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Certificate Of Deposit
Economics
Federal Open Market Committee
Federal Reserve System
Finance
Personal Finance
Everfi Modules 1, 2, 3, 4, 5, 6, 7, 8, 9 Final Quiz Questions and Answers Flashcard 90 terms

Maddison Bailey
90 terms
Preview
Everfi Modules 1, 2, 3, 4, 5, 6, 7, 8, 9 Final Quiz Questions and Answers Flashcard
question
Interest is - a charge for lending money to a bank - the amount owed for borrowing money - the amount added into your savings when opening a bank account - a charge for the convenience of accessing money stored in your bank account
answer
the amount owed for borrwoing money
question
Which of the following is a type of savings vehicle? • Certificate of Deposit • Money Market Account • Checking Account • Both A &B
answer
Both A &B
question
John just opened a savings account and wants to maximize the amount of interest he earns. Which of the following actions would enable him to earn MORE interest? - Selecting an account with a high interest rate. - Leaving his money in the account for long period of time. - Transferring money into his checking account each month. - Both A & B
answer
Both A & B
question
You are opening a savings account that earns compound interest. Which compounding frequency will earn you the MOST money? - Compounding 1 time a year - Compounding 4 times a year - Compounding monthly - Compounding daily
answer
Compounding daily
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To earn as much interest as possible, you should open a savings account that earns _______ interest and has the ______ interest rate. • compound; lowest • compound; highest • simple; lowest • simple; highest
answer
compound; highest
question
The purpose of a budget is to: • help you plan how you will spend the money you earn or receive • stop you from spending too much money • increase the balance of your savings account • tell you how much you owe the government in taxes
answer
help you plan how you will spend the money you earn or receive
question
Which of the following savings vehicles usually requires a high minimum balance? • Simple savings account • Certificate of Deposit (CD) • Checking account • All of the above
answer
Certificate of Deposit (CD)
question
Which of the following is generally true about savings vehicles? • Savings vehicles are only useful for long-‐term investments • People should evaluate different forms of savings vehicles based on their needs • Savings vehicles are never insured • All of the above
answer
People should evaluate different forms of savings vehicles based on their needs
question
Which of the following accounts will give you the LEAST access to your money? • Simple savings account • Certificate of Deposit (CD) • Checking account • Cash
answer
Certificate of Deposit (CD)
question
When it comes to saving money, what is a good rule of thumb? • Keep most of your savings in your checking account • Put aside money for savings each month • Choose the savings account with the lowest interest rate • Putting anything you can't afford on your credit card
answer
Put aside money for savings each month
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Which of the following is a unique feature of credit unions? • Credit unions are typically owned and run by their members. • Credit unions limit membership to certain people or groups. • Credit unions offer a wide variety of banking services. • Both A & B
answer
Both A & B (correct answer)
question
The best way to ensure the accuracy and safety of your accounts is to: • Monitor your online accounts regularly • Shred your paper account statements weekly • Balance your checkbook annually • Call your customer service center daily
answer
Monitor your online accounts regularly
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Which of the following represent typical account fees? - ATM fee - Service fee - Minimum balance fee - All of the above
answer
question
Which of the following is NOT one of the responsibilities of the Federal Reserve? • Supervising the Reserve banks • Establishing the federal budget • Maintaining a stable banking system • Setting the nation's monetary policy
answer
Establishing the federal budget
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The three parts of the Federal Reserve System are the Reserve Banks, the Federal Open Market Committee (FOMC), and the: • Board of Governors • United States Mint • Department of the Treasury • Secretary of State
answer
Board of Governors
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Which type of account is typically the MOST liquid? - Checking account - Savings account - Certificate of Deposit - Exchange Traded Fund
answer
question
What's the best strategy for avoiding ATM fees? - Only use ATMs close to your house - Only use ATMs to withdraw cash - Only use ATMs in your bank's network - Only use ATMs you have used before
answer
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What's the purpose of balancing or monitoring your checking account? • To help you calculate how much money you have in your account • To keep an estimation of how many checks you write • To find out which checks you have bounced • To stop identity theft from occurring
answer
To help you calculate how much money you have in your account (
question
What part of a check is the LEAST important? • memo line • signature line • routing number • The check number
answer
memo line
question
Savings accounts usually offer _________ interest rates than checking accounts. It is _________ to access your money in a savings account than in a checking account. • lower; easier • higher; harder • lower; harder • higher; easier
answer
higher; harder
question
Which of the following statements comparing debit cards to credit cards is TRUE? • Debit cards allow you to draw funds directly from your checking account. • Debit cards typically offer greater fraud protection than credit cards. • Debit cards never require a signature to finalize a purchase like credit cards. • Debit cards charge higher interest rates on purchases than credit cards.
answer
Debit cards allow you to draw funds directly from your checking account. (correct answer)
question
Making a minimum payment: • Means you are paying a small portion of your total credit card debt • Is the same thing as making a late credit card payment • Will have a negative effect on your credit score • Will cause your credit card to be cancelled
answer
Means you are paying a small portion of your total credit card debt (correct answer)
question
What is a credit card balance? • The amount of interest you must pay the credit card company • The required minimum payment to your credit card company • A way to track your incoming and outgoing purchases • The amount of money you still owe to the credit card company
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The amount of money you still owe to the credit card company (correct answer)
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Which of the following is NOT a common credit card fee? • Late fee • Annual membership fee • Balance transfer fee • Minimum payment fee
answer
Minimum payment fee (correct answer)
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What payment type can help you stick to a budget? • Credit cards • Debit cards • Payday loans • Cash advances
answer
Debit cards (correct answer)
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Which of the following payment types require you to pay upfront? • Money order • Cashier's check • Prepaid card • All of the above
answer
All of the above (correct answer)
question
The annual percentage rate on a credit card determines: • The amount of interest you are charged on credit card purchases • The amount your credit limit can go up within a year • How many credit cards that you can own • None of the above
answer
The amount of interest you are charged on credit card purchases (correct answer)
question
Which of the following can increase your credit card's APR? • Paying the minimum • Missing a credit card payment • Paying off the full balance • Cashing in on rewards points
answer
Missing a credit card payment (correct answer)
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If you are planning to carry a large balance on your credit card, which of the following credit card features should you look for? • Low APR • Low annual fees • Lots of credit card rewards • A large credit limit
answer
Low APR (correct answer)
question
Which payment method typically charges the highest interest rates? • Credit cards • Cashier's checks • Prepaid cards • Payday loans
answer
Payday loans (correct answer)
question
Which of the following MOST influences your credit score? • Types of Credit Used • Payment History • Length of Credit History • Amounts Owed
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Payment History (correct answer)
question
Which of the following actions would IMPROVE your credit score? • Closing out old credit cards • Paying off your credit card bill • Using a large portion of your credit limit • Opening a new savings account
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Paying off your credit card bill (correct answer)
question
How many free credit reports are you legally entitled to each year? • One credit report each year • Three credit reports each year • One credit report from each credit bureau • Three credit reports from each credit bureau
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One credit report from each credit bureau (correct answer)
question
All of the following make up the big three credit reporting agencies EXCEPT: • Federal Reserve • Experian • Equifax • TransUnion
answer
Federal Reserve (correct answer)
question
Which of the following actions can NEGATIVELY impact your credit score? • You disputed an item on your credit report. • You forgot to pay the cable bill. • You pay all your bills in cash. • You use a small amount of your available credit.
answer
You forgot to pay the cable bill. (correct answer)
question
Having a low credit score can make it more difficult to: • Obtain a car loan • Open a new credit card • Secure an apartment lease • All of the above
answer
All of the above (correct answer)
question
Which of the following actions has NO impact on your credit score? • You inquire about a credit card charge. • You use a large percentage of your credit limit. • You opened several new credit cards last week. • You send in your credit card payment a couple days late.
answer
You inquire about a credit card charge. (correct answer)
question
Which of the following statements about credit scores is TRUE? • Credit scores reflect how likely individuals are to repay their debts. • Credit scores range from the low 300's to the mid 800's. • Each person has three credit scores. • All of the above.
answer
All of the above. (correct answer)
question
Having a good credit score is important because: • It can impact your ability to get a driver's license. • It can impact your ability to be approved for bank loans. • It can impact how much you will have to pay the government in taxes. • It can impact how much you will have to pay for college.
answer
It can impact your ability to be approved for bank loans. (correct answer)
question
Which action is LEAST important to maintaining a healthy credit score? • Make on‐time payments • Check your credit report annually • Know your exact credit score • Fix inaccurate information on your credit report
answer
Know your exact credit score (correct answer)
question
When referring to student loans, what is a grace period? • The time period between graduating college and starting your first job when you don't have to pay back student loans • The period after graduating or leaving school before you must begin paying back student loans • The amount of time you have to pay back your entire student loan amount - None of the above
answer
The period after graduating or leaving school before you must begin paying back student loans (correct answer)
question
Which of the following loans will typically offer the lowest interest rate? • Payday loan • Federal Student Loan • Private Loan • Both A & B
answer
Federal Student Loan (correct answer)
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The Federal Application for Student Aid (FAFSA) form: • must be completed by your guidance counselor • can be submitted on online or by mail • can only be filled out by U.S. citizens • is used to apply for private loans
answer
can be submitted on online or by mail (correct answer)
question
You are looking for ways to pay for your higher education costs. Which of the following options will require you to pay back any money you receive? • Grants • 529 plans • Federal student loans • Scholarships
answer
Federal student loans (correct answer)
question
Your sister is starting 9th grade next year and is thinking about going to college. What step would you recommend she take first? • Fill out her FAFSA form • Sign up for college admission exams • Start applying for grants & scholarships • Look for school clubs & organizations she's interested in
answer
Look for school clubs & organizations she's interested in (correct answer)
question
After you send in your FAFSA form, what will you receive back? • Your IRS Data Retrieval Form • Your Student Aid Report • A copy of your family's tax returns • A copy of your completed FAFSA form
answer
Your Student Aid Report (correct answer)
question
Using the FAFSA form, you can apply for: • Federal student loans • The federal work-‐study program • Private loans • Both A & B
answer
Both A & B (correct answer)
question
Which of the following statements about federal student loans is TRUE? • The interest rate on your loan will be fixed over time. • The interest rates on federal loans and private loans are similar. • You can only get federal student loans if you demonstrate financial need. • You do not accumulate interest on federal loans.
answer
The interest rate on your loan will be fixed over time. (correct answer)
question
The return on investment (ROI) from education is typically the highest for: • A high school graduate • A college applicant • Someone with a 2‐year (Associate) degree • Someone with a 4‐year (Bachelor's) degree
answer
Someone with a 4‐year (Bachelor's) degree (correct answer)
question
Which loan type requires you to make loan payments while you're attending school? • Unsubsidized federal loan • Subsidized federal loan • Both A & B • Neither A nor B
answer
Neither A nor B (correct answer)
question
Jim is in the market for a car, but he'll probably only need it for a couple of years. After that, he plans on moving into the city and using public transportation. He has a short commute to work, so he won't be putting many miles on his vehicle. What's the best transportation option for Jim? • Use his savings to buy the car in full • Buy the car using an auto loan • Lease the car • Take public transportation
answer
Lease the car (correct answer)
question
All of the following components are commonly found in rental housing agreements EXCEPT: • Whether the renter can have pets in the house • How much the renter will pay • What type of renter's insurance the renter must buy • Which repair types the renter will be responsible for
answer
What type of renter's insurance the renter must buy (correct answer)
question
What is a mortgage? • A type of rent used to pay for housing • A type of loan used to buy property • A measure of the value of a home • A measure of your credit rating
answer
A type of loan used to buy property (correct answer)
question
What is a mortgage? • A type of rent used to pay for housing • A type of loan used to buy property • A measure of the value of a home • A measure of your credit rating
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A type of loan used to buy property (correct answer)
question
A _________ is generally considered an appreciating asset because it will _________ in value over time. • car; increase • car; decrease • house; increase • house; decrease
answer
house; increase (correct answer)
question
Renting provides _________ flexibility but can lead to _________ costs in the long-‐term. • greater; lower • greater; higher • less; lower • less; higher
answer
greater; higher (correct answer)
question
John would like to move from the suburbs into the city, but the rent in the city is very high. John has found an apartment he really likes, but he can only afford about 60% of the monthly rent. What is the best housing option for John? • Purchase a home in the city center instead. • Rent the apartment anyway. • Rent the apartment with a roommate. • Purchase a home in the suburbs instead.
answer
Rent the apartment with a roommate. (correct answer)
question
Which of the following are costs associated with owning a car? I. Fuel II. Insurance III. Repairs IV. Wear & Tear fees• I, III, and IV • I, II, and IV • I, II and III • I, II, III, and IV
answer
I, II and III (correct answer)
question
Someone may choose to own a car instead of leasing because: • The car can be resold later to make some money back. • The car can be resold later for a higher price. • The maintenance costs for a leased car are generally higher. • The insurance costs for a leased car are higher.
answer
The car can be resold later to make some money back. (correct answer)
question
One reason to buy a home instead of rent a home is: • Homes have the potential to appreciate in value over time. • Homes have few maintenance costs. • Buying a home requires less money upfront. • Buying a home is a more flexible housing option.
answer
Homes have the potential to appreciate in value over time. (correct answer)
question
Which of the following are NOT deducted on a typical paystub: • Sales tax • Social security tax • State income tax • Medicare tax
answer
Sales tax (correct answer)
question
Which of the following statements about taxes is FALSE? • Taxes are collected at the local, state and federal level • Taxes at the local, state and federal level are all equal • Some states don't collect sales tax. • Some states don't collect income tax
answer
Taxes at the local, state and federal level are all equal (correct answer)
question
Insurance can help you: • minimize monthly expenses • protect against unexpected accidents • reduce the chances of getting into an accident • cover all out‐of‐pocket costs
answer
protect against unexpected accidents (correct answer)
question
When starting a new job, the form you complete to determine how much tax to withhold from your paycheck is the _______. • 1040 EZ • 1099 • W-2 • W-4
answer
W-4 (correct answer)
question
When you purchase an item in a store, you may be charged __________. • income tax • capital gains tax • sales tax • property tax
answer
sales tax (correct answer)
question
Your auto insurance policy has a $200 monthly premium and $700 deductible. What is the maximum amount you will have to pay out-of‐pocket before your insurance covers your costs? • $200 • $500 • $700 • $900
answer
$700 (correct answer)
question
Jan pays $70 each month for her auto insurance policy. This regular payment is called a: • co-‐pay • deductible • premium • claim
answer
premium (correct answer)
question
Which of the following typically have the highest insurance premiums. • Drivers who travel long distances • Drivers who have safe driving records • Older, experienced drivers • Young, inexperienced drivers
answer
Young, inexperienced drivers (correct answer)
question
In which of the following scenarios will you be entitled to pay the least amount of money out-of‐pocket for medical expenses? • You have no insurance. • You have health insurance with a $500 deductible. • You have auto insurance with a $700 deductible. • You have health insurance with a $1,500 deductible.
answer
You have health insurance with a $500 deductible. (correct answer)
question
You have an insurance policy with the terms listed below. How much should you expect to pay the insurance company each month for coverage? YOUR INSURANCE PLAN: Premium = $300/month; Deductible = $500 • $200 • $300 • $500 • $800
answer
$300 (correct answer)
question
Consumer protection laws are meant to: • Protect consumers from spending too much money. • Prevent consumers from buying unnecessary items. • Protect businesses from consumers. • Prevent unfair or deceptive business practices.
answer
Prevent unfair or deceptive business practices. (correct answer)
question
The best way to investigate fraudulent transactions on your credit card is to: • Keep track of your monthly budget. • Review all old bank statements. • Keep a copy of your bank statements in a safe place. • Review your recent credit card statements.
answer
Review your recent credit card statements. (correct answer)
question
The safest action to take if someone claiming to be from your bank calls you to ask for account information is to: • Pull up the bank website and compare information. • Hang up and call back using the bank's official phone number. • Ask the caller to explain the account information they need in more detail. • Provide only your name and account number.
answer
Hang up and call back using the bank's official phone number. (correct answer)
question
What is the first action you should take if you suspect there has been a fraudulent charge on your credit card? • Close all bank accounts associated with that credit card. • Contact the credit card company to report the fraudulent charge. • Order your credit report to look for other fraudulent activity. • Call the store where the purchase was made and ask them to remove the charge.
answer
Contact the credit card company to report the fraudulent charge. (correct answer)
question
What is the safest way to dispose of old bank account statements? • Shred them in a paper shredder. • Throw them out in a neighbor's trash. • Keep them bundled together in a folder. • Put them in the trash unopened.
answer
Shred them in a paper shredder. (correct answer)
question
It is generally safe to provide your Social Security Number to: • Anyone who asks you for it. • Close friends and relatives who do not know it. • School personnel who want to have it on record. • Verified trusted sources that need it.
answer
Verified trusted sources that need it. (correct answer)
question
Identity thieves can use your personal information to: • Open a credit card • Sign up for electricity service • Get a cell phone contract • All of the above
answer
All of the above (correct answer)
question
Which action will be least helpful if you've been the victim of identity theft? • Withdraw your money from all accounts. • Report the fraud to each credit bureau. • Ordering your latest credit report. • Contact your bank and credit card companies.
answer
Withdraw your money from all accounts. (correct answer)
question
Which document puts you at the least risk of identity theft? • Cash receipts • Paycheck stubs • Pre-approved credit card offers • Old tax records
answer
Cash receipts (correct answer)
question
Which of the following is the BEST way to protect against identity theft? • Discard old account statements weekly. • Use only local public access Wi‐Fi. • Change online account passwords frequently. • Avoid emails from people who do not like you.
answer
Change online account passwords frequently. (correct answer)
question
When it comes to investing, what is the typical relationship between risk and return? • It depends on the investment mix in your portfolio. • The greater the potential risk, the smaller the potential return. • The greater the potential risk, the greater the potential return. • There is no relationship between risk and return.
answer
The greater the potential risk, the greater the potential return. (correct answer)
question
Diversification is important in investing because... • It helps you to balance your risk across different types of investments • It increases your overall risk, which guarantees that you will make more money • It ensures that you only make low-‐risk investments • It helps you gain the highest rate of return despite any risks.
answer
It helps you to balance your risk across different types of investments (correct answer)
question
Which best describes the difference between stocks and bonds? • Stocks allow investors to own a portion of the company; bonds are loans to the company. • Stocks are a more reliable investment; bonds tend to be more volatile. • Stocks pay interest to investors throughout the year; bonds only pay interest at fixed times during the year. • Stocks allow investors to share in profits; bonds make investors responsible for company debts.
answer
Stocks allow investors to own a portion of the company; bonds are loans to the company. (correct answer)
question
What is the primary reason to issue stock? • To help investors earn a higher rate of return • To raise money to grow the company • To distribute the risk of bankruptcy across more investors • To increase investor awareness of the company
answer
To raise money to grow the company (correct answer)
question
How can investors receive compounding returns? • By selecting a savings account that has a higher interest rate • By investing their earnings back into their original investment • By transferring their earnings into a high‐risk investment • By diversifying their investment portfolio
answer
• By investing their earnings back into their original investment (correct answer)
question
If an investment is considered "volatile", it means... • the investment will experience rapid growth over time. • the investment is high‐risk, and will its price will increase quickly. • the value of the investment may be hard to predict. • the investment is undervalued and may increase over time.
answer
• the value of the investment may be hard to predict. (correct answer)
question
Which of the following would be considered the highest risk portfolio? • A portfolio made up of 20% savings accounts, 50% mutual funds, and 30% bonds. • A portfolio made up of 40% mutual funds, 40% Treasury bonds, and 10% stocks. • A portfolio made up of 70% mutual funds, 10% stocks, and 20% Treasury bonds. • A portfolio made up of 60% stocks, 30% mutual funds, and 10% Treasury bonds.
answer
• A portfolio made up of 60% stocks, 30% mutual funds, and 10% Treasury bonds. (correct answer)
question
When you buy a ____ , you are loaning money to an organization. • Index fund • Stock • Mutual fund • Bond
answer
• Bond (correct answer)
question
Which of the following correctly orders the investments from LOWEST risk to HIGHEST risk? • Treasury bond − Stock − Diversified mutual fund • Stock − Treasury bond − Diversified mutual fund • Treasury bond − Diversified mutual fund - Stock • Diversified mutual fund − Treasury bond − Stock
answer
• Treasury bond − Diversified mutual fund - Stock (correct answer)
question
Which of the following is generally true about 401(k) and 403(b) retirement plans? • They are plans offered through employers • They offer some tax benefits • They restrict when you can withdraw your money • All of the above
answer
• All of the above (correct answer)
AP Government
Economics
Federal Open Market Committee
Macroeconomics
Principles Of Economics: Microeconomics
Public Goods And Services
Savings And Loan Associations
WH – Flashcard 33 terms

