Econ 204

By the government's ability to control the supply of money and therefore to keep its value relatively stable

The money supply is backed:

$9 billion

Refer to the above table. The commercial banking system has excess reserves of . . .

$30 billion

Refer to the above table. The maximum amount by which the commercial banking system can expand the money supply by lending is . . .

Bond issuers fail to make promised payemts

"Deafult" occurs when . . .

Unit of account

A $70 price tag on a sweater in a department store window is an example of money functioning as . . .

A bond

A document that promises to pay specified sums of money on specified dates and is debt to the issuer is called . . .

Loans

An asset category that carries the highest interest rate for a commercial bank is . . .

$6,000

Assuming a legal reserve ratio of 20%, how much in excess reserves would this bank have after a check for $10,000 was drawn and cleared against it?

Making loans at a higher interest rate than the rates that they offer on their deposits

Banks earn a profit by . . .

5600

Based on the data table, at equilibrium, the level of investment in the economy is . . .

80 billion, sell 10 billion of bonds

Based on the data table, congress and the president have decided to decrease government spending by 240 billion dollars. The Federal Open Market Committee has studied this action and knows that additional cuts in spending will be needed to bring the economy back to full employment. If G decreases by 240 billion, then the Federal Reserve will need to cut investment spending by . . . and . . . so that the economy can achieve full employment.

-320

Based on the data table, in order to fix the economy and bring RGDP to the full employment level, investment must change by . . .

Sell $40 billion worth of government securities

Based on the data table, in order to fix the economy and bring RGDP to the full employment level, the Federal Reserve must . . .

A budget surplus

Based on the data table, it is clear that the federal government is running . . .

Inflationary gap

Based on the data table, the economy is currently experiencing a . . .

12.5

Based on the data table, the investment multiplier is . . .

20

Based on the data table, the money multiplier is . . .

Create checkable deposits in exchange for IOUs

Commercial banks create money when they . . .

More than $1,000

Consider a bond with a coupon of $90, and a face value of $1,000, due to mature in one year's time. The current interest is 5%. The current price of the bond is . . .

Both M1 and M2

Currency in circulation is part of . . .

Lower interest rates, an expanded GDP, and a higher rate of inflation

If the Fed were to reduce the legal reserve ratio, we would expect . . .

$250

Facebook issued a bond with a face value of $10,000 and a coupon rate of 2.5%. Each year the owner of the bond is entitled to a coupon payment of . . . dollars

Commercial bank reserves will decrease and the money supply will decrease

If the Fed sells government securities, . . .

M1 increases and M2 stays the same

Michelle transfers $4,000 from her savings account to her checking account. What effect is this change likely to have on M1 and M2?

Delaying consumption only

Rates of return on short-term U.S. government bonds are compensation for . . .

Banks; other banks

The Federal Funds rate is the interest rate that . . . charge(s) . . .

I and II

The Federal Reserve is responsible for . . . I. Regulating Banks II. Conducting Monetary Policy III. Regulating Government Spending

Lower is the monetary multiplier

The greater the required reserve ratio, the . . .

Federal Open Market Committee

The main policy making body of the Federal Reserve system is the . . .

Deposits at the Federal Reserve Bank and vault cash

The reserves of a commercial bank consist of:

Commercial banks

Wells Fargo, J.P. Morgan Chase, and Citibank are all primarily:

The money supply increases, interest rates fall and investment rises

When the Federal Reserve uses expansionary Monetary Policy . . .

4

When the legal reserve ratio is 25%, the monetary multiplier is . . .

A savings account

Which of the following assets is most liquid? (an Italian Ferrari, an art painting by Claude Monet, a savings account, or a 5 year certificate of deposit)

Short-term U.S. government bonds

Which of the following financial assets is essentially risk-free?

The United States treasury

Who issues T-Bills, T-Notes, and T-Bonds?