Econ W11
Which of these policies affects the economy through intended changes in the money supply?
Monetary policy
Who is the chairperson of the Federal Open Market Committee (FOMC)?
The chairperson of the Board of Governors
Which of these factors contributed to the recession of 2007-2009?
The end of the housing bubble
If firms reduce investment spending and the economy enters a recession, which of these contributes to the adjustment that causes the economy to return to its long-run equilibrium?
The eventual agreement by workers to accept lower wages
The name given to the fraction of deposits that a bank is legally required to hold in its vault, or as deposits at the Fed, is __________.
required reserves
The long-run aggregate supply curve:
shifts to the right as technological change occurs
The aggregate demand and aggregate supply model explains:
short-run fluctuations in real GDP and the price level
According to the graph, the situation of this economy after the supply shock can be called:
stagflation
The fact that wages and prices may not rapidly adjust to changes in demand or supply is called:
sticky wages and prices.
The 1974-1975 recession was a result of a:
supply shock that caused a leftward shift of the short-run aggregate supply curve
The 2007-2009 recession was a clear example of the impact:
that a decrease in aggregate demand can have on the economy
The wealth effect refers to the fact that:
when the price level falls, the real value of household wealth rises, and so will consumption
A higher domestic price level will result in:
higher imports
Credit cards are:
not part of the money supply.
The economy is in long-run equilibrium when the short-run aggregate supply and the aggregate demand curve intersect at a point:
on the long-run aggregate supply curve
The Fed conducts monetary policy primarily through:
open market operations.
When we say that one of the functions of the Fed is to be a lender of last resort, we mean that the Fed:
provides funds to troubled banks that cannot find any other source of funds.
Suppose that the reserve ratio is 25% and that banks loan out all their excess reserves. If a person deposits $100 cash in a bank, checking account balances will increase by a maximum of:
$400
A bank panic occurs when:
many banks experience runs at the same time.
The theory concerning the link between the money supply and the price level that assumes the velocity of money is constant is called the:
quantity theory of money.
Assume that banks are always fully loaned and people hold no cash. Given a required reserve ratio of 10%, an infusion of $100 billion in reserves will result in a maximum of:
$1,000 billion in deposits.
Suppose that velocity is 3 and the money supply is $500 million. According to the quantity theory of money, nominal output equals:
$1.5 billion.
Which of these factors will cause the aggregate demand curve to shift?
A change in the expectations of households and firms
Which of these factors will shift the short-run aggregate supply to the left?
A decrease in the size of the labor force
How can government policies shift the aggregate demand curve to the right?
By increasing government purchases
Which of these predictions can be made using the growth rates associated with the quantity equation?
If the money supply grows at a faster rate than real GDP, there will be inflation.
According to the graph, an increase in government spending, all else equal, will shift the AD curve from the initial AD curve to the curve labeled:
Increased AD
Which of these shifts the aggregate demand curve to the right?
Lower interest rates
The sum of all currency in the hands of the public plus demand deposits and other checkable deposits plus traveler's checks is the official definition of:
M1
The actions the Federal Reserve takes to manage the money supply and interest rates in order to pursue economic objectives are called __________.
Monetary policy
When we say that money serves as a unit of account, we mean that:
Prices are quoted in terms of money.
The Board of Governors of the Federal Reserve has _________ members that are appointed for staggered _________ by the __________ and confirmed by the Senate.
Seven, 14-year terms, President
Which of these facts is true about the creation of the Federal Reserve System (the Fed)?
The Fed was created in 1913.
The aggregate demand curve shows the relationship between:
The price level and the quantity of real GDP demanded
Which of these best represents the impact of a decrease in government spending through the multiplier process?
The shift from c to b, and then to a
Velocity is defined as:
V = (P x Q) / M
When many depositors decide simultaneously to withdraw their money from a bank, there is __________.
a bank run
An unexpected change in the price of oil would be called __________ by economists.
a supply shock
The money multiplier for the United States is __________.
between 2 and 3
According to the graph, in this economy there will be a tendency for:
both wages and prices to rise over time
To increase the money supply, the FOMC directs the trading desk located at the Federal Reserve Bank of New York to:
buy U.S. Treasury securities from the public.
Stagflation is a:
combination of inflation and recession
In the short run, a supply shock as a result of an unexpected decrease in oil prices will:
decrease the price level but increase real GDP
Assuming there are no leakages out of the banking system, a money multiplier equal to 5 means that:
each additional dollar of reserves creates $5 of deposits.
On the balance sheet of a bank:
loans are the most important asset
The Federal Reserve System is __________.
the central bank of the United States
In the long-run, the level of output is:
the full-employment level of output
How many Federal Reserve districts are there?
12
Which body of the Federal Reserve System sets the majority of U.S. monetary policy?
The Federal Open Market Committee
Which of these factors will cause the long-run aggregate supply curve to shift to the right?
The accumulation of more machinery and equipment