Daniel Jimmerson
33 terms
Preview
WH – Flashcard
question
when the government spends more money than they bring in
answer
deficit spending
question
Put France into big debt. Pleasures over business. Called on Estates-General.
answer
Louis XVI
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Legislative body consisting of members from the 3 estates.
answer
Estates-General
question
Oath made by members of 3rd estate on a tennis court. Members promised to never separate and meet where circumstances required.
answer
Tennis Court Oath
question
A prison. Stormed when Parissians thought it was holding weapons and gunpowder.
answer
Bastille
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3 estates: 1st made of nobility, 2nd of clergy and 3rd (largest) of peasants. 1st and 2nd paid no taxes while 3rd paid heavy taxes.
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What was the social structure of the old regime of France like?
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Bad harvests lead to hunger in peasant population. Debt causes government to have to pay 50% revenue toward interest on loans.
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What economic troubles did France face? How did it lead to further unrest?
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They declared themselves as the National Assembly & took the Tennis Court Oath.
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What actions did delegates of the 3rd estate take when the Estates-General met in 1789?
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Parissians challengedf t the status quo & challenged the existence of the regime.
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What was the significance of the storming of the Bastille?
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Rumors that the government were going to seize peasant crops & were trying to reimpose old taxes.
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Why did peasants revolt against the nobles?
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Abolished feudalism & convinces Louis XIV to not react.
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How did the National Assembly react to peasant uprisings?
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Legislative Assembly & natural/civil rights.
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What were provisions of the Constitution of 1791?
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Increased border control, enlightened rulers turned against France, & the Legislative Assembly declared war on multiple states.
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How did the rest of Europe react to the French Revolution?
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devince used during reign of terror to execute by beheading.
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guillotine
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port city of France
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Marseilles
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They wrote a new declaration of rights & constitution.
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What occurred after radicals took control of the Assembly?
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He thought it'd give him a political advantage.
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Why did Robespierre think the terror was necessary to achieve the goals of the revolution?
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New gov: power in the hands of the upper-middle class. 2 house legislature & executive body.
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What changes occurred after the reign of terror came to an end?
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To deal with threats imposed upon France.
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What were goals of the Committee of Public Safety?
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People felt safer and would voice their opinions because there were less executions.
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How did life in France change after the terror came to an end?
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The monarchy was overthrown, no more old social order, church was controlled by the state, strong sense of national identity, slavery was abolished, pushes for social reform & religious tolerance.
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What changes occurred in France because of the French Revolution?
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Body of French civil laws that served as a model for other nation's civil codes.
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Napoleonic Code
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blockade designed by Napoleon to hurt Britian economically by closing European ports.
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Continental System
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European leaders who worked to piece Europe back together after Napoleon era.
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Congress of Vienna
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Result from quadruple alliance. Consisted of Austria, Prussia, Britain, and Russia. Discuss problems affecting peace in Europe.
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Concert of Europe
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Got UK out of Toulon. Ended royalist counter revolution. Friends included him in the coup against French government.
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How did Napoleon rise to power so quickly in France?
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Napoleonic code (embodied enlightenment ideas) & controlled prices, promoted new industry, and built roads/canals.
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What reforms did Napoleon introduce during his rise to power?
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Good tactics: find weak point of enemy and have best men attack them. Conquer & ally with other countries.
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How did Napoleon dominate most of Europe by 1812?
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Napoleon lost a majority of his soldiers & the French army became devastated and weak.
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What were the effects of the disaster in Russia?
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He was seen as a foreign oppressor, was resented for trying to push French culture on his empire, revolts against France & supply trains and troops were ambushed.
answer
What challenges threatened Napoleon's empire?
question
Tsar of Russia & Napoleon wanted to divide Europe. Russians were upset about the economic effects of the Continental System. Napoleon made the Grand Army & invaded Russia. When retreating, Russia attacked the army. The attack and the winter killed a majority of Napoleon's men.
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What led to te disaster in Russia?
question
He centralized French government, gave it a constitution, gave more citizens the right to property&education, sparked nationalist feelings, and sold France's Louisiana territory to the U.S.
answer
How did Napoleon impact Europe and the rest of the world?
question
Goal: To create a lasting piece in Europe. Outcome: Concert of Europe was created & Europe didn't experience a Napoleonic war until 1914.
answer
Explain the goal and outcome of the Congress of Vienna.
Federal Open Market Committee
Labor Economics
Labor Force Participation Rate
Labor Supply Curve
Macroeconomics
National Income Accounting
Net Domestic Product
Working Age Population
Macroeconomics Final Exam Review Test Questions – Flashcards 39 terms

Judith Simpson
39 terms
Preview
Macroeconomics Final Exam Review Test Questions – Flashcards
question
Pros of Unions
answer
1. Increase wages for union members 2. Increase benefits 3. Decrease opportunities for uneducated and unskilled
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Cons of Unions
answer
1. Increase company costs 2. Increase price of goods/services 3. Reduce profits 4. Reduce value of the firm
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4 stages of population
answer
-Preindustrial societies a) high death rate, high birth rate -Early industrial development b) better health increases population -Urbanization and education c) persuades to have more children -Mature society d) couples want 2-3 children
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National income accounting
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-a bookkeeping system that a national government uses to measure the level of the country's economic activity in a given time period
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Which is a primary use for national income accounting?
answer
It provides a basis for assessing the performance of the economy
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GDP provides an indication of society's valuation of the relative worth of goods and services because of it
answer
a monetary measure
question
To include the value of parts used in production of automobiles turned out during a year in gross domestic product is an example of
answer
multiple counting
question
Which of the following is a public transfer payment?
answer
the social security benefits sent to a retired worker
question
sale of an automobile in year 2, which was produced in year one would be:
answer
non production transaction
question
Babysitter staying at home while her parents are out, doing it for free
answer
non-market transaction
question
Which would be considered an economic investment?
answer
construction of a new computer chip factory
question
Annual charge estimates the amount of private capital equipment used up in each year's production is called
answer
depreciation
question
the allowance for the private and publically owned capital used in consumed producing the year's gdp is
answer
consumption of fixed capital
question
Gross private domestic investment
answer
Net private domestic investment + consumption of fixed capital
question
Net exports
answer
US exports - US imports
question
Expenditure Approach to GDP
answer
Y = C + I + G + NX Y = GDP, output, total income, total expenditure C = consumption I = investment G = government purchases of goods and services NX = export - imports
question
Income approach to GDP
answer
W+R+I+P+S= net + consumption of fixed capital
question
Net domestic product
answer
GDP - depreciation
question
National income
answer
NDP - IBT - Business transfer payments + Net Foreign + Government subsides - surplus of government enterprises - statistical discrepancy
question
Personal income
answer
NI+TP-Taxes on production and imports-SSC-CIT-Undistributed corporate profits
question
Discretionary income
answer
Personal income - personal taxes
question
Fiscal Policy
answer
functions: tax, spend *if spending exceeds taxes = deficit which means that debt goes up
question
Expansionary fiscal policy
answer
-increase in government purchase of goods and services and decrease in taxes to increase aggregate demand
question
Discretionary fiscal policy
answer
-deliberate changes in taxes and government spending to promote employment and economic growth
question
Eminent domain
answer
-when government takes your land *must provide adequate compensation
question
Contractionary fiscal policy
answer
decrease in government purchases of goods and services and increase in taxes to decrease aggregate demand and reduce inflation
question
The federal reserve
answer
central bank of the united states a) oversees the banking system b) regulates the money supply
question
Equation of exchange
answer
Mathematically speaking, the effect of the money supply on the economy can be summarized by the formula MxV = PxY in which M is the money supply V is velocity, which is the number of times each dollar is spent on GDP P is the price level (or the ratio of the current year's prices to the base year) Y is real GDP
question
Open market operations
answer
-directed by federal open market committee -conducted by federal reserve bank of NY -buying and selling securities -primary source of money supply fluctuations
question
Discount rate
answer
-fed is lender of last resort -sets interest rate of the member banks -creates economic expectation
question
Reserve Requirement
answer
A. % of deposits financial institutions must keep in accounts with the fed B. disadvantage 1. causes immediate problems for bank's liqudity 2. costly to administer C. Money multiplier
question
Board of governors --> Chair=Yellen
answer
-federal open market committee --> 12 members, 8 fixtures 4 member rotations -federal advisory council -12 federal reserve banks -member banks -7 board of governors, every term, appointed by president, confirmed by congress
question
Fed's three policy tools
answer
-open market operations "fine adjustment to economy" -buy and sell bonds and treasury notes -changes to the discount rate (when economy is growing too quickly) -rate at which banks borrow from the federal reserve -fed funds rate: rate at which banks borrow amongst each other -when the fed raises/lowers interest rates, they control money supply and direction of the economy
question
Independence of the fed
answer
-doesn't need appropriations from congress, made $17 billion last year from treasury securities -board of governors are appointed to 14 year terms one every two years (new member) -chairman of the board of governors -serves a 4 year term: non-concurrent with presidential term No audits No accountability Closed meetings No guidelines or objectives major economic influence-power
question
Arguments for independence
answer
-greater focus on long term objectives -less pressure to finance deficit -more likely to pursue unpopular policies
question
Arguments against independence
answer
-accountability for mistakes -coordination of fiscal and monetary policy -president is responsible for economic policy but has no control over the fed -no evidence of benefits or performance by independence -no other agency has independence
question
Why banks have excess reserves
answer
avoid cost of: 1. borrowing from other banks or competitors 2. selling securities 3. borrowing from the fed 4. calling in or selling off loans
question
Bank Balance sheet
answer
lists assets and liabilities a. reserves b. deposits at other banks c. securities d. loans e. other assets 2. Liabilities sources of funds a. checkable deposits b. non transaction deposits c. borrowings d. bank equity capital
question
Bank balance sheet: fractional reserve checking
answer
Assets: reserves 1. Reserves are: a. bank deposits held at fed b. currency held at the bank 2. reasons to hold resources: a. % of deposits required by law b. required reserves 1. meet depositors obligations 2. highly liquid
Economics
Federal Open Market Committee
Macroeconomics Test Answers – Flashcards 167 terms

