Macro Final Exam
Sumit deposits $1,500 cash into his checking account. The reserve requirement is 25%. What is the change in his bank's required reserves?
$1,125
Suppose that a bonds total interest payments are $400 and its yield is 5%. How much is this bonds price?
$8,000
Assume the reserve requirement is 10% and all banks are fully loaded up. If a new deposit of $10,000 is made into Bank X, with this deposit of Bank X can make new loans of
$9,000
What is the yield on a bond sold for $1,850 and paying $25.50 in interest annually?
1.38%
money multiplier=
1/r
Civil Adult Population
16 & older, not in the military, institutionalized, and prison.
Using the equation of exchange, if the money supply is $4 trillion, the price level is 2, and the level of output (real GDP) is $6 trillion, then the velocity of money is ___.
3
Using the equation of exchange, if the money supply is $4 trillion, the price level is 2, and the level of output (real GDP) is $6 trillion, then the velocity of money is:
3
If the reserve requirement ratio is 20%, the money multiplier is
5
The ____ is the central bank of the United States
Federal Reserve System
Which of the following is NOT a policy tool of the Federal Reserve?
Fiscal Policy
Required Reserves
Initial deposit x r
excess reserves (amount to loan out)
Initial deposit-required reserves
Yield
Interest Payment/Price of bond
Yolanda took $5,000 from her checking account and put the money in her savings account at the same bank. Based on that information, which of these is true?
M1 went down by $5,000 but M2 was unchanged.
Which of the following is the LEAST liquid?
Picasso painting
In the equation of exchange, if M = $1.5 trillion, V = 7, and P = 1.05, then:
Q=$10 trillion
If households decide to save a larger portion of their income because they fear job loss due to a recession, the loanable funds supply curve will shift from ___ to___, and the new equilibrium will be at point____.
S0;S1;b
Which action is the Fed most likely to take to curb inflation (decrease AD)?
The fed will sell securities in the open market
What are the primary functions of money?
Unit of account, medium of exchange, and store of value
unemployment rate
[unemployed/labor force]x100
The use of money as a medium of exchange helps reduce the inefficiencies inherent in:
a barter economy
Which of the following will increase aggregate demand
a decrease in taxes
Which is NOT one of the three basic functions of money
a means to collect taxes
Which one of the following will cause the supply of loanable funds curve to shift leftward?
an increase in the government deficit
Which one of the following will cause the demand of loanable funds curve to shift rightward?
businesses are more confident in the future of the economy?
Quantitative easing refers to the process whereby the Federal Reserve:
buys securities to stimulate the economy
M1 includes
cash, demand deposits, and other checkable deposits
In the short run, changes in the money supply will NOT change output according to:
classical economists
In times of economic downturn the Fed will engage in ____ monetary policy by ____ bonds.
expansionary; buying
Assume initially that market interest rates are 7% and the bondholder is receiving a $70 coupon payment per year on a bond with a face value of $1,000. If market interest rates rise to 8%, the bond price:
falls to $875
Institutions that acquire funds from savers and then lend those funds to borrows are
finanial intermediaries
In the counteracting a negative supply shock, the Fed could achieve _____ monetary policy
full employment but not price stability; expansionary
Assume the reserve requirement is 20% and the federal open market committee buys a $10,000 bond. The money supply
increases by a maximum of $500,000
Monetary policy involves all of these except
increases in personal taxes
a lower reserve requirement
increases the ability of
Which of the following measures is an example of an expansionary fiscal policy?
increasing unemployment compensation
Total deposits
initial deposit x 1/r
Price of Bond
interest payment/yield or interest rate
The financial panic and credit freeze in late 2008 pointed to the Fed's important role as a:
lender of a last resort
Generally, economists believe that monetary policy should focus on price stability in the _____ run and output or income in the _____ run.
long;short
In a liquidity trap:
monetary policy is ineffective in changing income and output.
The main tool of monetary policy is
open market operations
the main tool of monetary policy is
open market operations
Tight monetary policy refers to the Federal Reserve
raising interest rates, usually to fight inflation
Financial Institutions
reduce information costs, reduce transaction costs, and diversify assets.
r=
reserve requirement
A reduction in the interest rate causes consumption and investment to _____, which shifts the aggregate demand curve _____.
rise; rightward
When the fed wants to decrease the money supply. it will
sell bonds
If the fed wants to raise the interest rate, it will ______ bonds, which ____bond.
sell; lowers
All of these are considered monetary policy lags except
speculation lag
If there is a general rise in fear of the financial system:
the actual multiplier will fall
When the long-run aggregate supply curve is drawn as a vertical line, the theorist is assuming that
the economy tends to full employment in the long run
When the long-run aggregate supply curve is drawn as a vertical line, the theorist is assuming that:
the economy tends to move toward full employment in the ling run
In the equation of exchange, if M=$2 trillion, P=1.5, and Q=$8 trillion
the velocity of money (V)=6
Which one of the following will cause the supply of loanable funds curve to shift rightward?
workers fear that unemployment will increase