Macro
Which of the actions by the Fed is considered tight money policy?
Selling bonds in the open market
In the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by
Selling bonds. This selling would reduce the money supply
If the economy were encountering rapid growth and inflation, appropriate monetary policies would call for:
Selling government securities, raising the reserve ratio, and raising the discount rate
What is not correct of unemployment?
Unemployment rate is computed using the number of unemployment insurance claims filled
Anna says price of her dress was $100. Which function of money is being emphasized here?
Unit of account
In a system of fractional-reserve banking, even without action by the central bank, the money supply declines if households chose to hold ___ currency or if banks chose to hold ____ excess reserves
more, more
Most important functions of a commercial bank include
-Accepting deposits -Making loans
The tools of monetary policy include
-Conducting open market operations -Changing discount rate -Changing reserve ratio -Paying interest on member banks' reserves at the Fed
Fractional reserve banking: Suppose your instructor deposits $5,000 in cash in her account at Commerce Bank. As a result, we can conclude that
-M1 supply will not change immediately -Composition of M1 will change immediately
Unemployment insurance
-May improve ability of the economy to math workers with appropriate jobs -Reduces the job search efforts of the unemployed -Increases the amount of frictional unemployment in the economy
Official unemployment statistics:
-Overstate unemployment when people lie about their job search activities -Understate unemployment because "discouraged workers" are not counted as unemployed -Understate unemployment because part time employees are counted as fully employed
The goal of full employment means
-Reducing the cyclical component of unemployment rate to zero -Reducing the difference between actual and natural unemployment to zero
Suppose the adult population is 115 million. If 80 million people are employed and 5 million are unemployed, then
30 million are not in the labor force
The Federal Funds rate is currently in the range of
0%-0.25%
Suppose a country had an adult population of about 25 million, a labor-force population of 60% and an unemployment rate of 6%. How many people were unemployed?
0.9 Million
Which statement is correct? In the special case of the 100-percent reserve ratio banking the money multiplier is
1 and banks do not create money
At any meeting of the Federal Open Market Committee, that committee's voting members consist of
5 Federal Reserve regional bank presidents and all the members of the Board of Governors
The Federal Open Market Committee consists of
7 Governors and 5 Federal Reserve bank presidents
When employers pay efficiency wages, they pay wages
Above the equilibrium to increase productivity
Which is true: Fed refers to Federal Reserve System, Fed was instituted in 1913, and FDIC was instituted in 1933
All are true
On the balance sheet of a commercial bank, loans granted to customers appears on
Asset side
On the balance sheet of the Federal Reserve, US government bonds appear on
Asset side
The Federal Funds market is in the market in which:
Banks borrow reserves from one another on an overnight basis
Which creates unemployment by keeping wages above the equilibrium level?
Both efficiency wages and labor unions
The natural unemployment rate includes
Both frictional and structural unemployment
The money supply increases when the Fed
Buys bonds. The increase will be larger, the smaller is the reserve ratio
When conducting an open-market purchase, the Fed
Buys government bonds. And in doing on increases the money supply
Monetary Policy
Can be described either in terms of the money supply or in terms of the interest rate
The most important function of the Federal Reserve is to:
Control the money supply of the economy
If the natural unemployment rate is 5.2% and the actual rate of unemployment is 5.7%, then by definition there is
Cyclical unemployment amounting to 0.5 percent of the labor force
The Fed can reduce the federal funds rate by
Increasing the money supply. To increase money supply it could buy bonds
US Department of Treasury keeps an account at the Fed to carry out its day to day operations. On the balance sheet of the Fed, US treasury deposits will appear on
Liability side
The money supply includes all of the following EXCEPT:
Lines of credit accessible with credit cards
Small time deposits are included in
M2 definition of money
The unemployment rate is calculated by
The BLS on a monthly basis
The discount rate is the interest rate
The Fed charges on loans granted to Commercial banks
What is correct of the Fed?
The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms
Of the three tools of monetary control, the most frequently used is
The open market operations
Chloe takes currency from her wallet and deposits it into her checking account. If the bank adds the entire amount to reserves, the money supply ____, but if the bank lends out some of the reserves, the money supply ___
is unchanged, increases