Judith Simpson
167 terms
Preview
Macroeconomics Test Answers – Flashcards
question
The three functions of money are:
answer
medium of exchange, measure of value, store of value
question
When money is being used as a _______ ___ _______ it is being used in the buying and selling of goods and services.
answer
Medium of exchange
question
Money is being used as a _______ ___ _______ when it is a yardstick for measuring the relative worth of heterogenous goods and services.
answer
Measure of value
question
The existence of money enables us to avoid barter. In this capacity, money is functioning as a
answer
Medium of exchange
question
Money makes it possible to easily compare the prices of different products with one another. In this capacity, money is functioning as a
answer
Measure of value
question
Barter exchange:
answer
hinders specialization in the economy.
question
The 3 major definitions of money are:
answer
M1, M2, and M3
question
_______ is currency and checkable deposits.
answer
M1
question
_______ is M1 + noncheckable savings deposits + small time deosits + money market deposit accounts + money market mutual funds
answer
M2
question
______ is M2 + large time deposits
answer
M3
question
______ is the most narrowly defined definition of money.
answer
M1
question
Which official money aggregate shows the smallest money supply?
answer
M1
question
The narrow definitions of money (M1) includes only:
answer
currency and checkable deposits
question
What is the correct definition of the M1 money supply?
answer
checkable deposits, coins, and paper currency
question
The M1 definition of money does not include
answer
savings deposits
question
Passbook savings deposits are excluded from the M1 money supply because they
answer
are not accepted as a medium of exchange
question
_____ and _____ are near monies. Near monies are certain highly liquid financial assets such as noncheckable savings accounts, time deposits and short term government securities which, although they do not directly function as a medium of exchange, can e readily and without risk of financial loss converted into currency or checkable deposits.
answer
M2 and M3
question
Passbook savings accounts are
answer
near money
question
True or False: Credit cards are included in the definition of money
answer
false
question
Money has value because of the following three reasons:
answer
acceptability, legal tender, relatively scarce
question
True or False: people accept paper money because they are confident that others will also be willing to accept it in exchange for goods and services.
answer
true
question
True or False: People accept paper mone because it has been designated as legal tender by government.
answer
true
question
True or False: Money derives its value from its scarcity relative to its usefulness
answer
true
question
United States currency in the 1980's is:
answer
fiat money (money that is not backed by any commodity)
question
The two types of demand for money:
answer
Asset demand and transaction demand
question
The transactions motive for holding money referred to money held in order to
answer
pay regular expenses
question
Changes in economic expectations about interest rates are most likely to affect the:
answer
asset demand for money
question
True or False: The transactions demand for money varies indirectly with nominal GDP.
answer
false
question
The _______ demand for money is being affected when money is being used as a medium of exchange.
answer
transactions
question
Households and firms will want more money for transactions purposes if either ________ _______ or real output increases.
answer
prices rise
question
True or False: The transactions demand for money is assumed to be dependent on interest rates
answer
false
question
The advantages of holding money as an asset is that it is ______ and ______ ______.
answer
liquid and lacks risk
question
The disadvantage of holding money as an asset is that it does not____ ______ ______
answer
earn interest income
question
In models of the asset demand for money, assets can be held as ________ or _______.
answer
money or bonds
question
Keynes described three motives for demanding or "holding" money. They include all of the following except
answer
The contributory motive
question
True or False: As bond prices increases interest prices also increase.
answer
false
question
The Board of Governors of the Federal Reserve System has _____ members.
answer
7
question
Each member of the Board of Governors of the Federal Reserve System is appointed for _____ years.
answer
14
question
True or False: The Federal Open Market Committee is made up of the 7 members of the Board of Governors and the 13 presidents of the regional banks.
answer
false
question
The Federal Reserve System was established in
answer
1913
question
Today there are ____ Federal Reserve banks, and ____ branches.
answer
12, 24
question
The Board of Governors consists of
answer
7 members, appointed by the President of the United States.
question
In the United States there is:
answer
one Federal Reserve Bank for each 10,000 customers.
question
The Federal Advisory Council is composed of
answer
12 prominent commercial bankers
question
The original purpose of the Federal Reserve was to
answer
act as a lender of last resort
question
Today, the primary function of the Federal Reserve is to
answer
stabilize the economy by regulating the money supply
question
The function of the Federal Reserve banks is to
answer
manage the money supply in accordance with the needs of the economy as a whole
question
The policy making branch of the Federal Reserve is called
answer
the Board of Governors
question
Gresham's Law states that:
answer
bad money drives out good money
question
The use of a _______ _______ _______ ____ _______ makes it possible for banks to create money.
answer
Fractional reserve system of banking
question
One of the problems with a fractional reserve system of banking is that banks are vulnerable to _______ or ______
answer
panics or runs
question
Fractional reserve banking is a situation where banks
answer
hold only a fraction of their demand deposits as reserves
question
According to the fractional reserve principle
answer
a bank only needs a fraction of a dollar in reserves for each dollar of demand deposits
question
Banks can increase the money supply because they can
answer
loan out a portion of their reserves
question
Money is created when banks make ______
answer
loans
question
When banks use their excess reserves to grant loans to consumers, the money supply
answer
grows
question
When loans are repaid _____ is destroyed
answer
money
question
True or False: Money is created when people deposit money into a demand deposit in the bank
answer
false
question
Banks create money by
answer
creating demand deposits
question
The _____ _____ is an amount of funds equal to a specified percentage of its own deposit liabilities which a member bank must keep on deposit with the Federal Reserve Bank in its district or as vault cash
answer
legal reserve
question
The reserve ratio is equal to ______ _____ ______ ________ divided by the ________ ________ __________ ________.
answer
commercial banks required reserves, commercial banks demand deposit liabilities
question
The reserve requirement is the
answer
percentage of bank deposits that banks must hold as required reserves
question
______ _______ are a means by which the Board of Governors can influence the lending ability of commercial banks.
answer
Legal reserves
question
True or False: Commercial banks and other depository institutions are required to keep legal reserve deposits, or simply "reserves" equal to a specified percentage of their own deposit liabilities as cash, government securities, or on deposit with the Federal Reserve Bank of their district.
answer
false
question
Bank reserves include
answer
vault cash plus funds on deposit with the Fed.
question
A banks excess reserves are defined as
answer
total reserves minus required reserves
question
The amount by which a banks actual reserves exceed its required reserves is the banks
answer
excess reserves
question
Excess reserves for commercial banks are equal to
answer
actual reserves minus required reserves
question
Whenever a check is drawn against a bank and deposited in another bank, the collection of that check will entail a loss of both ________ and _______ ______ by the bank upon which the check is drawn.
answer
reserves and demand deposits
question
An increase in banks loans would tend to decrease
answer
banks excess reserves
question
True or False: When a bank accepts deposits of cash, the composition of the money supply is changed, but the total supply of money is not directly altered.
answer
true
question
True or False: When a commercial bank buys government bonds from the public, the effect is substantially the same as that of lending. New money is created.
answer
true
question
The selling of government bonds to the public by a commercial bank will _____ the supply of money.
answer
decrease
question
The potential money multiplier equals
answer
1/reserve requirements ratio
question
The potential money multiplier determines the maximum supply of
answer
money that can be generated if banks hold no excess reserves and all private funds are deposited in banks
question
1/required reserve ratio=
answer
money multiplier
question
The _____ _____ tells us the maximum amount of new demand deposit money which can be created for a single dollar of excess reserves, given the value of R.
answer
money multiplier
question
The entire banking system could increase total loans by an amount equal to
answer
a multiple of its excess reserves
question
True or False: The banking system can lend by a multiple of its excess reserves, but each individual bank can only lend dollar four dollar with its excess reserves because reserves lost by a single bank are not lost to the banking system as a whole.
answer
true
question
As the reserve requirements ratio increases
answer
the actual money multiplier would decrease
question
Each bank must limit its loans to the amount of its excess reserves because
answer
when customers spend the money they have borrowed, the bank is likely to lose reserves to other banks.
question
Although individual banks must limit their loans to the amount of their excess reserves, the banking system can make loans equal to a multiple of its excess reserves. The basic reason for this difference is that
answer
reserves lost by an individual bank are gained by other banks in the system.
question
Two "leakages" which dampen the money-creating potential of the banking system are _____ _____ and bankers hold _____ _____.
answer
currency drains and excess reserves
question
True or False: The fundamental objective of monetary policy is to assist the economy in achieving a full employment, noninflationary level of total output.
answer
true
question
The 3 tools of monetary policy are:
answer
open market operations, changing the reserve ratio, and changing the discount rate
question
Open market operations are:
answer
FED purchase or sale of government bonds on the open market.
question
Open-market operations involve
answer
the buying and selling of government securities by the Federal Reserve
question
The FED controls the money supply primarily through
answer
open-market operations
question
If the Federal Reserve Bank ______ (buys,sells) government bonds in the open market commercial bank reserves will be increased.
answer
buys
question
If the Federal Reserve desired to increase the lending ability of banks, it would
answer
buy government securities
question
To reduce the supply of money, the Federal Reserve
answer
sells government securities on the open market
question
When the FED buys government securities in the "open market"
answer
the money supply tends to expand
question
True or False: Raising the reserve ratio changes required reserves to excess reserves, thereby enhancing the ability of banks to create new money by lending.
answer
false
question
When the Federal Reserve increases the reserve requirement
answer
the lending ability of banks tends to contract.
question
An increase in the reserve requirements ratio would
answer
decrease the potential money multiplier
question
When the FED raises the reserve requirements ratio
answer
excess reserves are reduced
question
True or False: The reserve requirements are very powerful tools, thus the federal reserve uses it frequently.
answer
flase
question
The rate at which banks can borrow money from the FED is called
answer
the discount rate
question
Monetary policy makers may expand the money supply by
answer
cutting the discount rate
question
By ________ the discount rate the Federal Reserve makes it possible for banks to make more loans
answer
decreasing
question
Changes in the discount rate
answer
are generally regarded as an ineffective policy tool
question
Changes in the discount rate have little effect on the banking system's lending ability because
answer
banks are reluctant to borrow from the Federal Reserve
question
One of the weaknesses of the discount rate is that the federal reserve _______ make banks borrow from it
answer
cannot
question
True or False: The discount rate can have an announcement effect.
answer
true
question
When the Federal Reserve makes loans to member banks it is referred to as a lender _____ ______ _______.
answer
of last resort
question
The rate banks pay to borrow reserves from one another is called
answer
the federal funds rate
question
What 3 things should the federal reserve do for an easy monetary policy?
answer
decrease the required reserve ratio, decrease the discount rate, buy government securities
question
What 3 things should the federal reserve do for a tight monetary policy?
answer
increase the required reserve ratio, increase the discount rate, sell government securities
question
3 minor controls that the federal reserve can use are:
answer
margin requirements, consumer credit, and moral suasion
question
True or False: One of the weaknesses of monetary policy is that while the Federal Reserve can pursue an easy money policy, it cannot force banks to make loans to expand the money supply.
answer
true
question
True or False: The flatter the demand for money curve the larger will be the effect of any given change in the money supply upon the equilibrium rate of interest.
answer
false
question
True or False: A flat investment demand curve will mean that a change in the money supply will not elicit a very large change in investment.
answer
false
question
A ______ _______ refers to the situation where an increase in the GDP which occurs because of an easy monetary policy will in turn increase the demand for money, tending to partially offset or blunt the interest reducing effect of the easy monetary policy
answer
feedback effect
question
True or False: One of the weaknesses of monetary policy is that it is isolated from the political process.
answer
false
question
True or False: While it is true that monetary policy can be altered very quickly, it can take a long time before the effects of monetary policy show up in the economy.
answer
true
question
The equation of exchange is
answer
MV=PQ
question
___ is the money supply in the equation of exchange.
answer
M
question
___ is the velocity of money in the equation of exchange.
answer
V
question
___ is the price level in the equation of exchange.
answer
P
question
___ is the physical volume of goods and services produced in the equation of exchange.
answer
Q
question
The algebraic statement of MV=PQ is known as
answer
the equation of exchange
question
According to the quantity theory of money
answer
the velocity of money is constant
question
True or False: Monetarists believe that although a change in M may cause short-run changes in real output and employment as market adjustment occur, the long-run impact of a change in M will be on the price level
answer
true
question
If an economist believes that velocity is stable, this economist is probably a
answer
monetarist
question
If an economist believes that velocity is unstable, this economist is probably a
answer
keynesian
question
True or False: Monetarists hold that changes in the money supply are the single most important factor in determining the levels of output, employment, and prices.
answer
true
question
Monetarists believe that the velocity of money is
answer
stable
question
True or False: Keynesians argue that the government has contributed to the instability of the business cycle through its clumsy and mistaken attempts to achieve greater stability through discretionary fiscal and monetary policy.
answer
false
question
True or False: Keynesians contend there are many loose links in the cause-effect chain or monetary policy with the result that monetary policy is an uncertain and relatively weak stabilization tool compared with fiscal policy.
answer
true
question
According to Keynes, monetary policy affects the level of output and income
answer
by altering the rate of interest
question
According to the Keynesian model, a reduction in the money supply will tend to
answer
reduce the level of investment spending
question
According to the Keynesian model, which would be an appropriate monetary policy action for a period of unemployment?
answer
the purchase of government securities by the FED
question
According to the Keynesian model, if the FED wanted to reduce inflationary pressures, which combinations of policies should it pursue?
answer
increase the reserve requirement, increase the discount rate, buy government securities
question
Equilibrium GDP would tend to increase if
answer
the reserve requirement was lowered
question
Monetary policy may be less effective in combating unemployment than it is in combating inflation because
answer
bankers may not use the additional reserves provided by the fed to make loans.
question
According to the classical economists, if the money supply doubled
answer
the price level would tend to double.
question
Monetarists contend that
answer
the economy is inherently stable
question
Monetarists tend to support
answer
a fixed rate of growth in the money supply
question
Monetarists support a "monetary rule." This means they would like to see
answer
the money supply increased at a constant annual rate
question
According to the monetarists view, Keynesian monetary policy which attempts to stabilize the economy
answer
has tended to make the performance of the economy worse than it would otherwise have been
question
According to monetarists, increases in government spending
answer
tend to crowd out investment spending
question
Monetarists do not believe that monetary policy should be used to manipulate or micromanage the economy. Instead they believe that the proper money policy is:
answer
a slow growth of the money supply
question
True or False: The monetarists believe that the monetary authorities should attempt to control interest rates
answer
false
question
The ______ ______ theory think that people behave rationally as does all of economics. market participants gather information and process it intelligently to form expectations about things in which they have a monetary stake.
answer
rational expectations
question
True or False: Rational expectations theory contends that the aggregate response of the public to its expectations will make discretionary stabilization policies very effective
answer
false
question
The _________ ________ ______ contends that businesses, consumers, and workers generally understand how the economy functions and effectively use available information to protect or further their own self interests.
answer
Rational Expectations Theory
question
The ______ ______ _____ assumes that people form their expectations of future inflation on the basis of previous and present rates of inflation and only gradually change their expectations as experience unfolds.
answer
Adaptive Expectations Theory
question
Supporters of the theory of rational expectations believe that Keynesian monetary and fiscal policy
answer
tend to be ineffective or counterproductive
question
Monetarists and rational expectations theorists both support
answer
a "monetary rule"
question
Monetarists and rational expectations theorists believe that if policy makers would avoid intervening in the economy
answer
unemployment and inflation would tend to be minimized
question
The ______ _____ shows that the greater the rate of growth of aggregate demand, the greater will be the resulting inflation and the greater the growth of real domestic output
answer
Phillips Curve
question
Phillips curve suggests that goals may be in conflict between
answer
full employment and price level stability
question
______ is when the economy is experiencing both inflation and unemplyment
answer
stagflation
question
Stagflation may be defined as
answer
high inflation combined with high unemployment
question
Stagflation presents problems for Keynesian monetary policy because
answer
it is impossible to increase and decrease spending at the same time
question
Keynesian economists contend that ____ _____ _____ cause stagflation in the 1970's
answer
aggregate supply shocks
question
The adaptive expectations theory distinguishes between a _____ ____ phillips curve and a _____ _____ Phillips Curve
answer
long run, short run
question
The ______ ______ ______ concludes that the economy is stable in the long-run at the natural rate of unemployment
answer
Natural rate hypothesis
question
According to the natural rate theory, one-shot expansionary macroeconomic policies can push unemployment below its natural rate
answer
in the short run, but it will return to the natural rate in the long-run
question
According to natural rate theory, macropolicy cannot influence the rate of
answer
unemployment in the long-run
question
_______ ______ economists contend that changes in aggregate supply-shifts in the long-run aggregate supply curve must be recognized as an "active" force in determining both the levels of inflation and unemployment
answer
Supply side
question
Which policy would not be supported by a supply-side economist?
answer
an increase in marginal tax rates to help pay off the public debt
question
Modern supply side policy stresses the idea that
answer
taxes and government spending critically affect aggregate supply
question
Supply-side economists believe that
answer
lowering tax rates will increase the incentive to work
question
The ______ curve shows the relationship between tax rates and tax revenue. As tax rates increase from 0 to 100 percent, tax revenue will increase from 0 to some maximum level and then decline to 0.
answer
Laffer
question
The Laffer curve shows that
answer
higher tax rates boost tax revenue up to a point; after that, higher taxes lower tax revenue
question
Tax rate reductions can yield more tax revenue if
answer
people respond by choosing much less leisure and more work
Economics
Federal Open Market Committee
Macroeconomics
Money Supply And Interest Rates
New York Stock Exchange
Savings And Loan Association
AP Macroeconomics: Ch. 6 – Flashcards 85 terms

Rebecca Baker
85 terms
Preview
AP Macroeconomics: Ch. 6 – Flashcards
question
assets
answer
An object that a business, household, or government owns, such as a building, equipment, or a loan made to others
question
Balance sheet
answer
a system of keeping track of a business's assets and liabilities over time
question
Bank Deregulation Act of 1980
answer
A law enacted by Congress that introduced several changes into the banking sector such as the requirement that all banks follow the required reserve ratio that the Feds mandate
question
Bank run
answer
A situation in banking in which a bank's depositors want to remove all their deposits at the same time; since a fractional reserve bank does not keep all its depositors fund, it cannot deal with this situation and is forced out of business
question
Check clearing
answer
The process of taking checks deposited at one bank, sending the, to their issuers' bank, and adjusting the banks' Federal Reserve accounts in order to transfer the funds between them
question
Checking account
answer
Money a household deposits at a bank; the household can make purchases using checks drawn on account. The recipient of a check presents it to the bank and receives money, which the bank deducts from the household's checking account
question
Commodity Money
answer
Money that has uses in addition to being a medium of exchange, a unit of account, and a store of value. in other words, money that has intrinsic value
question
Credit card
answer
A card that can be used to purchase goods and services electronically; the credit card company reimburses the vendor and issues a loan to the purchaser
question
Credit Union
answer
A type of financial intermediacy that only accepts deposits from and only makes loans to certain types of workers
question
Currency in Circulation
answer
The paper money and coins used to pay for daily expenditures in the economy
question
Debit card
answer
A card that can be used to purchase goods and services electronically; the bank reimburses the vendor that accepts the debit card as payment and then deducts that purchase from a checking account
question
Demand deposits
answer
Checking account deposits ; traditionally, these deposits do not earn interest
question
Discount rate
answer
The interest rate the Fed charges to banks fir discount window loans
question
Discount Window Loan
answer
An overnight loan issued by the Fed to allow a bank to meet its reserve requirement at the end of the day
question
Disintermediation
answer
A situation that occurs when depositors withdraw their money from financial intermediaries
question
Excess Reserves
answer
The total deposits at a bank minus its required reserves
question
Federal Deposit Insurance Corporation (FDIC)
answer
An insurance program administered by the federal government that guarantees up to $100,000 of an individual's deposits in a bank
question
Federal funds market
answer
A loanable funds market in which banks borrow and lend funds to other banks
question
Federal Open Market Committee (FOMC)
answer
A group composed of the Board if Governors, the president of New York district's Fed bank, and the presidents of four other Fed district banks. This group selects the open market monetary policy the Federal Reserve will implement
question
Federal Reserve Act of 1913
answer
A law enacted in 1913 that established the Federal Reserve and made it responsible for providing money for economic activity and overseeing the health of banks and the economy
question
Federal reserve board of Governors
answer
A group of seven governors, each of whom is appointed by the president and confirmed by the Senate to one, 14-year term. The board helps to manage the Federal Reserve
question
Federal Reserve District Bank
answer
A part of the Federal Reserve that implements its policy and keeps track if economic activity for a certain geographic region of the nation
question
Federal Savings and Loan Insurance Corporation (FSLIC)
answer
A now defunct insurance program administered by the federal government, similar to FDIC except it insured deposits at savings and loan associations; it went bankrupt during the Saving and Loan Crisis of 1980s
question
Fiat Money
answer
Money that has no use besides being a medium of exchange, a unit of account, and a store of value. In other words, money with no intrinsic value
question
Fractional reserve banking
answer
A banking system in which banks keep a small share ( a fraction) of their depositors' funds on hand (in reserve) and loan out the rest; banks do not keep all of their depositors funds
question
Gold standard
answer
A type of fiat currency in which government agrees to buy and sell gold for currency it issues
question
Gresham's law
answer
Bad money drives good money out of circulation; the type of commodity money that has the lowest intrinsic value will become the dominant type of money, and the money with the highest intrinsic value be hoarded rather used as money
question
Large time deposits
answer
A financial instrument is similar to a savings account since it earns interest; the account is more than $100,000, the funds are deposited for less than 90 days but for a specified length of time, and theres a penalty for early withdraw of funds
question
Lender of last resort
answer
A duty of the Federal Reserve, which is to lend funds to banks that cannot obtain the funds from anywhere else
question
Liability
answer
An object that a business, households, or government owes such as a loan received from others
question
Life insurance company
answer
A company that takes small amounts of money from a large group of policy holders, invests the money, and then pays large amounts of money to the beneficiaries of the small number of policy holders who die
question
Liquidity
answer
The ease with which an asset can be converted into its full cash value
question
M1
answer
A measure of the most liquid parts of the money stock; m1 is the sum of the currency in circulation, the value of demand deposits, and the value of traveler's checks
question
M2
answer
A measure if the money stock; m2 = m1+less liquid forms of money, which include saving deposits, small time deposits, and money market mutual funds
question
M3
answer
A measure of the money stock; M3 = M2 + near monies
question
Money demand
answer
An inverse relationship that shows the amount of money households want to hold at various interest rates; at higher interest rates, people want to hold less money, and at lower interest rates people want to hold more money, ceteris paribus
question
Money demand curve
answer
A graphical representation of money demand
question
Money multiplier
answer
The increase or decrease in the money supply when the Fed increase or decreases excess reserves by one dollar; the reciprocal of the required reserve ratio
question
Money stock
answer
The amount of money in an economy at a point in time
question
Mortgage
answer
A longterm loan used to purchase real estate
question
Near monies
answer
A group of least liquid types of money, such a large time deposits
question
Net worth
answer
Assets minus liabilties
question
Open market operations
answer
The sales and purchases if Treasury bonds by the Fed, with the intent of changing the money supply and interest rates
question
Pension fund
answer
A financial organization that invests the savings of a large number of workers and then uses the funds to provide the workers with a source of income when they retire
question
Portfolio motive
answer
The desire to hold money, instead of investing it in financial instrument, to diversify a household's portfolio of assets
question
Precautionary Motive
answer
The desire to hold money, instead of investing it in a financial instrument, to pay for future unexpected expenditures
question
Purchasing power
answer
The goods and service an amount of money can purchase
question
Required reserve ratio
answer
The ratio of (a) the deposits a bank does not loan to other to (b) the total deposits at the bank; this ratio is determined by the government and must be met by all banks
question
Saving account
answer
Money a household keeps in a bank to earn interest payments, to keep the money safe, and to all easy access to their funds
question
Saving and loan association
answer
A type of financial intermediary that accepts the long-term deposits and specializes in making longterm loans for real estate purchases
question
Savings and loan crisis
answer
A collapse of many saving and loan associations in the late 1980s caused by improper deregulation and risk investments; it required the federal government to spend large amounts if money to correct the situtation
question
Small time deposits
answer
A financial instrument similar to a savings account since it earns interest; the account is less than $100,000, the funds are deposited for less than 90 days but for a specified length of time, and theres a penalty for early withdraw of funds
question
Store of value
answer
An object that can be used to hold onto purchasing power
question
Thrift
answer
A type of financial intermediary that uses depositors funds to make loans; credit union and saving and loan associations are types of thrifts
question
Transaction Motive
answer
The desire to hold money, instead of investing it in a financial instrument, because money enable a households to purchase goods and services
question
Traveler's Checks
answer
A check issued by a financial intermediary that household can use as they use a regular check
question
Unit of account
answer
An object that can be used to measure the value of a good or service
question
Velocity of money
answer
The number of times, on average, that a dollar is used to purchase final goods and services over a period of one year
question
Bond re-sale market
answer
A market in which people can buy and sell bins that were previously issued
question
Contractionary monetary policy
answer
Monetary policy with the goal of decreasing the money supply; this policy is usually used to deal with inflation
question
Coupon payment
answer
Periodic interest payments made by bond issuers to bond holders
question
Equation of exchange
answer
The quantity of money(M) multiplied by the money's velocity (v) equals nominal GDP, which equals the price level (P) multiplied by the real GDP(Q); M times V equals P times Q
question
Equilibrium Interest Rate
answer
The interest rate at which the quantity of money supplied equals the quantity of money demanded; the money supply curve and money demand curve intersect at the equilibrium interest rate
question
Expansionary Monetary Policy
answer
Monetary policy with the goal of increasing the money supply; this policy is usually used to deal with a recession
question
Identity
answer
A relationship that is true by definition
question
Maturity date
answer
The time at which the bond issuer pays the bond holder the money that was initially borrowed with the bond
question
Monetarism
answer
The belief that the fed's monetary policy should be to grow the money supply at a constant rate
question
Monetarist
answer
A person who believes in monetarism
question
Money supply curve
answer
A graphical representation of money supply; since the Fed determines the money supply, the money supply curve is a vertical line
question
New York Stock Exchange
answer
A large market in which people can buy and sell shares of stock of certain corporations
question
Quantity theory of money
answer
A theory holding that a change in the money supply leads to a change in the price level, but nit to a change in RGDP
question
Repurchase agreement
answer
A type of loan that a bank receives from its customers
question
Treasury securities
answer
Bond issued by the US Treasury Department
question
Paul Volcker
answer
The chairman of the Fed during the late 1970s and early 1980s who presided over a contradictory monetary policy to combat inflation
question
Adaptive Expectations Theory
answer
The idea that people make their decisions based on information from the recent past
question
Richard Brumberg
answer
(1930-1955) an economist who helped develop the life cycle theory of consumption concurrently with Friedman's development of the permanent income theory of consumption
question
Milton Friedman
answer
(1912-) an american economist who advocates the laissez faire approach to fiscal policy and who developed the permanent income theory of consumption
question
Full-Employment and Balanced Growth Act 1978
answer
A law that reiterated the intentions of the Employment Act if 1946
question
Long-run Phillips curve
answer
Based on the natural rate hypothesis, the long-run Phillips curve is a vertical line at the natural rate of unemployment, on a graph comparing inflation and unemployment rates
question
Franco Modigliani
answer
(1918-) an economist who helped to develop the life-cycle theory of consumption concurrently with Friedman's development of the permanent income theory of consumption
question
Natural rate hypothesis
answer
Certain real variables have natural rates of growth that they follow in the long run; many times, this hypothesis refers to the assumption that there is a natural rate of unemployment to which the economy will always return, in the long run
question
Permanent income theory of consumption
answer
The idea that people base their consumption decisions on the income they expect to earn over their lifetime; this is in contrast to the Keynesian approach of basing consumption on current income
question
Phillips curve
answer
The graphical representation of a hypothesized inverse relationship between the unemployment rate and the rate if inflation
question
Rational expectations theory
answer
The idea that people make their decisions based in all the information they can gather, including events form the recent past, new media reports, and their understanding of how the economy works
question
Supply-side economics
answer
The idea that the government should encourage economic growth by using fiscal policies to alter aggregate supply, by reducing taxes and decreasing cumbersome regulations, for example
Economics
Federal Open Market Committee
Monetary Economics
Principles Of Economics: Macroeconomics
Savings And Loan Association
Savings And Loan Associations
Macroeconomics Chapter 24 – Money, the Price Level and Inflation – Flashcards 55 terms

