Econ #3

Which of the following is NOT a function of the Federal Reserve Bank?

Purchasing and selling foreign currencies

Which of the following guarantees deposits in almost all banks up to $100,000 limit per account?

The FDIC

In making policies about the nation’s money supply, the Federal Reserve Board

Operates as an independent entity

Which of the following assets is the most liquid?

Currency or "paper money"

The Federal Reserve Bank’s Open Market Committee can engage in a contractionary monetary policy by

Selling US government bonds

The Federal Reserve Bank’s Open Market Committee can engage in a expansionary monetary policy by

Buying US government bonds

Which of the following are counted as part of the M2 money supply?

All of the above are part of the M2 money supply measure

Which of the following is NOT counted as part of the M1 money supply?

Passbook savings deposits

The correct formula for the money multiplier is:

MM=1/Required Reserve Ratio

Which of the following statements does NOT describe a function of money?

A hedge against inflation

If banks are subject to a 20 percent required reserve ratio the money multiplier would be:

5

Fractional reserve banking takes its name from the fact that:

Banks keep only a fraction of total deposits on reserve

The Federal Reserve Banking System was founded in

1913

The equation of exchanged that the Federal Reserve Bank uses as a guide to control the money supply in the economy can be written as _______

M x V = P x Q

A bank’s required reserves are:

Are held as deposits with the Federal Reserve Bank

Fiat money:

Is acceptable as money because the government decreed it to be so

Which of the following will lead to an increase in the money supply?

Your bank gives you $10,000 load by adding $10,000 to your checking account

Decisions regarding the purchase and sale of US government securities by the Federal Reserve Bank are made by the:

The Federal Reserve Open Market Committee

The money supply contracts when the FED

Sells US government bonds

Which of the following actions would increase the money supply?

Buying US government bonds

Which of the following actions would decrease the money supply?

All of the above would decrease the money supply

If the velocity of money (V)=5, the price level (P)=3, the quantity of goods and services (Q) is equal to 50, then, according to the equation of exchange, the money supply equals:

30

The financial panic and credit freeze of late 2008 pointed to the FED’s important role as:

Lender of last resort

Who is the current chairman of the Federal Reserve Board of Governors?

Ben Bernanks

A customer deposits $10,000 in a bank account. If the reserve requirement were 15%, how much can the bank make in new loans because of that new deposit?

$8,500

Institutions that acquire funds from savers and then lend those funds to borrowers are called:

Financial intermediaries

Which of the following is not a motive for holding money?

Expectations motive

The velocity of money is

The number of times per year a dollar is, on average, spent on final goods and services

If a bank that is subject to a 10% required reserve ratio has $25,000 in excess reserves it can extend new loans up to a maximum of

$25,000

Banks would normally want to hold few excess reserves because this practice is, from the bank’s point of view:

Not profitable because they much pay depositors interest on their deposits

The amount by which annual government spending exceeds tax revenues is called the:

Deficit

The accumulation of past government deficits is called the:

Public debt

Which of the following does not represent a form of government debt?

US dollars

The central bank of the United States is:

The Federal Reserve System

The Federal Reserve System includes _____ regional banks

12

The main policymaking arm of the FED is the:

Federal Open Market Committee

New deposits of $1 billion are placed in a bank. The reserve requirement is 20%. How much does the money supply increase, assuming no leakages?

$5 billion

The economy is experiencing 10% inflation. What should the federal government do?

Raise taxes and attempt to slow the economy

When government borrowing increase interest rates and causes investment spending in the economy to decrease it is called

Crowding out

A policy action by the FED to increase the money supply ______

Is slow acting and takes usually one year or more to fully increase the money supply, lower interest rates, and increase economic activity.

Money is employed as a ______, because it enables people to save the money they earn today use it to buy goods and services at a later date.

Store of value

Money is the most _____ of all assets because, as a medium of exchange, it requires no conversion

Liquid

Monetary policy is

The use of the money supply to change interest rates in the economy to influence economic activity

Which of the following is NOT a tool of monetary policy?

Changing government spending and taxes

The Federal Reserve Open Market Committee is responsible for

Overseeing the buying and selling of government securities in the open market

A progressive tax is a tax where ________

The tax as a percent of income increases as income increases

A regressive tax is tax where _____

The tax as a percent of income decreases as income increases

In the GDP expenditure equation (GDP = C + I +G + (X-M)) the G term represents:

Government spending

In the GDP expenditure equation (GDP = C + I +G + (X-M)) the I term represents:

Investment spending

Which of the following statements are NOT a characteristic of "good" money?

Money must have historic value