econ exam 3
Which of the following is included as part of the M1 money supply?
$200,000 balance in the checking account of Main Street Trading Corporation
In 2017, the public debt in the U.S. on a per capita basis was about:
$62,000
approximately what % of the U.S. public debt is held by foreign individuals and institutions?
29%
A federal reserve system consists of which of the following?
Board of Governors and 12 Federal Reserve Banks
Banks can lend their excess reserves to other banks in the:
Federal Funds Market
Overnight loans from one bank to another for reserve purposes entail an interest rate called the:
Federal Funds Rate
Which of the following is considered a limitation of monetary policy?
a cyclical asymmetry
What function is money serving when you use it to go shopping?
a medium of exchange
What percent of the money that a typical modern bank invests comes from borrowing?
about 95%
A bank is in the position to make loans when required reserves:
are less than actual reserves
the Federal Funds Market is the market in which:
banks borrow reserves from one another on an overnight basis
In the recent financial and economic crises, the economy fell into a so-called liquidity trap, which means:
banks held on to excess reserves and people chose to pay off loans rather than spend
What describes 12 Federal Reserve banks?
basic goal is to control money supply and interest rates in promoting the general economic welfare
a bank can get additional excess reserves by doing any of the following except:
buying treasury securities from the fed
The money supply is backed:
by the government's ability to control the supply of money and therefore keep its value relatively stable
one of the strengths of monetary policy relative to fiscal policy is that monetary policy:
can be implemented more quickly
the main function of the federal reserve system is to
control the money supply
the group of 3 economists who provide fiscal policy recommendations to the president is the:
council of economic advisors
The social security program is designed to pay:
current retirees, using funds from current contributions
Without a change in discretionary fiscal policy, we would expect that if the economy goes into recession, then the:
cyclically adjusted deficit would stay the same while the actual deficit would increase
The intent of contractionary fiscal policy is to:
decrease aggregate demand
Other things equal, an increase in taxes on businesses will:
decrease aggregate spending, decrease aggregate demand, and cause real GDP to fall
the set of fiscal policies that would be most contractionary would be a:
decrease in government spending and an increase in taxes
If the MPC in an economy is 0.8, government could shift the AD curve rightward by $100 billion by:
decreasing taxes by $25 billion
Most of the U.S. public debt is owed to the nation's citizens and domestic institutions. This is one reason that the public debt:
does not impose a large burden on future generations
If a government wants to pursue an expansionary fiscal policy, then a tax cut of a certain size will be more expansionary when the:
economy's MPS is small
One major advantage of having money as a medium of exchange is:
escaping the complications of barter
as it related to federal reserve activities, the acronym fomc is:
federal open market committee
most modern banking systems are based on:
fractional reserves
When the fed does repos and reverse repos with financial institutions, the collateral used in these transactions is:
government bonds
Crowding-out effect of expansionary fiscal policy suggests:
government spending increases at the expense of private investment
The more progressive the tax system, the:
greater is the built-in stability for the economy
all else equal, if the fed engages in a repo transaction, then it means the fed is attempting to:
increase the money supply
Other things equal, an expansion of commercial bank lending:
increases the money supply
The federal reserve system is an:
independent agency of government
the crowding-out effect tends to be stronger when the economy:
is at, or close to full employment
Which of the following does not explain what backs the money supply in the U.S.?
it is backed by gold
When a commercial bank has excess reserves:
it is in a position to make additional loans
One major component of money supply M1 is part of a bank's:
liabilities
money is destroyed when
loans are repaid
if the fed were to reduce the legal reserve ratio, we would expect:
lower interest rates, an expanded GDP, and a higher inflation rate
When commercial banks use excess reserves to buy government securities from the public:
new money is created
Time deposits of $100,000 or more are:
not M1 or M2
currency held in the vault of First National Bank is:
not counted as part of the money supply
What is the most important type of monetary policy day-to-day?
open market operations
the feds response to the zero lower bound problem was:
quantitative easing
The interest rate will fall when the:
quantity of money supplied exceeds the quantity demanded
Open market operations include:
repos and reverse repos
Which of the following are near-monies?
savings deposits, small-denominated time deposits, money market deposit accounts, money market mutual fund balances held by businesses
Development that happened in 2008, relating to the fed and bank reserves, was that the fed:
started paying interest on the bank's reserves
the american recovery and reinvestment act of 2009 was implemented primarily to
stimulate aggregate demand and employment
what function of money is depositing money into a savings account?
store of value
The cyclically adjusted budget estimates the federal budget deficit or surplus if:
the economy were at full employment
In a reverse repo transaction:
the fed borrows money from financial institutions
A major reason that the public debt cannot bankrupt the fed government is because:
the public can be easily refinanced by issuing new bonds
Checkable deposits are classified as money because:
they can be readily used in purchasing goods and paying debts
Interest paid on excess reserves held at the fed,
will incentivize financial institutions to hold more reserves and reduce risky lending