William Hopper
55 terms
Preview
Macroeconomics Chapter 24 – Money, the Price Level and Inflation – Flashcards
question
What is money?
answer
Any commodity or bill/token that is generally acceptable as a means of payment
question
What is a means of payment?
answer
A method of settling a debt
question
What are the functions of money?
answer
1) A means of payment 2) Medium of exchange 3) Unit of account 4) Store of value
question
Explain the role of money as a medium of exchange
answer
A medium of exchange is an object that is generally accepted for goods and services
question
What occurs in the absence of money?
answer
People would need to exchange goods and services directly in a process called bartering Bartering is costly and requires double coincidence of wants
question
Explain the role of money as a unit of account
answer
A unit of account is an agreed measure for stating the price of goods and services
question
Explain the role of money as a store of value
answer
As a store of value, money can be held for a time and later exchanged for goods and services
question
What is currency?
answer
Notes and coins held by individuals and buisnesses
question
What does M1 consist of?
answer
M1 consists of currency held by individuals and businessess plus chequable deposits owned by individuals and buisnesses
question
What does M2 consist of?
answer
M2 consists of M1 plus all other deposits - non-chequable deposits and fixed term deposits
question
Is M1 considered money?
answer
Yes. All items in M1 are a means of payment and can act as money.
question
Is M2 considered money?
answer
No. Some savings deposits in M2 are not means of payments but are liquid assets
question
Define liquidity
answer
The property of being instantly convertible into a means of payment with little loss of value
question
Compare deposits and cheques in terms of being used as money
answer
Deposits are money but cheques are not A cheque is an instruction to a bank to transfer money
question
Is a credit card considered money?
answer
Credit cards are not money A credit card enables the holder to obtain a loan, which is repaid with money
question
Define a depository institution
answer
A firm that takes deposits from households and firms and makes loans to other households and firms
question
What are the three depository institutions in a nation?
answer
1) Chartered banks 2) Credit unions and caisses populaires 3) Trust and mortgage loan companies
question
What is a chartered bank?
answer
A chartered bank is a private firm that can receive deposits and make loans
question
What is a credit union?
answer
A cooperative organization that receives deposits from and makes loans to its members
question
What is the goal of any bank?
answer
To maximize wealth
question
How do banks maximize wealth?
answer
To maximize wealth, the interest rate at which banks lends must exceed the interest rate it pays on deposits Loans generate profit Depositors must be able to obtain their funds when they want
question
What are reserves?
answer
Notes and coins in a chartered banks vault or the banks deposit at the Bank of Canada
question
What are liquid assets?
answer
Canadian government Treasury bills and commercial bills
question
What are securities?
answer
Longer-term Canadian bonds and other bonds such as mortgage-backed securities
question
What are loans?
answer
Commitments of fixed amounts of money for agreed-upon periods of time
question
How do depository institutions make a profit?
answer
Depository institutions make a profit from the spread between the interest rate they pay on their deposits and the interest rate they charge on their loans
question
What benefits do depository institutions provide?
answer
1) Create liquidity 2) Pool risk 3) Lower the cost of borrowing 4) Lower the cost of monitoring borrowers
question
What is the central bank?
answer
The public authority that regulates a nation's depository institutions and controls the quantity of money
question
What are the roles of the Bank of Canada (central bank)?
answer
1) Banker to the banks and government 2) Lender of last resort 3) Sole issuer of banks notes
question
What does it mean for the central bank to be the banker to the banks and government?
answer
Accepts deposits from depository institutions that make up the payments system and the government of Canada
question
What does it mean for the central bank to be the lender of last resort?
answer
The central bank stands ready to make loans when the banking system as a whole is short of reserves Banks lend and borrow reserves from other banks in the overnight loans market
question
What does it mean for the central bank to be the sole issuer of banks notes?
answer
Only the central bank is permitted to issue bank notes
question
What is the Bank of Canada's Balance sheet?
answer
The Bank of Canada's assets are government securities (bond) and last resort loans to banks Its liabilities are Bank of Canada notes and deposits of banks and the government
question
What is the monetary base?
answer
Sum of Bank of Canada notes outside the Bank of Canada, banks' deposits at the Bank of Canada, and coins held by households, firms, and banks
question
How does the Bank of Canada change the monetary base?
answer
Conducts open market operation, which is the purchase/sale of government of Canada securities (bonds) by the Bank of Canada in the open market
question
What is an open market operation?
answer
The purchase/sale of government securities by the Bank of Canada from/to a chartered bank When the Bank of Canada buys securities (bonds), it pays for them with newly created reserves held by the banks When the Bank of Canada sells securities (bonds), it is paid for with reserves held by the banks
question
What occurs in an open market purchase?
answer
Open market purchase increases bank reserves This is because in order to buy the securities (bonds), the central bank pays for it with newly created reserves
question
What occurs in an open market sale?
answer
Open market sales decrease bank reserves This is because in order when selling the securities (bonds), the central bank is paid with reserves from banks
question
How do banks create deposits?
answer
Banks create deposits when they make loans and the new deposits created are new money
question
What factors limit the quantity of deposits a bank can create?
answer
1) The monetary base 2) Desired reserves 3) Desired currency holding
question
How does the monetary base limit the quantity of deposits a bank can create?
answer
Monetary base is the sum of bank of Canada notes, coins, and banks' deposits at the Bank of Canada Size of monetary banks limits the total quantity of money that the banking system can create because: 1) Banks have desired reserves 2) Households and firms have desired currency holdings
question
What is a bank's actual reserves?
answer
Consists of notes and coins in its vault and its deposit at the Bank of Canada
question
What is the desired reserve ratio?
answer
Ratio of the bank's reserves to total deposits that a bank plans to hold The desired reserve ratio exceeds the required reserve ratio by the amount that the banks determines prudent for its daily buisnesses
question
What is desired currency holding?
answer
People hold some fraction of their money as currency If total quantity of money increases, so does the quantity of currency that people plan to hold As desired currency holding increases when deposits increase, currency leaves the banks when they make loans and increase deposits
question
What is currency drain?
answer
Ratio of currency to deposits; leakage of reserves into currency
question
How do you calculate excess reserves?
answer
Excess reserves = Actual reserves - desired reserves
question
Outline the money creation process
answer
Money creation process begins with an increase in the monetary base The Bank of Canada conducts an open market operation in which it buys securities from banks The Bank of Canada pays for the securities with newly created bank reserves Banks now have more reserves but the same amount of deposits, so they have excess reserves
question
What is the money multiplier?
answer
Ratio of the change in quantity of money to the change in monetary base Money multiplier = (change in quantity of money)/(change in monetary base)
question
What factors influence the quantity of money people plan to hold?
answer
1) The price level 2) The nominal interest rate 3) Real GDP 4) Financial innovation
question
How does the price level influence the quantity of money people plan to hold?
answer
A rise in price level increases quantity of nominal money but does not change the quantity of real money people plan to hold Quantity of nominal money demanded is proportional to the price level - 10% rise in price level increases quantity of nominal demanded by 10%
question
What is nominal money?
answer
Amount of money measured in dollars
question
What is real money?
answer
Equals nominal money divided by price level
question
How does the nominal interest rate influence the amount of money held?
answer
The nominal interest rate is the opportunity cost of holding wealth in the form of money rather than an interest-bearing asset A rise in the nominal interest rate on other assets decrease the quantity of real money people plan to hold
question
How does real GDP influence the amount of money held?
answer
An increase in real GDP increases the volume of expenditure, which increases the quantity of real money that people plan to hold
question
How does financial innovation influence the amount of money held?
answer
Financial innovation lowers the cost of switching between money and interest-bearing assets, which decreases the quantity of real money that people plan to hold
Federal Open Market Committee
Less Than One Year
True False Questions
FINC 409 – Chapter 5 – Practice Problems – Flashcards 106 terms

