2 changed because the transfer was done at the same bank. D- M1 and M2 both rose by $5000

B- M1 went down by $5000 but M2 was unchanged

The unit of account function of money: A- requries a double coincidence of wants, as in barter B- eliminates the needs to value every item in terms of other item C- is the most important function of money D- refers to the value of money over time

B- eliminates the needs to value every item in terms of other item

The demand curve for loanable funds represents _______ and is ________ A- investors; horizontal B- investors; downward sloping C- savers; horizontal D- savers; downward sloping

B- investors; downward sloping

Which of the following statements regarding money supply measure is INCORRECT? A- M1 is the narrowest measure of the money suppply B- near monies are as liquid as cash C- coins form only a small part of M1 D- M2 is about four times the size of M1

B- near monies are as liquid as cash

Checking account balances are A- part of M1 but not part of M2 B- part of M1 and part of M2 C- part of M2 but not part of M1 D- not part of either M1 or M2

B- part of M1 and part of M2

Which of the following lists represents monetary plicy actions that are consistent with one another? A- buy government bonds, raise resrve requirements, raise the discount rate B- sell government bonds, raise reserve requirements, lower the discount rate C- sell government bonds, raise resrve requirements, raise the discount rate D- buy government bonds, lower reserve requirements, raise the discount rate

B- sell government bonds, raise reserve requirements, lower the discount rate

All of these actions are performed by the Federal Reserve regional banks EXCEPT: A- distributing coins and currency B- setting reserve requirements C- regulating and supervising member banks D- providing a nationwide payments system

B- setting reserve requirements

The Feds Board of Governors consists of _______ members who are appointed by the _______ and confirmed by the ______. A- five; President; Senate B- seven; President; Senate C- seven; Senate; President D- 12; congress; President

B- seven; President; Senate

Perry deposits $10,000 in his bank account. If the reserve requirement is 15%, how much of this amount can his bank make in new loans? A- $1,500 B- $15,000 C- $8,500 D- $10,000

C- $8,500

The quanitity of loanable funds demanded by _________ is __________ related to the real interest rate A- saver; negatively B- savers; positively C- borrowers; negatively D- borrowers; positively

C- borrowers; negatively

Which of the folowing is included in M1? A- saving deposits B- large denomination certificates of deposit C- demand deposits D- deposits in money market accounts

C- demand deposits

Fiat Money: A- was initially used by an automobile manufacturer B- is made out of commodities such as gold or silver C- does not necessarily have any intrisic value but has been declared by a government to be money D- loses its value over time

C- does not necessarily have any intrisic value but has been declared by a government to be money

Institutions that serve as the bridge betwen savers and borrowers are known as: A- commercial banks B- credit unions C- financial intermediaries D- securities firms

C- financial intermediaries

Checking accounts are counted as part of: A- M1 only B- M3 only C- M2 and M3 D- M1 and M2

D- M1 and M2

M1 includes: A- cash, savings deposits, demand deposits, money market deposit accounts, small- denomination time deposits, and share in retail money market mutual funds. B- cash, demand deposits, and small-denomination time deposits C- cash, demand deposits, and large-denomination deposits D- cash, demand deposits, and other checkable deposits

D- cash, demand deposits, and other checkable deposits

The ____ rate is the rate at which banks charge each other for overnight loans, while the ____ rate is the rate at which regional Federal Reserve banks charge depository instiutions for short-term loans. A- bank prime; discount B- discount; federal funds C- bank prime; federal funds D- federal funds; discount

D- federal funds; discount

Which of the following is NOT a policy tool of the Federal reserve? A- reserve requiremnts B- the discount rate C- open market operations D- fiscal policy

D- fiscal policy

If a bank is subject to a reserve requirement of 15%, then it is required to: A- place 15% of its deposits in the vault B- lend out 15% of it deposits C- place 15% of its deposits in the account with its regional Federal Reserve bank D- place 15% of its deposits in the account with its regional Federal Reserve bank or the vault

D- place 15% of its deposits in the account with its regional Federal Reserve bank or the vault

The forumula for calculating the reserve ratio is: A- total deposits divided by reserve requirements B- reserves times reserve requiremnt C- reserves divided by reserve requirement D- reserves divided by total deposits

D- reserves divided by total deposits

The central bank of the United States is: A- the Treasury B- the Congressional Budget Office C- the Internal Revenue System D- the Federal Reserve System

D- the Federal Reserve System