ECON CH. 23&25
During 2014, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2013, real GDP was 105 billion and the population was 0.85 billion. In 2014, real GDP per person was
$128
The chairman of the Federal Reserve's Board of Governors
- Controls the agenda of the Federal Open Market Committee meetings - Receives frequent background briefings on monetary policy issues from a large staff of economists and technical experts - Is the main point of contact between the Fed and the President of the U.S.
The definition of M2 includes I. M1. II. money market mutual funds. III. currency held outside of banks.
1,2,3
What is the value of M1? Money market mutual fund deposits = 4,400 Time deposits = 1,237 Savings Deposits = 1,589 Checking Deposits = 752 Currency = 609
1,361 Billion
Using the Rule of 70, if China's current growth rate of real GDP per person was 7 percent a year, how long would it take the country's real GDP per person to double
10 years
The Federal Reserve has ________ regional Federal Reserve banks and ________ members of the Board of Governors.
12; 7
During 2013, the country of Economia had a real GDP of $115 billion and the population was 0.9 billion. In 2012, real GDP was 105 billion and the population was 0.85 billion. Economia's growth rate of real GDP per person is
3.23 Percent
What is the value of M2? Money market mutual fund deposits = 4,400 Time deposits = 1,237 Savings Deposits = 1,589 Checking Deposits = 752 Currency = 609
8587 Billion
In 2011, Armenia had a real GDP of $4.21 billion and a population of 2.98 million. In 2012, real GDP was $4.59 billion and population was 2.97 million. What was Armenia's economic growth rate from 2011 to 2012?
9.0 percent
A $25,000 price tag on a new car is an example of money as
A unit of account
The demand for nominal money
Increases as the price level decreases
The required reserve ratio
Is the fraction of a bank's total deposits that is required to be held in reserves
Checking deposits are included in
M1 and M2
Sam has $500 in traveler's checks. He cashes a $100 traveler check, deposits $150 into his checking account at a Savings and Loan Association, and deposits the remaining $250 into a savings account at a credit union. Immediately, ________.
M1 decreases by $250 and M2 does not change
Controlling the quantity of money and interest rates to influence aggregate economic activity is called
Monetary Policy
The opportunity cost of holding money is the
Nominal interest rate on assets other than money
Monetary Policy is conducted
Only by the Federal Reserve
Which of the following is a tool that is used by the Fed to control the quantity of money?
Open market operations
The discount rate is the interest rate
Paid on funds that depository institutions borrow from the Federal Reserve
During periods of inflation, which function of money is most severely affected?
Store of value
A unit of account
is an agreed measure of stating the prices of goods and services in an economy
An asset category that caries the highest interest rate is
loans
Depository institutions
make profit from the spread between the interest rate they pay on deposits and the interest rate they receive on loans
The most direct way in which money eliminates the need for a double coincidence of wants is through its use as a
medium of exchange
Aside form being a means of payment, the other functions of money are?
medium of exchange, unit of account, and store of value
The country of Kemper is on its aggregate production function at point W in the figure. The government of Kemper passes a law that makes 4 years of college mandatory for all citizens. After all citizens have their education, the economy will
move to a point such as Z
Economic growth is measured by
Changed in real GDP
If the Fed sells government securities
Commercial bank reserves will decrease
The Federal Reserves System
Controls the amount of currency in circulation
M1 includes
Currency, checking deposits and traveler's check
Liquidity is
Ease with which an asset can be converted into money
The main policy designer of the Federal Reserve system is the
Federal Open Market Committee
The Federal Open Market Committee (FOMC) is composed of
Presidents of 5 Federal Reserve regional banks and the Board of Governors
When the nominal interest rate rises, the
Quantity of money demanded decreases
The Fed buys $100 million of government securities from Bank A. What is the effect on Bank A's balance sheet?
Securities decrease by $100 million and reserves increase by $100 million
For a commercial bank, the term "reserves" refers to
The cash in its vaults and its deposits at the federal reserve
In the figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of an increase in financial innovation such as the introduction of ATMs?
The demand for money curve would shift leftward to MD0
In the figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of an increase in real GDP?
The demand for money curve would shift rightward to MD2
The interest rate banks charge other banks for overnight loans is
The federal funds rate
In the figure, suppose the economy is initially on the demand for money curve MD1. What is the effect of a rise in the interest rate?
There would be a movement upward along the demand for money curve MD1
Suppose you hold $50 to buy groceries weekly and then the price of groceries increases by 5 percent. To be able to buy the same amount of groceries, what must happen to your nominal money holdings?
They must increase by $2.50
Which of the following is NOT included in M1?
Time deposits
The best definition for economic growth is
a sustained expansion of production possibilities measured as the increase in read GDP over a given period
Which of the following is used to calculate the standard of living?
real GDP/Population