Chad Lipe
106 terms
Preview
FINC 409 – Chapter 5 – Practice Problems – Flashcards
question
True or False: The relationship between the money supply and demand affects the level of prices and economic activity in our market economy.
answer
True
question
True or False: The output of goods and services in an economy is referred to as the gross domestic product.
answer
True
question
True or False: The United States economy has little influence on the economies of other nations.
answer
False
question
True or False: Nations that export more than they import will have a trade deficit.
answer
False
question
True or False: Traditionally, the federal government should provide services that cannot be provided as efficiently by the private sector.
answer
True
question
True or False: A government raises funds to pay for its activities in only two ways: levies taxes or prints money for its own use.
answer
False
question
True or False: Monetizing the debt occurs when the Fed increases the money supply by purchasing government securities.
answer
True
question
True or False: Commercial banks are one of the four policy making groups.
answer
False
question
True or False: The President of the United States and the Fed formulate a program of fiscal policy.
answer
False
question
True or False: The U.S. Treasury has primary responsibility for management of the federal debt.
answer
True
question
True or False: The President of the United States formulates budgetary and fiscal policy, but Congress must enact legislation to implement these policies.
answer
True
question
True or False: Although the Treasury has vast power to affect the supply of money and credit, the Treasury largely limits its actions to taxing, borrowing, paying bills, and refunding maturing obligations.
answer
True
question
True or False: The Treasury's primary checkable deposit accounts for day-to-day operations are kept at several commercial banks in large cities.
answer
False
question
True or False: The Fed closely monitors the Treasury account and takes any changes into consideration in conducting daily open market operations in order to minimize the effect on bank reserves.
answer
True
question
True or False: The U.S. government may influence monetary and credit conditions indirectly through taxation and expenditure programs.
answer
True
question
True or False: Unemployment and welfare benefits are examples of transfer payments for which no current productive services are given in return.
answer
True
question
True or False: A primary Treasury objective is to maintain satisfactory conditions in the government securities market through maintaining investor confidence.
answer
False
question
True or False: The Fed can increase the money supply to help offset the demand for increased funds to finance the deficit.
answer
True
question
True or False: In the fractional reserve system, banks must hold, with the Fed, reserves equal to a certain percentage of their deposits.
answer
True
question
True or False: The deposit of a check drawn on the Fed is a derivative deposit because it adds new reserves to the bank where deposited and to the banking system.
answer
False
question
True or False: The U.S. Treasury is responsible for refinancing the outstanding debt of the government.
answer
True
question
True or False: The money multiplier indicates the maximum increase in deposits (and money supply) that can result from a given increase in excess reserves.
answer
True
question
True or False: If required reserves are larger than the total reserves of an institution, the difference is called excess reserves.
answer
False
question
True or False: One of the reasons open market operations are conducted virtually every business day is to implement changes in the money supply called for by the Federal Open Market Committee.
answer
True
question
True or False: The monetary base is the banking system reserves, plus currency held by the public.
answer
True
question
True or False: The velocity of money is expressed as the average number of times each dollar is spend on purchases of goods and services, and it is calculated as real GDP divided by M1.
answer
False
question
True or False: The U.S. Treasury has little power to influence money markets.
answer
False
question
True or False: The President of the United States has no influence over the Federal Reserve System nor exerts any pressure on the Fed.
answer
False
question
True or False: The Fed plays a significant role in tax policy.
answer
False
question
True or False: Aggregate demand refers to total spending in the economy.
answer
True
question
True or False: Tax receipts tend to increase during economic downturns.
answer
False
question
True or False: Transfer payments are income payments for which no current productive service is rendered.
answer
True
question
True or False: High inflation has been a significant problem in the United States during the past decade.
answer
False
question
True or False: The fiscal policy effects of a tax cut occur more slowly than an increase in government spending.
answer
False
question
True or False: "Crowding out" caused by deficit financing can result in tighter credit conditions and higher interest rates.
answer
True
question
True or False: Required reserves are the minimum amount of total reserves that a depository institution must hold.
answer
True
question
True or False: The velocity of money measures the rate at which wire transfers can be transmitted to overseas banks.
answer
False
question
True or False: U.S. economic policy actions are directed toward the four general goals of economic growth, high employment, price stability, and balance in international transactions.
answer
True
question
True or False: Inflation occurs when an increase in the price of goods or services is more than offset by an increase in quality.
answer
False
question
True or False: The four groups of policy makers that are actively involved in achieving the nation's economic policy objectives are the Federal Reserve System, the President, Congress, and the U.S. Treasury.
answer
True
question
True or False: The government body primarily responsible for monetary policy is Congress.
answer
False
question
True or False: The branch of government primarily responsible for the formulation of fiscal policy is the President and his Council of Economic Advisors.
answer
False
question
True or False: The branch of government primarily responsible for the formulation of fiscal policy is the U.S. Senate.
answer
False
question
True or False: Automatic stabilizers include trade deficits, budget deficits, and floating exchange rates.
answer
False
question
True or False: When a government borrows to finance budget deficits, crowding out may occur, which results in a restriction of available funds for private sector borrowers due to public sector demand.
answer
True
question
True or False: Primary deposits are deposits that add new reserves to a bank while secondary deposits are deposits that were borrowed from the reserves of primary deposits.
answer
False
question
The U.S. Treasury is primarily responsible for: a. monetary policy b. debt management c. fiscal policy d. the money supply
answer
debt management
question
Examples of automatic stabilizers are: a. open market operations b. changes in the discount rate c. unemployment insurance d. issuance of currency
answer
unemployment insurance
question
Automatic stabilizers include all of the following except: a. unemployment insurance b. social security c. welfare d. pay-as-you-go tax system
answer
social security
question
Almost all Treasury disbursements are made by: a. checks drawn directly on the U.S. Treasury b. check drawn against deposits at commercial banks in large cities c. drafts drawn on member banks d. checks drawn against deposits at Federal Reserve Banks
answer
checks drawn against deposits at Federal Reserve Banks
question
When the United States Treasury makes a payment to an individual or business, it usually takes the form of a: a. check drawn on a Federal Reserve Bank b. check drawn directly against the U.S. Treasury c. special Treasury voucher d. check drawn against a bank in which tax balances are held
answer
check drawn on a Federal Reserve Bank
question
When the United States Treasury makes a payment to an individual or business, it usually takes the form of a: a. check drawn on the Central Bank of China b. check drawn directly against the U.S. Treasury c. special Treasury voucher d. check drawn against a bank in which tax balances are held e. none of the above
answer
none of the above
question
The budget-making process is carried out by: a. Congress b. U.S. Treasury c. the President d. U.S. Treasury in cooperation with the Fed e. both a and c
answer
both a and c Congress & the President
question
Budgetary deficits always have the effect of: a. creating inflationary pressures b. crowding out private lenders c. forcing the Federal Reserve to buy government securities d. creating governmental competition for private investment funds
answer
creating governmental competition for private investment funds
question
U.S. debt management, which is an important function of the Treasury, is generally designed to: a. lower interest rates b. stimulate economic activity c. encourage orderly economic growth and stability d. all three of the above, a, b, and c
answer
encourage orderly economic growth and stability
question
Price inflation: a. is relatively unimportant to individuals b. is considered to be acceptable in the nation's quest for high levels of employment c. courages investment by increasing the uncertainty about future returns d. is almost always due to financing wars
answer
courages investment by increasing the uncertainty about future returns
question
Price inflation: a. is relatively unimportant to individuals b. is considered to be acceptable in the nation's quest for high levels of employment c. encourages investment by reducing the uncertainty about future returns d. is almost always due to financing wars e.none of the above
answer
none of the above
question
The federal government pays for the services it provides primarily through: a taxation b. creating money c. borrowing d. selling assets owned by the government
answer
taxation
question
The federal government pays for the services it provides primarily through: a. service fees b. creating money c. borrowing d. selling assets owned by the government e.none of the above
answer
none of the above
question
Federal Reserve open market operations, setting reserve requirement, and lending to depositories are: a. usually conducted simultaneously b. all designed to have their effect by influencing the reserves of depository institutions c. of equal importance in their effort d. functions shared with the U.S. Treasury
answer
all designed to have their effect by influencing the reserves of depository institutions
question
Federal Reserve open market operations, setting reserve requirement, and lending to depositories are: a. usually conducted simultaneously b. designed to improve the federal deficit c. of equal importance in their effort d. functions shared with the U.S. Treasury e . none of the above
answer
none of the above
question
Open Market operations differ from discounting operations in that they are" a. initiated by member depository institutions. b. designed to be of significance only to large city banks c. initiated by the President d. initiated by Congress e. none of the above
answer
e. none of the above
question
Various programs of the federal government help stabilize disposable income, and in turn, economic activity in general. In so doing: a. income tax rates may be lowered during periods of prosperity and increased during slack economic periods b. some programs act on a continuing basis and are described as automatic stabilizers c. the timing of sale of U.S. savings bonds is instrumental in accomplishing this objective d. these programs seldom attain their goals
answer
b. some programs act on a continuing basis and are described as automatic stabilizers
question
Various programs of the federal government help stabilize disposable income, and in turn, economic activity in general. In so doing: a. income tax rates may be lowered during periods of prosperity and increased during slack economic periods b. these programs waste valuable resources c. the timing of sale of U.S. savings bonds is instrumental in accomplishing this objective d. these programs seldom attain their goals e. none of the above
answer
e. none of the above
question
Continuing federal programs that stabilize economic activity are called a. transfer payments b. automatic stabilizers c. social insurance programs d. none of the above
answer
b. automatic stabilizers
question
Continuing federal programs that stabilize economic activity are called a. transfer payments b. leveling programs c. social insurance programs d. socialist spending e. none of the above
answer
e. none of the above
question
Currently, the backing for Federal Reserves notes is primarily in the form of: a. gold certificates b. gold bullion c. eligible paper (business notes and drafts) d. none of the above
answer
d. none of the above.
question
Debt management of the federal government includes: a. determining which types of refunding to implement b. determining the types of securities to sell c. deciding which interest rate patterns to use d. all the above
answer
d. all of the above
question
Debt management of the federal government includes: a. determining which types of refunding to implement b. determining the types of securities to sell c. deciding which interest rate patterns to use d. two of the above e. answers a, b and c are correct
answer
e. answers a, b, and c are correct
question
Debt management includes all of the following except: a. the types of securities to sell b. the interest rate patterns to use c. the required reserves ratio d. all of the above are included in debt management
answer
c. the required reserves ratio
question
Under required reserves of 20%, the maximum to which the money supply could be expanded by the banking system is: (Pick the closest answer.) a four times a new primary deposit b. five times a new primary deposit c. six times a new primary deposit d. until all of a new primary deposit has been converted to required reserves
answer
a. four times a new primary deposit
question
One factor that decreases the volume of bank reserves is a decrease in: a. the public's demand for currency to be held outside the banking system b. the reserve requirement ratio c. life insurance company reserves d. Federal Reserve float
answer
d. Federal Reserve float
question
One factor that decreases the volume of bank reserves is a(n): a. increase in the public's demand for currency to be held outside the banking system b. decrease in the reserve requirement ratio c. increase in life insurance company reserves d. increase in Federal Reserve Float e. none of the above
answer
a. increase in the public's demand for currency to be held outside the banking system
question
Bank reserves are increased when the Treasury: a. sells Treasury bonds to individuals b. decreases its holding of cash c. increases its account at a Federal Reserve bank d. none of the above
answer
b. decreases its holding of cash
question
Bank reserves are increased when the Treasury: a. sells Treasury bonds to individuals b. needs to increase its payment of funds from its accounts at the Reserve Banks c. increases its account at a Federal Reserve bank d. increases its holding of cash e. none of the above
answer
e. none of the above
question
Which one of the following transactions or operations is entirely at the initiative of the Federal Reserve? a. open market operations b. change in float c. change in bank borrowings d. change in Treasury cash holdings
answer
a. open market operations
question
The monetary base: a. equals the money supply b. consists of checkable and noncheckable deposits c. consists of bank reserves, plus currency held by the public d. equals the money multiplier, plus bank reserves
answer
c. consists of bank reserves, plus currency held by the public
question
Changes in the growth rates for money supply and money velocity affect the growth rate in: a. real economic activity b. the rate of inflation c. the turnover of goods and services d. both a and b
answer
d. both a and b
question
If a check is written for the full amount of a derivative deposit created by a bank loan and then is sent to a bank in another city for deposit: a. the lending bank would lose all of its excess reserves b. the lending bank would still have reserves to lend c. the full amount would be added to the receiving bank's excess reserves d. both a and c
answer
a. the lending bank would lose all of its excess reserves
question
Total reserves in the banking system consist of: a. vault cash held at commercial banks and other depository institutions b. reserve deposits held at Federal Reserve banks c. currency in circulation d. both a and b
answer
a. both a and b
question
When a customer demands additional currency by cashing a check for $500, all of the following occur except: a. the deposits of the bank are reduced $500 b. required reserves are reduced c. Federal Reserves notes decrease d. additional reserves must be acquired if the bank has no excess reserves
answer
c. Federal Reserves notes decrease
question
Bank reserves are not affected by: a. the purchase of government bonds by the Fed b. changes in reserve requirements c. the sale of government bonds by the Fed d. changes in the level of deposits of foreign banks at the Federal Reserve banks e. all of the above affect bank reserves
answer
a. the purchase of government bonds by the Fed
question
In our financial system, the money multiplier: a. is not affected by the Federal Reserve b. can fluctuate over time c. is not affected by the nonbank public d. is not affected by the U.S. Treasury
answer
b. can fluctuate over time
question
The U.S. banking system has the ability to alter the size of the money supply because of the use of: a. a 100% reserve system b. a fractional reserve system c. the Federal Reserve System's excess reserves d. Federal Reserve notes issued by the U.S. Treasury
answer
b. a fractional reserve system
question
Assume that a bank receives a primary deposit of $1,000, and the reserve requirement is 15%. Which of the following would reflect the asset side of the balance sheet after a maximum loan amount has just been made (i.e. before the check on the new loan is deposited in another bank)? a. reserves of $1,000 b. deposits of $1,000 c. reserves of $1,000 and loans of $150 d. reserves of $1,000 and loans of $850
answer
d. reserves of $1000 and loans of $850
question
Which of the following statements is most correct? a. Bank reserves are not affected by transactions involving the Treasury. b. Derivative deposits occur when reserves created from primary deposits are made available through bank loans to borrowers who leave them on deposit in order to write checks against the funds. c. Total bank reserves in the banking system consist of bank's member bank deposits held in Federal Reserve Banks, plus non-member banks vault cash. d. Federal Reserve notes have been increasingly backed by gold certificates and eligible paper in recent years.
answer
b. Derivative deposits occur when reserves created from primary deposits are made available through bank loans to borrowers who leave them on deposit in order to write checks against the funds
question
Which of the following statements is most correct? a. A monetary base of $5 million and a money multiplier of 5 means that the money supply will be $1 million. b. The magnitude of the money multiplier today is in the 8 to 9 range. c. The money multiplier is influenced by the public's switching between checkable and noncheckable deposits at their banks. d. The monetary base multiplied by the money multiplier calculates the amount of required reserves for the banking system as a whole.
answer
c. The money multiplier is influenced by the public's switching between checkable and non checkable deposits at their banks.
question
Which of the following statements is false? a. The multiplying capacity of primary deposits is hindered by cash leakages from the banking system. b. The monetary base is defined as bank reserves plus currency held by the nonbank public. c. In contrast to the other transactions that affect reserves in the banking system, open market operations are entirely at the initiative of the Federal Reserve. d. All the above statements are correct.
answer
d. all the above statements are correct
question
Which of the following statements is false? a. The difference between total reserves and the monetary base is currency held by the nonbank public. b. The ability to alter the money supply and credit is based on the fact that our banking system does not utilize a fractional reserve system. c. The ability to predict M1 velocity, in addition to money supply changes, is important in achieving successful monetary policy making. d. A derivative deposit arising out of a loan from Bank A is transferred by check to Bank B, where reserve requirement are again imposed.
answer
b. The ability to alter the money supply and credit is based on the fact that our banking system does not utilize a fractional reserve system
question
To equal M1 money supply, the monetary base: a. is multiplied by the money multiplier b. is added to by the money multiplier c. is subtracted from the money multiplier d. none of the above
answer
a. is multiplied by the money multiplier
question
Total bank reserves do not include which of the following? a. deficit reserves b. excess reserves c. required reserves d. all the above are included in total bank reserves
answer
a. deficit reserves
question
The government entity responsible for fiscal policy is: a. the U.S. Treasury b. the Federal Reserve c. the Congress d. the President e.both c and d
answer
e. both c and d
question
Government financing of large budgetary deficits: a. absorbs savings which decreases interest rates b. may crowd out private borrowers c. is known as monetizing the deficit d. increases savings which increases interest rates
answer
b. may crowd out private borrowers
question
Deposits that add new reserves to the bank where they are deposited are called: A. primary deposits b. derivative deposits c. secondary deposits d. Special Drawing Rights
answer
a. primary deposits
question
Transactions that affect bank reserves can be initiated by the: a. nonbank public b. Federal Reserve System c. U. S. Treasury d. all the above
answer
d. all the above
question
A country's economic policy actions are directed toward all of the following goals EXCEPT: a. balance in the federal budget b. high employment c. price stability d. all of the above are primary policy goals
answer
a. balance in the federal budget
question
A country's economic policy actions are directed toward all of the following goals EXCEPT: a. economic growth b. high employment c. price stability d. all of the above are primary policy goals
answer
d. all of the above are primary policy goals
question
In an effort to stimulate economic activity, Congress and the president passed the $787 billion _________________________________ in February, 2009 with the funds to be used to provide tax relief, appropriations, and direct spending. a. American Reconstruction and Reconfiguration Act of 2009 b. American Real Estate and Reconstruction Act of 2009 c. American Real Estate Reinvestment Act of 2009 d. American Recovery and Reinvestment Act of 2009 e. none of the above
answer
d. American Recovery and Reinvestment Act of 2009
question
A primary focus of the Economic Stabilization Act of 2008, which became know as the ___________________________, was to allow the U.S. Treasury purchase up to $700 billion of troubled or toxic assets held by financial institutions. a. Troubled Asset Relief Program (TARP) b. Toxic Asset Recovery Program (TARP) c. Troubled Area Relief Program (TARP) d. Toxic Area Recovery Program (TARP) e.none of the above
answer
a. Troubled Asset Relief Program
question
In fall 2008, the U.S. Congress and President George W. Bush responded to the financial crisis with the passage of the _____________ in early October of that year. a. Economic Stimulus Act b. Economic Recovery Act c. Economic Stabilization Act d. Economic Booster Act e.none of the above
answer
c. Economic Stabilization Act
question
During the 2007 - 2009 financial crisis, ___________ and __________, who were major participants in the secondary mortgage markets, were on the verge of financial insolvency and possible collapse in mid-2008. a. Fannie Mae and Freddie Mac b. the Federal Treasury and the Federal Reserve c. Morgan Stanley and Smith Barney d. Washington Mutual and Lehman Brothers e.none of the above
answer
a. Fannie Mae and Freddie Mac
question
During the 2007 - 2009 financial crisis, some of the very largest financial institutions were deemed as being "too big to fail" because their failure would cause cascading negative repercussions throughout the U.S. and many foreign economies. As a result, the Federal Reserve a. moved to increase liquidity in the monetary system and reduced its target federal funds rate to below .25 percent. b. worked with the U.S. Treasury to help facilitate the merging of financially weak institutions with institutions that were financially stronger. c. both a and b are true d. none of the above are true
answer
c. both a and b are true
question
During the 2007 - 2009 financial crisis, many major financial institutions and business corporations were on the verge of collapse or failure; however, some of the very largest corporations and financial institutions were deemed as being ________ because their failure would cause cascading negative repercussions throughout the U.S. and many foreign economies. a. toxic firms b. boat rockers. c. too large to ignore d. too big to fail e. none of the above
answer
d. none of the above
question
The "perfect financial storm" that developed in 2008, which put the U.S. economy was on the verge of collapse was characterized by all of the following EXCEPT: a. The housing price "bubble" burst in 2006 and began a sharp decline. b. Stock market prices peaked in 2007 and began a sharp decline. c. Many of the mortgage-related debt securities originated and sold to others, or held, by banks became difficult to value during the perfect financial storm and quickly became known as "troubled" or "tonic" assets. d. Individuals and businesses were defaulting on loans and home mortgages in increasing numbers due to the weakening economy and falling home prices. e.All of the above were factors
answer
e. all of the above were factors
question
The percentage of deposits that must be held as reserves is called a. excess reserves b. required reserves c. required reserve ratio d. none of the above
answer
c. required reserve ratio
question
Primary groups of policy makers that are actively involved in achieving U.S. economic policy objectives include all of the following EXCEPT: a. the Federal Reserve System b. the President c. Congress d. all of the above are primary policy makers
answer
d. all of the above are primary policy makers
Federal Open Market Committee
Federal Reserve Bank
Principles Of Economics: Macroeconomics
Principles Of Economics: Microeconomics
Required Reserve Ratio
Chapter 15 Answers – Flashcards 72 terms

Chad Lipe
72 terms
Preview
Chapter 15 Answers – Flashcards
question
The most important function of money is when money is used as a
answer
medium of exchange.
question
Which of the following statements about the FDIC is correct? I. The deposit insurance premiums charged by the FDIC to a member bank fully reflect the riskiness of that bank's assets II. The manner in which the FDIC is set up helps protect depository institutions from the rigors of true market competition
answer
II only
question
The FDIC was created because
answer
there were so many bank failures in the 1930s.
question
The two basic ways to define money are
answer
the transactions approach and the liquidity approach.
question
If the FDIC eliminated its insurance program for deposits, then
answer
individual depositors would have more incentive to ascertain the soundness and solvency of the bank.
question
The possibility that a borrower might engage in riskier behavior after a loan is made is called
answer
moral hazard.
question
When people decide to increase the amount of currency they are currently holding
answer
the actual money multiplier will decrease.
question
Suppose that the Fed purchases $1,000,000 worth of bonds and that the reserve ratio is 25 percent. Then, the maximum potential expansion of deposits is
answer
$4,000,000
question
The actual money multiplier multiplied by the change in total reserves is the
answer
actual change in the money supply.
question
When we examine the U.S. money supply, the smallest component of M1 is
answer
traveler's checks
question
The money supply in the United States is backed by
answer
faith.
question
When you set aside the money you have today in order to purchase goods and services later on, you are using money as a
answer
store of value
question
Which of the following is NOT a reason that people tend to deposit their funds with banks rather than lend their funds directly to other individuals?
answer
liquidity problems
question
The formula (1/required reserve ratio) is the
answer
potential money multiplier.
question
To be accepted as money, an item must perform all of the following functions EXCEPT
answer
be easily reproduced.
question
The designate M1 measure of money consists of
answer
the most liquid types of money in the U.S. system
question
A barter arrangement simply means
answer
a direct exchange of goods without the use of money.
question
For barter to occur there must be
answer
a double coincidence of wants for each good to be exchanged.
question
Which of the following institutions has responsibility for distributing currency and coins to the U.S. banking system?
answer
The Federal Reserve System
question
An increase in the reserve ratio
answer
has a contractionary effect on the money supply.
question
Which of the following represents a function of money?
answer
All of these
question
United States coins and currency are backed by
answer
confidence that they will retain their value.
question
The function of money as a store of value diminishes if
answer
prices of goods and services increase.
question
The potential money multiplier gives us
answer
the maximum potential change in the money supply due to a change in reserves.
question
The Federal Open Market Committee (FOMC)
answer
influences the future growth of the money supply
question
Which of the following is NOT part of M1?
answer
Credit cards
question
In economics, money is
answer
anything that people generally accept in exchange for goods and services.
question
The actual money multiplier multiplied by the change in total reserves is the
answer
actual change in the money supply.
question
A fiduciary monetary system is dependent on
answer
acceptability and predictability of value.
question
If proceeds from loans are NOT deposited back in the banking system, then
answer
the magnitude of the multiplier process is reduced.
question
Which one of the following statements is true?
answer
Not all forms of currency are accepted equally well by the public as a medium of exchange.
question
Which of the following is NOT one of the functions of money?
answer
Source of wealth
question
Which of the following is NOT a reason that people tend to deposit their funds with banks rather than lend their funds directly to other individuals?
answer
liquidity problems
question
Which of the following statements is NOT true about money?
answer
Money can only be coins and paper.
question
Bank runs are a possibility because
answer
banks do not keep enough reserves to cover all their depository liabilities.
question
When you make a purchase at a retail store by giving your bank an instruction to transfer funds directly from your bank account to the store's bank account, you have most likely made the purchase using
answer
a debit card.
question
The Federal Deposit Insurance Corporation insures
answer
the deposits held in member banks.
question
Which of the following represents a function of money?
answer
All of these
question
When you use a debit card to purchase a pair of jeans, you are
answer
giving your bank an instruction to transfer funds directly from your bank account to the store's bank account.
question
The two basic ways to define money are
answer
the transactions approach and the liquidity approach.
question
The value of the money multiplier depends on
answer
the reserve ratio.
question
Stock market price quotations are an example of money serving as a
answer
unit of accounting.
question
The function of money as a store of value diminishes if
answer
prices of goods and services increase.
question
Which of the following would be considered a transaction deposit?
answer
checking account
question
Adverse selection refers to the
answer
likelihood that a potential borrower may use the funds that he receives for unworthy, high risk projects.
question
The current chair of the Board of Governors of the Federal Reserve is
answer
Ben Bernanke.
question
As a result of money in an economy,
answer
real Gross Domestic Product (GDP) and economic growth are greater than they would be in a barter economy
question
United States coins and currency are backed by
answer
confidence that they will retain their value
question
The central bank for the United States is
answer
the Federal Reserve System.
question
When money is accepted as payment in a market transaction, it is functioning as a
answer
medium of exchange.
question
In economics, money is
answer
anything that people generally accept in exchange for goods and services.
question
The possibility that a borrower might engage in riskier behavior after a loan is made is called
answer
moral hazard.
question
When we examine the U.S. money supply, the smallest component of M1 is
answer
traveler's checks.
question
Stock market price quotations are an example of money serving as a
answer
unit of accounting.
question
The manner in which FDIC deposit insurance is set up in the United States encourages banks to
answer
make riskier loans than they otherwise would.
question
The transactions approach to measuring money stresses the role of money as a
answer
medium of exchange.
question
The Federal Open Market Committee (FOMC)
answer
influences the future growth of the money supply.
question
Suppose that the Fed purchases $1,000,000 worth of bonds and that the reserve ratio is 25 percent. Then, the maximum potential expansion of deposits is
answer
the magnitude of the multiplier process is reduced.
question
When you set aside the money you have today in order to purchase goods and services later on, you are using money as a
answer
store of value.
question
If the reserve ratio decreases from 20 percent to 10 percent, then the potential money multiplier
answer
increases from 5 to 10.
question
The use of money as a medium of exchange I.Lowers transaction costs II. Permits more specialization
answer
I & II
question
To the extent that the value of money is less predictable, it becomes
answer
less acceptable as a medium of exchange.
question
Which of the following would be considered a transaction deposit?
answer
checking account
question
Which of the following describes a moral hazard problem?
answer
a post-contractual problem that may result because participants to the exchange process have information that allows them to act in an opportunistic manner
question
When money provides a yardstick that allows individuals to compare the relative values of goods and services, it is functioning as a
answer
unit of accounting
question
The manner in which FDIC deposit insurance is set up in the United States encourages banks to
answer
make riskier loans than they otherwise would.
question
Which of the following represents a function of money
answer
All of these
question
The direct exchange of goods and services for other goods and services is known as
answer
barter.
question
The transactions approach to measuring money (M1) includes all of the following EXCEPT
answer
certificate of deposits
question
Without an accepted medium of exchange, people
answer
have to resort to barter in order to exchange goods and services.
question
When money serves as a standard for comparing values of different things, it is functioning as a
answer
unit of accounting.
question
When you make a purchase at a retail store by giving your bank an instruction to transfer funds directly from your bank account to the store's bank account, you have most likely made the purchase using
answer
a debit card
Accounting
Economics
Federal Open Market Committee
Final Goods And Services
Individual Income Taxes
Personal Income Taxes
Ch 15 Eco Worksheet – Flashcards 30 terms

