Macro Test Questions Unit 4
A customer deposits $2,000 into a checkabe account. The receiving bank hold no excess reserves and issues loans to the full amount of $1,200. The reserve requirement is
40 percent
The Fed's functions include all of the following EXCEPT
accepting deposits of individual businesses and corporations
A customer's checkable deposits would be entered on a bank's balance sheet as
liabilities
Open market operations consist of
the buying or selling of government securities. The Fed holds government securities, and so do individuals, banks, and other financial institutions such as brokerage companies and pension funds.
The M1 money supply is controlled by
the federal reserve system
The interest rate the Fed charges commercial banks for loans is the
the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility—the discount window.
Assume the reserve requirement is 15 percent and a bank initially has no excess reserves. If a customer deposits $1,000, how much of that deposit can be loaned?
$850
Which of the following is a function of money? A medium of exchange A store of value A unit of account
A medium of exchange A store of value A unit of account
policies would be appropriate to resolve a recession?
Expansionary fiscal policy
commitment of the government to issue all of the money citizens want to purchase goods and services
decreases
A higher reserve requirement will cause
a smaller potential growth of the money supply
In addition to the components of M1, M2 consists of the following additional components
are progressively more inclusive measures of money: M1 is included in M2. M1 consists of the most liquid forms of money, namely currency, demand deposits, and other liquid deposits. Other liquid deposits includes ATS and NOW accounts, share draft accounts, and savings deposits.
The Federal Reserve increases the money supply when it
buys bonds
The components of M1 consist of
checkable deposits travelers' checks currency
The stable value of money depends on all of the following EXCEPT the
commitment of the government to issue all of the money citizens want to purchase goods and services
The primary role of the Federal Reserve is to
control the money supply
When interest rates increase, asset demand for money
decreases because the opportunity cost of holding money as an asset increases.
When interest rates rise, current bond prices
fall because the fixed interest rate on current bonds is lower than the interest rate on newly-issued bonds
The reserve requirement is determined by the
federal reserve
The kind of currency used in the United States today can be best described as
fiat money
The components of the M1 money supply are distinguished from the additional components of the M2 money supply because M1 money is
highly liquid
The federal funds rate is the
interest rate banks charge each other for short-term loans
The value of fiat money as a medium of exchange is backed by
its purchasing power
When individual decide to hold money as currency and not deposit it in banks, the growth of the money supply will be
less than potential
Commercial banks create money by
making loans
The most commonly used tool of monetary policy is
open market operations
Expansionary monetary policy is most appropriate when
real GDP is falling
policies would be inappropriate if the Federal Reserve is trying to reduce the inflation rate?
reducing the federal funds rate
In the money market,
the trade in short-term loans between banks and other financial institutions.
The balance sheet of a commercial bank is a statement of
what is owned by the bank what is owed to the bank all claims on what is owned by or owed to the bank
