Econ Exam

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Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%. As a result of Kristy's deposit, Bank A can make a maximum loan of

$8000

Budget deficits occur when the government

Spends more than it has in tax revenue

Which of the following is NOT one of the physical properties that all types of money must possess?

Standardized quantity

A fractional reserve banking system is one in which banks hold less than 100 percent of ________ in reserves.

deposits

What is the current and original function of the Fed?

original: lender of last resort current: monetary policy

Dollar bills in the modern economy serve as money because

people have confidence that others will accept them as money.

Which of the following is not counted in M1?

time account balances

What will cause a rightward shift in aggregate demand curve?

faster income growth and increase in government purchases

The Fed was created in

1913

"Automatic Stabilizers" are government spending and taxes that change automatically with changes in

Business cycles

Assume the FOMC currently estimates the growth rate of Real GDP to be 1.5% per year, the unemployment rate to be 7.1%, and the inflation rate to be 1.0% per year. Which of the following Fed policies would the Fed likely engage in?

Buy bonds

What do the letters FOMC stand for

Federal Open Market Committee

Which of the following is (are) responsible for managing the money supply in the United States?

Federal Open Market Committee

The FOMC consists of the seven members of the ________, the president of the Federal Reserve Bank of New York, and ________.

Federal Reserve's Board of Governors; four presidents from the other 11 Federal Reserve banks

Which of the following is a potential macroeconomic problem from the US's current "fiscal time bomb" situation?

Higher future tax liabilities

All else equal, which of the following Fed actions would contract the money supply?

Increase the discount rate

Assume the FOMC currently estimates the growth rate of Real GDP to be 3.6% per year, the unemployment rate to be 5.1%, and the inflation rate to be 3.8% per year. Which of the following Fed policies would the Fed likely engage in?

Increase the discount rate

Which of the following is a monetary policy "target" of the Fed?

Interest rates

Who is the chair of the Fed?

Janet Yellen

Where was the Fed created?

Jekyll Island, GA

When the Fed engages in a contractionary monetary policy, which of the following is an outcome the Fed is hoping to achieve?

Lower levels of consumer spending

To calculate M2 you need to add

M1 and money market mutual fund shares and small demonstration timed deposits and savings account

In Chapter 16, the textbook refers to a potential "Time Bomb." According to the textbook, which of the following will most likely create this "Time Bomb?"

Medicare and Medicaid expenses

Which of the following is one of the most important benefits of money in an economy?

Money makes exchange easier, leading to more specialization and higher productivity.

Which of the following makes up the largest part of the US Federal Government's total expenditures?

Transfer payments

"Discretionary Fiscal Policy" is controlled by ________________.

US Congress

Which US government body is responsible for Fiscal Policy?

US Congress

The statement, "My iPhone is worth $300" represents money's function as

a unit of account

In economics, money is defined as

any asset people generally accept in exchange for goods and services.

In 1913, Congress established the Federal Reserve System with the intention of putting an end to

bank panics

The majority of power within the Federal Reserve lies with the

board of government

To calculate M1 you need to add

checking account deposits, travelers checks, currency

To increase the money supply, the Federal Reserve could

conduct an open market purchase of Treasury securities.

What will cause a movement up along the aggregate demand curve?

increase in price level?

What will cause a leftward shift in aggregate demand curve?

increase in state income taxes and interest rates

If a person withdraws $500 from his/her savings account and puts it in his/her checking account, then M1 will ________ and M2 will ________.

increase; not change

Fiat money has

little to no intrinsic value and is authorized by the central bank or governmental body.

"Fiat money" is best described as

money with value only as an exchange good

The federal funds rate is

one of the Fed's policy targets

The most important tool that the Federal Reserve uses to conduct monetary policy is

open market operations

Assume the FOMC currently estimates the growth rate of Real GDP to be 5.5% per year, the unemployment rate to be 5.1%, and the inflation rate to be 4.7% per year. Which of the following Fed policies would the Fed likely engage in?

sell bonds

A farm worker gets paid today in money, but plans to spend the money next week. This illustrates which function of money?

store of value


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