Edwin Holland
30 terms
Preview
Ch 15 Eco Worksheet – Flashcards
question
Fiscal year
answer
A 12-month period that is used for financial calculations
question
Federal budget
answer
A written document indicating the amount of money the government will receive and spend
question
Expansionary policies
answer
Fiscal procedures that try to increase economic output
question
Contractionary Policies
answer
Fiscal procedures that try to decrease economic output
question
Fiscal policy
answer
The federal government's use of taxing and spending to keep the economy stable
question
What is the role of the Office of Management and Budget
answer
To manage the federal government's budget
question
What is the purpose of "stop-gap" funding?
answer
To keep the gov running when the budget is finished
question
Why does the gov sometimes use an expansionary fiscal policy?
answer
To encourage growth and try to stop or prevent a recession
question
Why is it difficult for the federal government to increase or decrease spending?
answer
Two-thirds of all gov spending is on entitlements, which the gov cannot easily alter
question
What is one of the major uses of government fiscal policy?
answer
To prevent big changes in the level of the GDP
question
Keynesian Economics
answer
The idea that gov can and should regulate economy
question
Multiplier Effect
answer
Every dollar of change in gov use of money is reflected in a greater change in the economy
question
Supply-side Economics
answer
Idea that taxation is a major aspect of the economy
question
Classical Economics
answer
Idea that markets regulate themselves
question
What problem did the Great Depression in the 1930s highlight that classical economics did not address
answer
How long it would take the market to return to equilibrium
question
What is the maximum output that the economy can sustain over a period of time called?
answer
Productive capacity
question
What are the two main economic problems that Keynesian economics seeks to address?
answer
Periods of depression and inflation
question
When the gov collects taxes and pays out transfer payments as a way to balance the economy, what are these fiscal tools called?
answer
Automatic stabilizers
question
What does experience show about the relationship of taxation and work?
answer
A tax cut does not cause workers to work significantly more hours
question
What is the current highest bracket for personal income taxes?
answer
~40%
question
Balanced budget
answer
Federal spending equal to federal revenue
question
National debt
answer
Total amount of money owed by the federal gov
question
Treasury bond
answer
Gov bond that is substantial for as long as 30yrs
question
Budget deficit
answer
Federal spending in excess of federal revenue
question
United States Savings Bond
answer
Gov bond that allows the borrowing of small amounts of money
question
When the gov attempts to cover large deficits by creating more money, what is the probable result called?
answer
Hyperinflation
question
What is one of the major problems caused by a large national debt
answer
It decreases the amount of money available to be borrowed by buisness
question
What was the state of the federal budget at the start of the twenty-first century?
answer
Surpluses for the first time in 30yrs
question
What can be expected when members of the baby boom generation begin to retire in large numbers?
answer
Increased deficits
question
What is a major argument against a constitutional amendment requiring a balanced budget
answer
It would be too inflexible
Economics
Federal Open Market Committee
Monetary Economics
Econ Final Review Pt.1 – Flashcards 44 terms

Elizabeth Hill
44 terms
Preview
Econ Final Review Pt.1 – Flashcards
question
A bank's lending power is based on
answer
Excess reserves
question
A tight money policy
answer
Restricts the growth of money supply
question
Some people believe that a weak economy will result in
answer
A higher crime rate
question
According to the demand-pull theory, inflation is caused by
answer
Businesses
question
Economic growth benefits the government by
answer
Reducing budget surpluses
question
This is a proposed market based anti poverty program designed to encourage work and reduce administrative costs
answer
Negative income tax
question
Low interest rates
answer
Increase consumer borrowing
question
The immediate affect of inflation is the
answer
Decline in purchasing power of the dollar
question
High prices that cause employees to ask for raises, causing producers raise prices describes the
answer
Wage-price spiral
question
The Lorenz curve is used to demonstrate
answer
The degree of income inequality
question
When the Fed refers to M1, it is referring to such elements of the money supply as
answer
Traveler's checks and currency
question
An index that reports on price changes for about 90,000 goods and services is the
answer
Consumer price index
question
A general decline in the level of prices is called
answer
Deflation
question
A car assembled at an American plant in Canada is
answer
Excluded from GDP
question
The purpose of the market basket is to
answer
Keep track of prices of consumer items
question
Unlike demand-side economics, supply-side economics
answer
Advocates reduced government involvement in business
question
The availability of money and the cost of credit are decided by the
answer
Federal Open Market Committee
question
The sale of a used car is not counted in GDP because
answer
No new wealth is created
question
The largest sector of the macroeconomy is the
answer
Consumer sector
question
Liquidity refers to
answer
Bonds and other investments that can easily be converted to cash
question
Unemployment that is directly related to swings in the business cycle is
answer
Cyclical unemployment
question
An easy money policy
answer
Allows the money supply to grow
question
This marked the beginning of the Great Depression in 1929
answer
Stock market crash
question
The federal reserve system is
answer
The nation's central bank
question
Unlike many policies, the Fed
answer
Is concerned about the long-run health of the economy
question
Aggregate demand will increase
answer
If consumers save less and spend more
question
The Fed's Federal Open Market Committee
answer
Is the Fed's primary monetary policy making body
question
To increase the money supply The Federal Reserve System
answer
Buys government bonds on the open market
question
The federal reserve
answer
Is made up of 12 district banks and 25 branch banks
question
Since the colonial period, the census had revealed
answer
A trend toward smaller households
question
The federal reserve system
answer
Regulates margin requirements for the stock market
question
The foreign sector of the economy represents the
answer
Difference between the dollar value of exports and imports
question
When a shoe manufacturer buys a shipment of leather to make shoes, the leather is considered to be
answer
An intermediate product
question
Changes in technology and changes in consumer tastes can cause
answer
Structural unemployment
question
To make a profit, a bank must
answer
Charge more for the loans it makes than it pays on deposits
question
Deregulation is most closely associated with
answer
Supply-side economics
question
To monetize the debt incurred by deficit spending during the Vietnam War, the money supply was
answer
Increased to keep interest rates stable
question
The prime rate refers to the
answer
Lowest interest rate commercial banks may charge their customers
question
A comprehensive measure of consumer discomfort during a period of rising inflation and high unemployment is the
answer
Misery index
question
In the short run, an increase in the money supply results in
answer
Lower interest rates
question
A bank statement of assets and liabilities is a
answer
Balance sheet
question
The census is taken every
answer
10 years
question
To determine Gross National Product,
answer
Add to GDP all payments received by Americans outside the U.S. and subtract payments made to foreign-owned resources in the US
question
The business cycle since WWII has been characterized by
answer
Extended expansions alternating with brief recessions
Economics
Federal Open Market Committee
Federal Reserve Notes
Fractional Reserve Banking
Principles Of Economics: Macroeconomics
Principles Of Economics: Microeconomics
Econ 104 Final Review – Flashcards 126 terms

Henry Smith
126 terms
Preview
Econ 104 Final Review – Flashcards
question
In a market system, the most dangerous types of bankruptcies involve
answer
financial institutions.
question
Which of the following are reasons that banks are so heavily regulated?
answer
Governments are concerned about the safety of deposits, The industry is a principal determinant of aggregate demand, Bank failures are contagious
question
Bankers' business decisions effect the money supply because bankers
answer
have the ability to create money.
question
A bank run involves a large flow of money
answer
out of depositors' accounts.
question
In order for barter trades to occur, there must be a
answer
double coincidence of wants
question
The "efficiency of the payments mechanism" refers to
answer
the ease and speed of exchanging money for goods and services.
question
7. Money is an imperfect store of value when
answer
the rate of inflation is high.
question
8. Liquidity refers to the
answer
ease with which an asset can be converted into cash.
question
9. Fiat money is
answer
only backed by government decree.
question
10. The primary feature of money is that it serves as
answer
a medium of exchange.
question
11. Currently in the United States, money is backed by
answer
everyone's willingness to accept it.
question
12. The new $20 bills are being introduced by the U.S. Treasury primarily to diminish
answer
counterfeiting.
question
13. The official definition of the money supply that includes coins, paper money, travelers' checks, conventional checking accounts, and other checkable deposits at banks and savings institutions is called ____.
answer
M1
question
14. Electronic cash or E-cards are
answer
not included in the definition of the money supply.
question
15."Near monies" are
answer
liquid assets that are close substitutes for money.
question
16.One difference between the assets included in M1 and those added to calculate M2 is that items in M1 are
answer
more liquid than those added to compute M2.
question
17. Which of the following is included in M1?
answer
travelers' checks
question
18. The M2 definition of the money supply is based on the concept that
answer
many types of deposits can be used as both payments and stores of value.
question
19. Are "smart cards" or E-cash cards part of the money supply?
answer
No, because they are merely means to transfer checking deposits.
question
20. Due to new methods of electronically transferring assets from savings accounts to checking accounts, many economists favor moving savings accounts from
answer
M2 into M1.
question
21. Under fractional banking, when a bank lends to a customer
answer
the money supply increases.
question
22. Bank regulators are concerned about the safety of depositors because
answer
bank failures were common throughout most of U.S. history and have even occurred in recent decades,in the absence of federal insurance, depositors would lose their money if a bank failed, in the absence of federal insurance, depositors would lose their money if a bank failed, nervous depositors may rush to withdraw their accounts and produce a "run" that could threaten even a sound bank.
question
23. The objective of bank management is to
answer
strike the appropriate balance between the attraction of bank profits and the need for bank safety.
question
24. Excess reserves make a bank less vulnerable to runs, but bankers do not like to hold excess reserves because holding excess reserves
answer
means lower profits for banks.
question
25. If a bank has $1,000,000 in reserves and checking deposits of $3,000,000, what is the bank's reserve position if the required reserve ratio is 20 percent?
answer
The bank has $600,000 of required reserves and $400,000 of excess reserves.
question
26. The balance sheet of a solvent bank will show
answer
assets = liabilities + net worth.
question
27. The government banking regulation that places an upper limit on the money supply is
answer
reserve requirements on bank deposits.
question
28. The required reserve ratio is 10 percent, but banks actually keep 20 percent on reserve. The actual money multiplier will be
answer
5.
question
29. If people begin to hold more cash, the money multiplier process will
answer
decrease in actual size.
question
30. The Fed's principal objective is to
answer
manage the money supply and interest rates.
question
31. The Fed is unlike other central banks in that it
answer
has 12 branches.
question
32. The actual control of the Federal Reserve System resides in the
answer
Board of Governors.
question
33. Members of the Board of Governors of the Fed are
answer
appointed by the president for 14-year terms and confirmed by the Senate.
question
34. When the Federal Reserve System was first established, its founders intended the Fed to
answer
provide protection against financial panics by acting as the lender of last resort.
question
35. The European Central Bank, established in 1999, was patterned after the
answer
Federal Reserve, founded in 1914.
question
36. In practice, money supply and short-term interest rates are determined by the
answer
Federal Open Market Committee.
question
37. The Fed is institutionally independent. A major advantage of this is that monetary policy
answer
is not controlled by politicians.
question
38. If the Fed buys a T-bill from an individual rather than from a bank, the effect on the money supply is
answer
the same.
question
39. If the Fed buys a T-bill from a commercial bank, how will it pay for the T-bill?
answer
It will give the bank new reserves.
question
The tool most frequently relied on by the Fed is
answer
open market operations.
question
41. Assume the required reserve ratio is 20 percent and the FOMC orders an open market purchase of $100 million in government securities from member banks. If the oversimplified money multiplier is assumed, then the money supply will
answer
increase by $500 million.
question
42. When the Fed sells a government security to the public, how does it usually receive payment for the security?
answer
by accepting checks on bank accounts
question
43. Which of the following will lower interest rates in the short run?
answer
a decrease in real GDP
question
44. Interest rates rose in the second quarter of 1999. What happened to bond prices during this time?
answer
They decreased.
question
45. The concept of "lender of last resort" is that when
answer
commercial banks are hesitant to lend, the Fed will step in and increase reserves.
question
46. The reason that the Fed does not actively use discount rate policy to control the money supply is because the Fed
answer
does not know how banks will respond to discount rate changes.
question
47. Which of the following will increase interest rates in the short run?
answer
open market sales by the Fed
question
48. If the Fed were to increase the money supply at the same time the government was increasing taxes, we could expect
answer
a decrease in interest rates but the effect on real GDP is indeterminant.
question
49. Under what conditions will the inflationary impact of an expansionary monetary policy be the largest?
answer
When equilibrium real GDP is at potential real GDP.
question
50. After the attacks of September 11, 2001, the proper policy response was
answer
expansionary monetary and fiscal policy.
question
51. Which of the following is the formula for velocity?
answer
Velocity = nominal GDP/M
question
52. Which is likely to be larger, the velocity of M1 or M2?
answer
M1, because M2 is a larger number.
question
53. A look at the historical data indicates that velocity for M1
answer
has been more variable than the velocity for M2, but both have been fairly constant for the past 65 years.
question
54. The quantity theory of money assumes that
answer
changes in velocity are so small that velocity can be considered constant.
question
55. If credit cards were suddenly ruled illegal and were no longer used, the most likely effect would be a decrease in the
answer
velocity of circulation.
question
56. As the price level rises, the demand for money
answer
increases because more money is needed for each transaction.
question
57. The principal factor determining velocity is the
answer
frequency with which paychecks are distributed.
question
58. If financial news broadcasts reported that inflation was likely to rise significantly next year, what would most likely happen to the velocity of circulation?
answer
It will increase.
question
59. When comparing the Keynesian and monetarist approaches, the only substantive difference is that
answer
the Keynesian equation leads to a prediction of real GDP; the monetarist equation leads to a prediction of nominal GDP.
question
60. The major limitation of both the Keynesian approach and the monetarist approach is that both
answer
are ways of studying the aggregate demand curve, but to learn anything about the price level and output, the aggregate supply curve must be i
question
61. According to the simple quantity theory of money, a change in the money supply of 9.6 percent would lead to a
answer
9.6 percent change in nominal GDP.
question
62. Contractionary fiscal policy
answer
reduces the quantity of money demanded, reduces interest rates, and increases investment spending.
question
63. For Keynesian economists to incorporate monetary policy into their models, they must know
answer
how the money supply affects interest rates.
question
64. Which of the following is the Keynesian view of the sequence of cause and effect of monetary policy?
answer
M, r, I, Y
question
65. It is often reported by financial news reports that higher interest rates reduce automobile sales. If this is true, we can expect
answer
monetary policy to be more effective.
question
66. A major advantage of monetary policy over fiscal policy is that monetary
answer
policy can be put into effect more quickly.
question
67. The optimal time for the implementation of contractionary fiscal policy would be
answer
before inflation accelerated.
question
68. One of the problems with fixed targets for the money supply is that
answer
demand for money does not grow smoothly and predictably.
question
69. If the Fed decides to target money supply growth, it must be prepared to accept
answer
interest rate volatility.
question
70. Figure 1 shows the equilibrium interest rate and the money stock (M) before the demand for money shifted to M1D1. If the Fed wants to return to the original equilibrium position (E), it should
answer
It is impossible for the Fed to restore the original equilibrium condition.
question
71. In Figure 1, if the Fed wants to target the money supply at $830 billion, and the money demand curve shifts to M1D1, the interest rate will have to
answer
rise above 11 percent.
question
72. In Figure 1 if the Fed wants to stabilize interest rates at 9 percent, and the money demand curve shifts to M1D1, the money supply will have to rise
answer
above $840 billion.
question
73. If the aggregate supply curve is flat,
answer
expansionary fiscal or monetary policy will buy large gains in real output at low cost in terms of inflation.
question
74. Many economists maintain that
answer
the aggregate supply curve is nearly horizontal at low levels of real GDP,the aggregate supply curve is nearly vertical at very high levels of real GDP, any change in aggregate demand will have most of its effect on output when economic activity is low but on prices when
question
75. An expansionary monetary policy is most likely to produce an inflationary effect with little impact on output when the economy
answer
is near full employment and the aggregate supply curve is vertical.
question
76. When will stabilization policy be most effective in combating recessions?
answer
when AS is flat
question
77. What role does ideology play in the debate on stabilization?
answer
A large role, because there are conservative and liberal economists.
question
78. The Fed's quick response to the threat to the economy after September 11, 2001, makes a strong case for
answer
a discretionary-based monetary policy regime.
question
79. After September 11, 2001, both Republicans and Democrats agreed on the need for some type of
answer
stimulus package to counteract recession.
question
80. To maintain a balanced budget during the sag in personal spending in 2000-2001 could cause a(n)
answer
decrease in aggregate demand and a recession.
question
81. If the U.S. government decided to pay off the national debt by creating money in a few years, what would be the most likely effect?
answer
rapid inflation
question
82. The government should not attempt to balance the budget if
answer
the economy is in a recessionary gap.actual GDP is below full-employment GDP.unemployment is rising.
question
83. If the economy is in an inflationary gap, and the government attempts to balance the budget, the effect will be to
answer
continue inflationary pressures.
question
84. If the president and Congress agree to balance the budget during a recession, then the appropriate monetary policy is
answer
increase the growth of the money supply.
question
85. If in fiscal year 2001, the federal government receives $1,990 billion in revenues and spends $1,875 billion for goods and services, the national debt will
answer
decrease by $115 billion.
question
86. Compared to the size of GDP in 2004, the national debt was approximately
answer
one-third as large.
question
87. A chart of the ratio of national debt to GDP from 1915 to 2001 would show
answer
significant increases from 1980 to 1995.
question
88. The net national debt is smaller than the gross national debt because
answer
some debt is held by government agencies.
question
89. With no change in fiscal policy, the budget
answer
deficit will rise during a recession and fall during a boom.
question
90. A recessionary gap causes national debt to increase because
answer
income tax receipts drop off markedly.
question
91. If the inflation rate falls, what will happen to the budget deficit?
answer
It will fall, because interest payments will fall.
question
92. The U.S. government need never default on its debt because
answer
it can raise the funds it needs to repay by taxation, and it can print money to repay.
question
93. The policy mix that the Clinton administration sought in early 1993 was a
answer
smaller budget deficit and looser monetary policy.
question
94. Budget deficits are inflationary when
answer
the economy is at full employment and the aggregate supply curve is vertical.
question
95. The central bank is said to monetize the deficit when it
answer
purchases the bonds that the government issues.
question
96. If the Fed is increasing its holdings of government bonds at the same time the federal deficit is increasing,
answer
the debt is being monetized.
question
97. The decisions on the part of the government to increase spending by $5 billion will have the largest impact on aggregate demand when the spending is financed by the sale of bonds to
answer
the Fed.
question
98. Why might the Fed decide to monetize the deficit?
answer
to keep interest rates low
question
99. Crowding out can best be defined as:
answer
government deficits increase interest rates and decrease investment.
question
100. Economists who argue in favor of rapid deficit reduction claim that deficit reduction will
answer
reduce crowding out, increase investment, and increase AS.
question
101. In the late 1990s, the more than expected increases in tax revenues were the result of
answer
rapid economic growth.
question
102. The economy's self-correcting mechanism to eliminate a recessionary gap relies on
answer
falling wage rates that shift the aggregate supply curve outward.
question
103. Demand-side inflation differs from supply-side inflation in the following way:
answer
demand-side inflation has higher output; supply-side inflation has lower output.
question
104. Aggregate supply tends to grow because
answer
there are more workers in the economy every year.there is more capital in the economy every year.technology tends to improve every year.
question
105. If the aggregate supply curve is vertical, then the short-run Phillips curve will
answer
also be vertical.
question
106. The Phillips curve is built on the assumption that business fluctuations are
answer
from the demand side.
question
107. One reason why the Phillips curve "broke down" is
answer
most of the inflation of the 1970s was from the supply side.
question
108. The recent rapid advance in computer technology is one of the reasons given for the shift of the
answer
aggregate supply curve outward.
question
109. After September 11, 2001, President George W. Bush believed in the need for a fiscal stimulus. The proper fiscal policy to reflect this could include a(n)
answer
increase in government purchases.
question
110. Assume that the government is considering different policies to increase total expenditures in order to reduce unemployment. Which of the following would achieve this objective?
answer
decreasing taxes,increasing government spending,increasing transfer payments
question
111, The central idea of supply-side tax cuts is that certain types of tax cuts will increase
answer
aggregate supply.
question
112. A proponent of supply-side economics would advocate
answer
reducing income taxes on saving.
question
113. The primary goal of supply-side economics is to
answer
reduce inflation and increase growth at the same time.
question
114. A reduction in the capital gains tax, often advocated by proponents of supply-side economics, is supposed to stimulate
answer
investment spending.
question
115. Critics of supply-side economics argue that a major flaw is
answer
the small magnitude of supply-side effects.the large size of demand-side effects.increased income inequality.
question
116. One objection to supply-side tax cuts is that demand-side changes
answer
are larger than supply-side changes.
question
117. If the demand-side effects of supply-side tax cuts are greater than the supply-side effects, then we can expect the result to be a(n)
answer
increase in output and prices.
question
118. Capital gains tax cuts inevitably benefit
answer
high-income stock owners.
question
119. Tax cuts associated with supply-side economics often lead to increased
answer
federal budget deficits.
question
120. Since the supply-side tax cuts of the 1980s,
answer
there has been no evidence that supply-side incentives increase saving or the labor supply.
question
121. A Keynesian economist would expect a supply-side tax cut to shift
answer
only the aggregate demand curve outward.
question
122. When did we begin experiencing a negative growth rate during current recession?
answer
First quarter of 2008
question
123. Which of the following is said to cause current Great Recession?
answer
Excessive lending by banks which violated lending rules. Subprime mortgage defaults, High leverage,
question
124. If I use $10,000.00 of my own saving and borrow $60,000.00 from a local bank and invest the total Amount, my leverage is:
answer
7 to 1
question
125. One of the following is the main reason as to why the current recession has lasted for so long. Which one is it?
answer
Depressed housing market
question
126. Obama administration and the Fed have been consistent in fighting current recession in that
answer
Fed has engaged in excessive lending and administration has increased government spending
AP Economics
Business Law
Economics
Equality Before The Law
Federal Open Market Committee
Naked Economics Vocab – Flashcards 62 terms

