Macroeconomics Final

what is the yield on a bond sold for $1,850 and paying $25.50 in interest annually?

!.38%

Which one of the following will cause the supply of loanable funds curve to shift leftward??

an increase in the government deficit

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 $1000. If market interest rates rise to 8% the bond price:

falls to $875

Which of the following is NOT a policy tool of the Federal Reserve?

Fiscal Policy

Sumit deposits $1,500 cash into his checking account. The reserve requirement ration is 25%. What is the change in his bank's excess reserves?

1,500 * 0.25 = 375 1,500 - 375 = $1,125

If the reserve requirement ratio is 20%, the money multiplier is:

1/0.20 = 5

Assume the reserve requirement ratio is 10% and all bans are fully loaned up If a new deposit of $10,000 is made into Bank X, with this deposit Bank X can make new loans of:

10,000 * 0.10 =1000 10,000 - 1,000 = 9,000

Institutions that acquire funds from savers and then lend those funds to borrowers are called

Financial Intermediaries

Which of the following measures is an example of an expansionary fiscal policy?

Increasing unemployment compensation

Using the equation of exchange, if the money supply is $4 trillion, the price level is 2, and the level of output (real GDP) is $6 trillion, then the velocity of money is ______.

M * V = P * Q -> P * Q / M 2 * 6 / 4 = 3

If the Fed wants to raise the interest rate, it will ________ bonds, which _____ bond prices

Sell, Lowers M1 (up) = i (down) buy bonds M1 (down) = i (up) sell bonds

Which action is the Fed most likely to take to curb inflation (decrease AD)?

The Fed will sell securities in the open market

If there is a general rise in fear of the financial system:

The actual multiplier will fall

What are the primary functions of money?

Unit of account, medium of exchange, store of value

In the equation of exchange, if M = $2 trillion, P = 1.5, and Q = $8 trillion:

V = P * Q/ M 1.5 * 8 / 2 = 6

which of the following is the LEAST liquid

a Picasso painting

Which of the following will increase aggregate demand?

a decrease in taxes

M1 Includes

cash, demand deposits, and other checkable deposits

In the short run, changes in the money supply will NOT change output according to:

classical economists

A lower interest rate increases consumption, investment, and ________, which _______ aggregate demand

exports, increases

In times of economic downturn the Fed will engage in _____ monetary policy by _____ bonds

expansionary buying

In counteracting a negative supply shock, the Fed could achieve ________ by using _______ monetary policy.

full employment but not price stability; expansionary

The main tool of monetary policy is

open market operations

When the long-run aggregate supply curve is drawn as a vertical line, the theorist is assuming that:

the economy tends to full employment in the long run.