Ap Econ unit 4 test

If required reserves is ____ and that bank received a new demand deposit of $300, the banks balance sheet liabilities will increase by ____ and required reserves will increase by ____

10%, $300, $30

Which of the following is an asset for the ACDC bank

2,3,4

If on receiving a checking deposit of $500 a banks excess reserves increased by $400, the require reserve must be

20%

Assume the required reserve ratio is .2. If a bank initially has no excess reserves and 100,000 cash is deposited in the bank, the maximum amount by which this bank may increase its loan is

80,000

The federal funds rate is the interest rate that

Banks charge one another for short term loans

the federal reserve can j crease the money supply by

Buying bonds on the open market

Suppose businesses are fearful that there will be a secession on the near future. The impact of this belief will see a ______ in the demand for loanable funds and _____ in the interest rate

Decrease , decrease

If the supply for loan able funds increases, real interest rates will _____ and investment will _____

Decrease, increase

The federal reserve can change the US money supply by changing the

Discount rate

If the fed institutes a policy to reduce inflation, interest rates are likely too

Increase

Assume that a perfectly competitive financial market for loans me funds is at equilibrium. Quantity demanded Will ____ and the quantity supplied of loan able funds will ______ if the govt puts a cap on the interest rate

Increase , decrease

If the federal reserve raises the discount rate, interest rates will ___ and real gdp will ____

Increase , decrease

An open market purchase of bonds by the fed will most likely _____ the money supply, ____ the interest rates, and _____ the unemployment rate

Increase, decrease, decrease

Banks may not be able to create the maximum amount of money from a new deposit as a result of

Individuals holding a larger portion of their assets as cash

If more money is demanded that is supplied then

Interest rates will rise

Fractional reserve banking means that banks are required to

Keep part of their demand deposits as reserves

Where an economy is at full employment, an expansionary monetary policy will lead to

Lower interest rates and more investment

If you use money as a store of value, you would be

Putting money into a savings

Not part of M1

Savings deposits

To eliminate an inflationary gap, the federal reserve might

Sell bonds on the open market

When consumers hold money rather than bonds because they expect the interest rate to increase in the future, they are holding money for the purposes of

Speculation

Open market operations refer to

The buying and selling of government securities by the federal reserve

In a money market graph

There is an inverse relationship between the nominal interest rate and the quantity of money demanded

If the federal reserve conducts an open market purchase of bonds, we can expect that

There will be a movement to the left along a short run Phillips curve

"The price for a ticket to the Super Bowl is 500" this statement best illustrates money used as a

Unit of account

When gvt spending cause an increase in real interest rates, gross private domestic investment

Will experience crowding out