Daniel Thompson
62 terms
Preview
Naked Economics Vocab – Flashcards
question
agreements in which competitors divide markets among themselves.
answer
Market Allocation
question
a metaphor to describe the self-regulating behavior of the marketplace.
answer
Invisible Hand of the Economy
question
representation of sets of goods that bring some satisfaction to people who are in possession.
answer
Utility
question
what you give up to get something in return.
answer
Opportunity Cost
question
a cost or benefit that results from an activity or transaction and that affects an otherwise uninvolved party who did not choose to incur that cost or benefit
answer
Externalities
question
a systematic process for calculating and comparing benefits and costs of a project, decision or government policy
answer
Cost/Benefit Analysis
question
the reason for a business's existence is to turn a profit. The profit motive functions on the theory that individuals tend to pursue what is in their own best interests. Accordingly, businesses seek to benefit themselves and/or their shareholders by maximizing profits.
answer
Profit Motive
question
the stock of competencies, knowledge, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value.
answer
Human Capital
question
are obstacles that make it difficult to enter a given market.
answer
Barriers to Entry
question
the economic price for which a good or service is offered in the marketplace.
answer
Market price
question
publicly owned property, central authority makes decisions about production and consumption.
answer
Command Economy
question
refers to someone who benefits from resources, goods, or services without paying for the cost of the benefit.
answer
Free Rider problem
question
A positive, unexpected benefit. A negative, unexpected detriment occurring in addition to the desired effect of the policy A perverse effect contrary to what was originally intended (when an intended solution makes a problem worse)
answer
Law of Unintended Consequences
question
study the effects of social, cognitive, and emotional factors on the economic decisions of individuals and institutions and the consequences for market prices, returns, and the resource allocation.
answer
Behavioral Economics
question
Game Theory: a study of strategic decision making. Prisoner's Dilemma: a canonical example of a game analyzed in game theory that shows why two individuals might not cooperate, even if it appears that it is in their best interests to do so.
answer
Game theory & Prisoner's Dilemma
question
a limit on the quantity of a good that can be produced abroad and sold domestically
answer
Trade & Quotas
question
this curve shows the relationship between tax rates and tax revenue collected by governments.
answer
Taxation & Laffer curve
question
a loss of economic efficiency that can occur when equilibrium for a good or service is not Pareto optimal.
answer
Deadweight Loss
question
1. Civil Tort law 2. Criminalization 3. Government provision 4. Subsidies intended to redress economic injustices or imbalances.
answer
Government solutions to externalities
question
he transfer of income, wealth or property from some individuals to others caused by a social mechanism such as taxation, monetary policies, welfare, charity, divorce or tort law
answer
Redistribution
question
Efficiency: is concerned with the optimal production and allocation of resources given existing factors of production Equity: is concerned with how resources are distributed throughout society.
answer
Equity vs. Efficiency
question
refers to a market process in which undesired results occur when buyers and sellers have asymmetric information (access to different information); the "bad" products or services are more likely to be selected.
answer
Adverse Selection
question
discrimination based on economic factors.
answer
Economics of Discrimination
question
the study of decisions in transactions where one party has more or better information than the other.
answer
Asymmetry of Information
question
make sure everyone has access to the same information relating to the markets, no secret info to benefit just one company/group.
answer
Equality of information
question
companies spend enormous sums of money to build an identity for the products
answer
Branding
question
describes markets such that no participants are large enough to have the market power to set the price of a similar product.
answer
Perfect Competition
question
a market form in which a market or industry is dominated by a small number of sellers
answer
Monopolistic Competition/Oligopoly
question
the idea that one party credibly conveys some information about itself to another party.
answer
Signaling
question
resources are limited/finite
answer
Scarcity
question
to the level of wealth, comfort, material goods and necessities available to a certain socioeconomic class in a certain geographic area.
answer
Standard of Living
question
is a method for estimating an investment's doubling time. The rule number ( e.g., 72 ) is divided by the interest percentage per period to obtain the approximate number of periods (usually years) required for doubling.
answer
Rule of 72
question
a mathematical representation of a situation in which a participant's gain (or loss) of utility is exactly balanced by the losses (or gains) of the utility of the other participant(s).
answer
Zero sum game
question
asserts that financial markets are "informationally efficient". In consequence of this, one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis, given the information available at the time the investment is made.
answer
Efficient Market theory
question
The investment guidelines help us identify the businesses that have the highest potential to succeed commercially, while also generating a positive social impact.
answer
Investment guidelines
question
reducing risk by investing in a variety of assets. If the asset values do not move up and down in perfect synchrony, a diversified portfolio will have less risk than the weighted average risk of its constituent assets, and often less risk than the least risky of its constituent.
answer
Diversification
question
A well-organized group can wage a coordinated campaign that incorporates many different tactics. Organization can also make up for size: A well-organized small group often has a bigger impact than a large poorly organized one.
answer
Incentives for interest groups
question
Many times, the equilibrium price is lower than the highest price some folks are willing to pay. For all consumers, this is called consumer surplus. Similarly, the price might be higher than the minimum price at which some are willing to produce. For all the producers, this is called producer surplus.
answer
Consumer/Producer Surplus & Taxes
question
Price Floors are minimum prices set by the government for certain commodities and services that it believes are being sold in an unfair market with too low of a price and thus their producers deserve some assistance.
answer
Price Floors
question
an economic environment in which transactions between private parties are free from government restrictions, tariffs, and subsidies, with only enough regulations to protect property rights.
answer
Laissez faire economics
question
If there was no international trade, all countries would have to meet its own needs. Developed nations export staple goods/resources but undeveloped nations have cheap man power.
answer
Trade
question
(1)Supporting more productive, higher paying jobs in our export sectors, (2)Expanding the variety of products for purchase by consumers and business, (3)Encouraging investment and more rapid economic growth, (4) allowing countries to specialize in producing things in which they have an advantage to make.
answer
Benefits of trade
question
globalization refers to processes that increase world-wide exchanges of national and cultural resources. Advances in transportation and telecommunications infrastructure, including the rise of the telegraph and its posterity the Internet, are major factors in globalization, generating further interdependence of economic and cultural activities.
answer
Globalization
question
a consequence of specialization, or the division of labor, and is almost universal. The participants in an economic system are dependent on others for the products they cannot produce efficiently for themselves.
answer
Economic interdependence
question
refers to a country's ability to produce a certain good more efficiently than another country.
answer
Absolute Advantage
question
Intuitively, here's the logic. Imagine that America exports stuff that is produced mainly by college-educated workers, while those industries that compete with imports mainly employ less-educated workers. Now suppose the price of imports falls. Then in order for import-competing industries to cope, the wages of less-educated workers have to fall — in fact, they have to fall more than the price of imports, because other costs of import-competing production, namely the wages of highly educated workers, will actually rise. So if import prices fall, say, 10 percent, wages of less-educated workers will fall, say, 15 percent.
answer
Losers from trade
question
the economic policy of restraining trade between states through methods such as tariffs on imported goods, restrictive quotas etc. to allow for "fair competition"
answer
Protectionism
question
Lowering trade barriers allows trade to increase, which adds to incomes — national incomes and personal incomes. But some adjustment is necessary.
answer
Trade raises real income
question
a tax on imports or exports
answer
Tariffs
question
Cultural homogenization is the blending of different cultural practices into one cultural practice that does not allow easy identification of the characteristics of many cultures. It means over the years, peoples of two or more cultures have interacted and intermingles in such a manner as to lose their individual cultural identities and merged into a one uniform culture than does not show any trace of diversity of different cultures among the people.
answer
Cultural Homogenization
question
The Federal Open Market Committee (FOMC) is the group that makes the monetary decisions. They determine whether interest rates need to go up, down, or stay the same. They do things like lowering the cost of borrowing to stimulate the economy.
answer
FOMC
question
bad factory working environments often found in third world countries.
answer
Sweatshops
question
are a theoretical construct in economics for determining how a resource is used, and who owns that resource. (1) right to use the good, (2) right to earn income, (3) right to transfer good to others, (4) right to enforce property rights.
answer
Property Rights
question
consumer desire/willingness to pay for a good.
answer
demand
question
the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability
answer
monetary policy
question
refers to a country's ability to produce a particular good with a lower opportunity cost than another country.
answer
Comparative Advantage
question
Price Ceilings are maximum prices set by the government for particular goods and services that they believe are being sold at too high of a price and thus consumers need some help purchasing them.
answer
Price Ceilings
question
Fed Reserve controls the money supply and therefore the credit tap for the economy. Fed regulates commercial banks, supports the banking infrastructure, and generally makes the plumbing of the financial system work.
answer
Federal Reserve
question
the process of determining what a company will receive in exchange for its products
answer
pricing decisions
question
exists when sales of identical goods or services are transacted at different prices from the same provider.
answer
price discrimination
question
individuals own private property and manage according to interest.
answer
market economy
question
a financial disadvantage, that tends to discourage people from doing something.
answer
Law of Unintended Disincentives
Computer Based System
Consumer Economics
Economics
Federal Open Market Committee
Personal Finance and Economics Mod 6 Banking – Flashcards 33 terms

Lewis Gardner
33 terms
Preview
Personal Finance and Economics Mod 6 Banking – Flashcards
question
Specialized computer used by bank customers to handle their money (get cash, make deposits, check balances).
answer
Automatic Teller machine ATM
question
A check written against an account with insufficient funds to cover it.
answer
Bad Check
question
A financial institution that handles money, including keeping it for saving or comercial purposes; a profit company that is owned by investors.
answer
Bank
question
Check that can be further endorsed.
answer
Blank Endorsement Check
question
A register where you list all bank transactions including deposits, checks, debit card purchases, ATM withdrawals, and bank fees.
answer
Check Register
question
An account which allows the holder to write checks against deposited funds.
answer
Checking Account
question
When the bank pays a check you have written and deducts the amount from your account.
answer
Cleared Check
question
Not for profit financial institutution that is owned entirely by it's members.
answer
Credit Union
question
Plastic card used to deduct money from a checking account almost immediately to pay for purchases. Also known as a check card.
answer
Debit Card
question
Contains account holder's information and allows money to be deposited into the correct account.
answer
Deposit Slip
question
money deposited in a bank or some financial institution.
answer
Deposit
question
Uses a computer-based system that enables you to transfer money from one account to another in lieu of writing a check or exchanging cash.
answer
Electroni funds transfer (EFT)
question
Sign the back of a check authorizing the check to be exchanged for cash or credit.
answer
Endorse
question
Independent agency of the U.S. government that protects customers from the loss of any deposit if the financial institution fails.
answer
Federal Deposit Insurance Corporation (FDIC
question
The central banking system in the United States which consists of the twelve regional banks, the Federal Reserve Board, and the Federal Open Market Committee.
answer
Federal Reserve
question
a check signed by someone else other then who is specified on the check without that person's permission.
answer
Forged Check
question
Money paid to you by the financial institution when you deposit funds there.
answer
Interest (savings)
question
Currency, coins, checking accounts demand deposits.
answer
M1 money supply
question
M1 savings account and money market account.
answer
M2 (money supply
question
Independent federal agency that supervises fedral credit unions and insures depositor's money in credit unions.
answer
National Credit Union Administration (NCUA)
question
Lack of money in an account to pay a payment.
answer
Non-sufficient funds (NSF)
question
A check that has been written, but not yet received and paid by the bank.
answer
Outstanding Checks
question
Allows you to cover checks or withdrawals up to a specified amount if you have insufficient funds in the account.
answer
Overdraft Protection
question
Person, company, or organization to whom a check is written.
answer
Payee
question
A combination of letters or number that you use to access an account.
answer
Personal Identification Number (PIN)
question
The process of comparing the bank balance and check register so that they show the same amount.
answer
Reconciling
question
Percentage of deposits banks are required to keep in reserves.
answer
Required reserve ratio
question
Limits any further negotionation of the check.
answer
Restrictive Endorsement
question
Only person or company named in the endorsement can transfer the check to someone; transfers the right to cash the check to someone else.
answer
Special Endorsement
question
Check that is more then six months old. it may no longer be honored by the bank.
answer
Stale Check
question
request that a bank not cash or honor a specific check.
answer
Stop Payment
question
Monthly document sent by the financial institution that lists your account balance at the beginning of the period and the end of the period; includes checks deposits, deductions, and fees.
answer
Statement
question
To remove money from a bank account.
answer
Withdrawal
Cost Of Living Index
Federal Open Market Committee
Federal Reserve Notes
Money Market Deposit Accounts
Reduce The Price
Troubled Asset Relief Program
Macro Chap. 14 & 15 80 terms

