Macro Exam 4 – Flashcards

Money is:

An economy that lacks a medium of exchange is a(n):

Which of the following would NOT fit the economist's definition of money?

All of the following are roles of money, EXCEPT:

An example of a double coincidence of wants is:

Fiat money is:

Which of the following is NOT considered one of the three chief functions (roles) of money?

Commodity money is:

The primary difference between M1 and M2 is that:

Money that has value apart from its use as money is:

Money that the government has ordered be accepted as money is:

The U.S. dollar is an example of:

Included in the M1 definition of the money supply is:

The reserve ratio is the:

A reserve requirement ratio is the:

A bank run occurs when:

Which of the following is designed to protect depositors from a bank run by insuring all deposits up to $250,000?

The existence of banks:

Banks create money when they:

Suppose the reserve ratio is 20%. If Holly deposits $1,000 of cash into her checking account and her bank lends $600 to Freda, the money supply:

The money multiplier and the required reserve ratio are:

The _______ multiplier is equal to _______ .

Suppose the reserve ratio is 25%, then the money multiplier is

In the U.S., the institution that is charged with determining the size of the monetary base and with regulating the banking system is the:

The Federal Reserve System is the _______ for the United States.

All of the following are responsibilities of the Fed EXCEPT:

The major tools of monetary policy available to the Federal Reserve System include:

The tool of monetary policy that involves the Fed's buying and selling of government bonds is:

Federal funds are:

To _______ the money supply, the Fed could ________.

To _______ the money supply, the Fed could ________.

To change the money supply, the Fed most frequently uses:

When banks borrow and lend reserves from other banks, they are participating in the ______ market.

If the Federal Reserve wants to discourage banks from borrowing directly from the Fed and thus decrease the monetary base, the Fed would likely:

The Federal Reserve is able to have an impact on financial crises because the Fed:

If the interest rate on CDs increases from 5% to 10%, the opportunity cost of holding money will ______ and the quantity demanded of money will ______.

If one year the interest rate on 1-month Treasury bills was 2.5% and the next year the interest rate on 1-month Treasury bills was 2%, one could conclude that:

The opportunity cost of holding money is:

The interest earnings one gives up to hold more liquid assets are:

When an individual decides to hold money instead of other assets:

When the short-term interest rate _____, the opportunity cost of holding money _____, and the quantity of money individuals want to hold _____.

The money demand curve shows the relationship between the:

The amount of money that people demand is:

The slope of the demand curve for money is:

Which of the following does NOT cause the money demand curve to shift?

The demand curve for money will NOT shift as a result of a change in:

Improvements in banking and information technology have:

The fact that a larger number of stores in the United States have found it economical to accept credit cards has:

If at the current interest rate the demand for money is $100 billion and the supply of money is $200 billion, then the interest rate will:

If at the current interest rate the demand for money is $300 billion and the supply of money is $200 billion, then the interest rate will:

(Figure: Money Market I) If the money market is initially in equilibrium at point E and the central bank sells bonds, then the interest rate will:

(Figure: Money Market I) If the money market is initially in equilibrium at point E and the central bank buys bonds, then the interest rate will:

(Figure: Money Market II) Equilibrium in this money market will occur at interest rate _______ and quantity of money _______.

A decrease in the supply of money, with no change in demand for money, will lead to_______ in the equilibrium quantity of money and _______ in the equilibrium interest rate.

A sale of bonds by the Fed:

Suppose the Fed buys bonds. We can expect this transaction to:

Suppose the Fed sells bonds. We can expect this transaction to:

Which of the following statements is true?

If the federal reserve wants to lower the interest rate, it will:

The money supply curve is:

Suppose the Fed has set a target for the federal funds rate. If initially the equilibrium interest rate happens to be higher than the target interest rate, then the Fed should:

Other things equal, an increase in the interest rate leads to a:

Expansionary monetary policy:

Monetary policy that lowers the interest rate is called ________ because it ________.

The main objective of contractionary monetary policy is to:

If the economy is experiencing an inflationary gap, the Fed should conduct ______ monetary policy to ______ aggregate demand.

A reduction in interest rates due to an increase in the money supply will shift:

An increase in the money supply causes ______ in output in the short run, and _______ in output in the long run.

In the long run, changes in the money supply:

If the money supply increases by 10%, in the long run:

In the long run, an increase in the quantity of money:

(Figure: Short-Run Determination of the Interest Rate) If the money supply is currently at MS1 and the central bank chooses to buy bonds, then the resulting short-run shift in the supply of savings (loanable funds) may be represented by a shift of the:

A liquidity trap is a situation in which:

The liquidity trap occurs when all of the following happen EXCEPT:

The public (or national) debt is the total accumulation of all past deficits and surpluses. (T/F)

Public choice theory looks at each of the following issues EXCEPT:

Proponents of the functional finance approach to balancing the federal budget believe that the:

Economists in favor of the functional finance approach to balancing the federal budget believe that the first priority of lawmakers is to keep the economy at full employment with stable prices, not balancing the federal budget. (T/F)

Trying to annually balance the federal budget during a recession may worsen the economy. (T/F)

Budget and trade deficits are NOT linked. (T/F)

Internally held debt is the portion of the national debt held by American banks, corporations, mutual funds, pension plans, and individuals. (T/F)

Externally held debt is debt held by foreign entities and individuals. (T/F)

Interest paid on externally held debt does not pose a burden on our economy. (T/F)

Which of the following statements describes an implication of the crowding-out effect?

The crowding-out effect of deficit spending results from selling government bonds to the public—increasing interest rates, decreasing private investment, and bequeathing a potentially less productive economy to future generations. (T/F)

The generational imbalance (GI) measure estimates how much of the fiscal imbalance for a given policy will be shifted to future generations. (T/F)

Public choice theorists primarily examine the:

The cyclically balanced budget is a budget that is balanced:

Economists who favor a functional finance approach to the budget:

Monetization of the debt occurs when:

In the crowding-out effect of deficit spending, the supply of bonds sold on the market ______, bond prices ______, interest rates ______, and private investment ______.

Which of the following measures will NOT lessen the crowding-out effect?

Which of the following measures can mitigate the productivity effects of crowding out?