Robert Carter
80 terms
Preview
Macro Chap. 14 & 15
question
When economists say that money serves as a medium of exchange, they mean that it is:
answer
a means of payment.
question
Currency held in the vault of First National Bank is:
answer
not counted as part of the money supply.
question
Currency (paper money plus coins) constitutes about:
answer
45 percent of the U.S. M1 money supply.
question
To say that coins are \"token money\" means that:
answer
their face value is greater than their intrinsic value.
question
A $20 bill is a:
answer
Federal Reserve Note.
question
Coins held in commercial banks are:
answer
not part of the nation's money supply.
question
\"Near-monies\" are included in:
answer
M2 only.
question
Answer the question on the basis of the following list of assets: 1. Large-denominated ($100,000 and over) time deposits 2. Noncheckable savings deposits 3. Currency (coins and paper money) in circulation 4. Small-denominated (under $100,000) time deposits 5. Stock certificates 6. Checkable deposits 7. Money market deposit accounts 8. Money market mutual fund balances held by individuals 9. Money market mutual fund balances held by businesses 10. Currency held in bank vaults Refer to the given list. Which of the following are considered to be \"near-monies?\"
answer
Items 2, 4, 7, and 8.
question
Answer the question on the basis of the following table: Refer to the table. The value of the dollar in year 4 is:
answer
$2.00.
question
In the U.S. economy, the money supply is controlled by the:
answer
Federal Reserve System.
question
The Federal Open Market Committee (FOMC) is made up of:
answer
the seven members of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Bank presidents on a rotating basis.
question
The group that sets the Federal Reserve System's policy on buying and selling government securities (bills, notes, and bonds) is the:
answer
Federal Open Market Committee (FOMC).
question
Approximately how many commercial banks are now operating in the United States?
answer
About 6,000.
question
Some economists are concerned that the financial rescue provided by the TARP will encourage financial investors and firms to take on greater risks in the future. This is an example of:
answer
moral hazard.
question
In 2009, approximately how much of the money on deposit was held by the three largest U.S. banks?
answer
30 percent
question
Firms whose central business is providing individual account shares of a group of stocks, bonds, or both are known as:
answer
mutual funds companies.
question
(Last Word) After years of aiding drug cartels, mobsters, and terrorist groups laundering money, HSBC bank was:
answer
fined about five weeks' worth of profits.
question
(Last Word) The Assistant U.S. Attorney General in charge of prosecuting financial crimes did which of the following in response to HSBC bank's years of money laundering and helping firms and individuals cheat on their taxes?
answer
Imposed only modest fines on HSBC so as not to destabilize the bank and the financial system.
question
As part of its response to the financial crisis of 2007 and 2008, Federal Reserve Banks began paying interest on reserve deposits.
answer
True
question
(Consider This) Credit cards are defined as money because they facilitate transactions.
answer
False
question
Commercial bank reserves are an asset to commercial banks but a liability to the Federal Reserve Bank holding them.
answer
True.
question
The basic reason why the commercial banking system can increase its checkable deposits by a multiple of its excess reserves is that:
answer
reserves lost by any particular bank will be gained by some other bank.
question
Refer to row 1 in the table. The number appropriate for space W is:
answer
10.
question
Refer to the table. When the legal reserve ratio is 25 percent, the excess reserves of this single bank are:
answer
$0.
question
If actual reserves in the banking system are $8,000, checkable deposits are $70,000, and the legal reserve ratio is 10 percent, then excess reserves are:
answer
$1000
question
Suppose a commercial bank has checkable deposits of $100,000 and the legal reserve ratio is 10 percent. If the bank's required and excess reserves are equal, then its actual reserves:
answer
are $20,000.
question
Money is destroyed when:
answer
loans are repaid.
question
If actual reserves in the banking system are $50,000, excess reserves are $5,000, and checkable deposits are $225,000, then the monetary multiplier is:
answer
5.
question
Suppose a credit union has checkable deposits of $500,000 and the legal reserve ratio is 10 percent. If the institution has excess reserves of $4,000, then its actual reserves are:
answer
$54,000.
question
A bank that has liabilities of $150 billion and a net worth of $20 billion must have:
answer
assets of $170 billion.
question
Loans made to customers are a liability on a bank's balance sheet.
answer
False.
question
The claims of the owners of a firm against the firm's assets are called:
answer
net worth.
question
In a fractional reserve banking system:
answer
banks can create money through the lending process.
question
Excess reserves refer to the:
answer
difference between actual reserves and required reserves.
question
Assume that Smith deposits $600 in currency into her checking account in the XYZ Bank. Later that same day Jones negotiates a loan for $1,200 at the same bank. In what direction and by what amount has the supply of money changed?
answer
Increased by $1,200.
question
Commercial banks monetize claims when they:
answer
make loans to the public.
question
Checkable deposits are a liability on a bank's balance sheet.
answer
True.
question
Refer to the data. The commercial banking system has excess reserves of:
answer
$9 billion.
question
The amount of reserves that a commercial bank is required to hold is equal to:
answer
its checkable deposits multiplied by the reserve requirement.
question
Refer to the table. When the legal reserve ratio is 10 percent, the money-creating potential of this single bank is:
answer
$6,000.
question
The consolidation in the financial industry into fewer and larger firms:
answer
Progressed further in the Financial Crisis of 2007-2008
question
As of February 2013, more than half of the money supply (M1) was in the form of:
answer
Checkable deposits
question
How many members can serve on the Board of Governors of the Federal Reserve System?
answer
7
question
The following programs were part of the Fed's \"lender of last resort\" efforts in response to the Financial Crisis of 2007-2008, except:
answer
TARP (Troubled Asset Relief Program)
question
Holding the money deposits of businesses and households and making loans to the public are the basic functions of:
answer
Commercial banks and thrift institutions
question
Which of the following would be considered to be the most liquid?
answer
Checkable deposits
question
Debit card balances are part of money supply M1, but credit card balances are not.
answer
True
question
The Federal Reserve System consists of which of the following?
answer
Board of Governors and the 12 Federal Reserve Banks
question
The use of a credit card is most similar to:
answer
Obtaining a short-term loan
question
When you use money to purchase groceries, money is functioning as a store of value.
answer
False
question
Refer to the table above. The size of the M2 money supply is:
answer
$5,899 billion
question
The destabilizing effects of defaulting mortgages quickly spread throughout the financial system because those mortgages were involved in widespread:
answer
Securitization
question
The most important among the Federal Reserve district banks in conducting monetary policy is the:
answer
New York bank
question
Economic studies conducted in industrially advanced countries suggest there is:
answer
An inverse relationship between the degree of independence of the central bank and the size of the average annual rate of inflation
question
The M1 money supply is composed of currency, checkable deposits, and savings deposits.
answer
False
question
In the United States, all money is essentially the debt of the Fed, commercial banks, and thrift institutions.
answer
True
question
The so-called near-monies have the following characteristics, except:
answer
Part of money supply M1
question
The Financial Crisis of 2007-2008 was triggered by problems in the dot.com sector of the economy.
answer
False
question
The Federal Reserve System is a bankers' bank, and thereby acts as a \"lender of last resort\" to banks.
answer
True
question
If product prices were stated in terms of tobacco leaves, then tobacco leaves would be functioning primarily as:
answer
A unit of account
question
If all depositors of a bank were to try withdrawing all their deposits at the same time, a good solid bank should be able to meet all the withdrawals.
answer
False
question
Which of the following statements is correct?
answer
A bank can only grant loans to customers if it has excess reserves
question
Money is \"created\" when:
answer
A bank grants a loan to a customer
question
Assume that the required reserve ratio is 20 percent. A business deposits a $50,000 check at Bank A; the check is drawn against Bank B. What happens to the excess reserves at Bank A and Bank B?
answer
Increase by $10,000 at Bank A, and decrease by $10,000 at Bank B
question
Refer to the data given above. If the required reserve ratio is 10 percent, the bank has excess reserves of:
answer
$22,000
question
The granting of a $10,000 loan and the purchase of a $10,000 government bond from a securities dealer by a commercial bank would have the same effect on the money supply.
answer
True
question
When a bank buys government securities from the Fed, then the bank's ability to \"create money\" will be reduced.
answer
True
question
When a bank grants a loan, the money supply M1 will increase, even if the funds from the loan are not spent.
answer
True.
question
When a check is cleared against a bank, the bank will lose:
answer
Checkable deposits and reserves
question
A bank is in the position to make loans when required reserves:
answer
Are less than actual reserves
question
During a recession when banks tend to increase their excess reserves, the money supply M1 decreases.
answer
True
question
A bank's net worth is equal to its:
answer
Assets minus its liabilities
question
When loans are repaid at commercial banks:
answer
Money is destroyed
question
A single commercial bank must meet a 25 percent reserve requirement. If it initially has no excess reserves and then $2,000 in cash is deposited in the bank, it can increase its loans by a maximum of:
answer
$1,500
question
When a bank accepts additional deposits, its required reserves and excess reserves will both increase.
answer
True
question
If a bank has excess reserves of $100,000, then it can lend out only up to $100,000; but if the banking system has excess reserves of $100,000, then the system can make additional loans totaling more than $100,000.
answer
True
question
Refer to the data above. If a check for $14,000 is drawn and cleared against this bank, then its reserves and checkable deposits will be, respectively:
answer
$36,000 and $106,000
question
The relative importance of various asset items on a commercial bank's balance sheet reflects a bank's pursuit of which two conflicting goals?
answer
Liquidity and profits
question
Refer to the above information. The maximum amount by which this commercial banking system can expand the supply of money by lending is:
answer
$900,000 billion
question
Suppose that the reserve ratio is 6%, and applies only to checkable deposits. A bank has non-checkable time deposits of $300 million, checkable deposits of $100 million, and reserves of $8 million. What are the excess reserves of this bank?
answer
$2 million
Cost And Availability
Cost And Availability Of Credit
Federal Open Market Committee
Federal Reserve Banks
Federal Reserve System
Principles Of Economics: Microeconomics
Macroeconomics Chapter 32 25 terms

Jessica Forbes
25 terms
Preview
Macroeconomics Chapter 32
question
The Federal Reserve System is divided into:
answer
-12 districts
question
What function is money serving when you use it when you go shopping?
answer
-a medium of exchange
question
Joe deposits $200 in currency into his checking account at a bank. The deposit is treated as:
answer
-no change in the money supply because the $200 in currency has been converted to a $200 increase in checkable deposits
question
Which group aids the Board of Governors of the Federal Reserve System in conducting monetary policy?
answer
-Federal Open Market Committee
question
The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for:
answer
-setting the Fed's monetary policy and directing the purchase and sale of government securities
question
Members of the Federal Reserve Board of Governor's are:
answer
-appointed by the President to staggered 14-year terms
question
The use of a credit card is most similar to:
answer
-obtaining a short-term loan
question
One major advantage of money serving as a medium of exchange is that it allows society to:
answer
-escape the complications of barter
question
The functions of money are to serve as a:
answer
-unit of account, store of value, and medium of exchange
question
When a consumer wants to compare the price of one product with another, money is primarily functioning as a:
answer
-unit of account
question
The paper money or currency in the U.S. essentially represents:
answer
-a debt of the Federal Reserve System
question
How many members can serve on the Board of Governors of the Federal Reserve System?
answer
-7
question
One reason that \"near-monies\" are important is because:
answer
-they can be easily converted into money or vice versa, and thereby can influence the stability of the economy
question
Checkable deposits are:
answer
-debts of commercial banks and savings institutions
question
The Federal Reserve System was established by the Federal Reserve Act of:
answer
-1913
question
The main function of the Federal Reserve System is to:
answer
-control the money supply
question
The M(1) money supply is composed of:
answer
-checkable deposits and currency in circulation
question
To keep high inflation from eroding the value of money, monetary authorities in the United States:
answer
-control the supply of money in the economy
question
The paper currencies of the U.S. are also called:
answer
-Federal Reserve notes
question
What function is money serving when you deposit money in a savings account?
answer
-a store of value
question
The Federal Reserve Banks are owned by the:
answer
-member banks
question
The Federal Reserve System consists of which of the following?
answer
-Board of Governors and the 12 Federal Reserve Banks
question
The basic requirement for an item to function as money is that it be:
answer
-generally accepted as a medium of exchange
question
Which of the following items are included in money supply M(2) but not M(1)?
answer
-savings deposits
question
The currency or money of the United States, like those of other countries, is:
answer
-token money
Economics
Fed Funds Rate
Federal Open Market Committee
Macroeconomics
Monetary Economics
Principles Of Economics: Macroeconomics
econ chp16 79 terms

Steven Colyer
79 terms
Preview
econ chp16
question
Economists use the word "money" to refer to
answer
those assets regularly used to buy goods and services.
question
Money is consisted of cash, which is ____ by definition, as well as other highly liquid assets.
answer
liquid
question
Currency in circulation
answer
is cash held by the public (debit card- considered money).
question
Checkable bank deposits
answer
bank accounts on which people can write checks (also considered money)
question
Money supply
answer
the total value of financial assets in the economy that are considered money.
question
higher money supply= lower interest rate, lower money supply= higher interest rate
answer
question
The *narrowest* definition of "money supply" (M1) considers only the most liquid assets to be money (3):
answer
1. Currency in circulation ($1 bills, $5 bills) 2. Traveler's checks 3. Checkable/demand bank deposits
question
Money plays three *roles*:
answer
1. Medium of exchange (3) 2. a Store of value, 3. a Unit of account.
question
Medium of Exchange
answer
an asset that individuals use to trade for goods and services rather than for consumption
question
Example of the problem of finding a "double coincidence of wants" or *medium of exchange*
answer
In a barter system, a cardiac surgeon and an appliance store owner could trade only if the store owner happened to want a heart operation and the surgeon happened to want a new refrigerator.
question
In order to act as a medium of exchange, money must also be a:
answer
store of value
question
Store of Value
answer
a means of holding purchasing power over time (a necessary but not distinctive feature of money).
question
Unit of Account
answer
the commonly accepted measure individuals use to *set prices and make economic calculations*.
question
Example of unit of account:
answer
during the Middle Ages, peasants typically were required to provide landowners with goods and labor rather than money. A peasant might, for example, be required to work on the lord's land one day a week and hand over one-fifth of his harvest.
question
Types of Money (3):
answer
1. Commodity money 2. Commodity-backed money 3. Fiat money
question
Commodity money
answer
is a *good* used as a medium of exchange that has intrinsic value in other uses (normally gold or silver).
question
WW2 example of alternative uses of *commodity money*:
answer
cigarettes, which served as money in World War II prisoner of war camps, were also valuable because many prisoners smoked. Gold was valuable because it was used for jewelry and ornamentation, aside from the fact that it was minted into coins.
question
Commodity-backed money
answer
is a medium of exchange with *NO intrinsic value* whose ultimate value is *guaranteed by a promise* that it can be converted into *valuable* goods.
question
TRUE OR FALSE: Commodity-backed money uses resources more efficiently than simple commodity money (like gold), because it ties up fewer valuable resources.
answer
True
question
Example of commodity-backed money:
answer
By 1776, the year in which the United States declared independence and Adam Smith published The Wealth of Nations, there was widespread use of paper money in addition to gold or silver coins. Unlike modern dollar bills, however, this paper money consisted of notes issued by private banks, which *promised to exchange their notes for gold or silver coins* on demand.
question
In a famous passage in The Wealth of Nations, Adam Smith described *paper money* as a
answer
*"waggon-way through the air"* - (Smith was making an analogy between money and an imaginary highway that did not absorb valuable land beneath it).
question
TRUE OR FALSE: A U.S. dollar bill isn't commodity money, and it isn't even commodity-backed.
answer
True (Rather, its value arises entirely from the fact that it is generally accepted as a means of payment, a role that is ultimately decreed by the U.S. government).
question
Fiat Money
answer
money whose value derives entirely from its official status as a means of exchange (ex: paper money)
question
Fiat money has two major advantages over commodity-backed money:
answer
1. creating it doesn't use up any real resources beyond the paper it's printed on. 2. the supply of money can be adjusted based on the needs of the economy, instead of being determined by the amount of gold and silver prospectors happen to discover.
question
Risks of Fiat Money (2):
answer
1. Counterfeiting (imitation/fraudulent money) 2. governments that can create money whenever they feel like it will be tempted to abuse the privilege.
question
Historically, money first took the form of ____ money, then of _____ money. Today the dollar is pure ___ money.
answer
commodity, commodity-back, fiat
question
Monetary Policy
answer
increases/decreases the *money supply* to speed up/slow down the overall economy
question
Monetary Aggregate
answer
an overall measure of the money supply
question
The money supply is measured by two monetary aggregates (calculated by the Fed. Reserve):
answer
M1 and M2
question
*M1* includes: (assets you can use to buy groceries:)
answer
1. currency 2. traveler's checks 3. checkable/demand deposits
question
*M2* (the broader definition of money supply) includes:
answer
1. Savings accounts/deposits 2. Near-moneys: a. Time deposits (CD's, *interest-bearing deposit* held by a bank or financial institution for a *fixed term*), b. Market funds.
question
Near-moneys
answer
financial *assets that aren't directly usable as a medium of exchange* but can be readily *converted into* cash/checkable bank deposits, such as *savings accounts*.
question
TRUE OR FALSE: Because currency and checkable deposits are directly usable as a medium of exchange, M1 is the *most liquid measure of money*.
answer
True
question
Suppose you hold a gift certificate, good for certain products at participating stores. Is this gift certificate money?
answer
No. Although a gift certificate can easily be used to purchase a very defined set of goods or services, it cannot be used to purchase any other goods or services. A gift certificate is therefore not money, since it cannot easily be used to purchase all goods or services.
question
A *bank* uses *liquid assets* in the form of ___ ____ to finance the illiquid investments (stocks, bonds,collectibles) of borrowers.
answer
bank deposits
question
Bank Reserves
answer
currency in bank vaults and bank deposits held at the Federal Reserve (not held by the public, not part of currency in circulation).
question
T-account

answer
a tool for analyzing a business's financial position by showing. *Bank Assets*: reserves and loans. *Bank Liabilities*: deposits *Customer Assets*: deposits. *Customer liabilities*: loans
question
TRUE OR FALSE: banks are required by law to maintain assets larger by a specific percentage than their liabilities.
answer
True (ex: First Street Bank holds reserves equal to 10% of its customers' bank deposits).
question
Reserve Ration (rr)
answer
the fraction of bank deposits that a bank holds as reserves
question
The Federal Reserve does (3):
answer
1. serve as a bank regulator 2. conduct monetary policy 3. act as a lender of last resort
question
To understand why banks are regulates, let's consider a problem banks can face:
answer
bank runs
question
Banks convert most of their depositors' funds into ____ made to borrowers.
answer
Loans- that's how banks earn revenue: by charging interest on loans. (illiquid)
question
Bank run
answer
a phenomenon in which many of a bank's depositors try to withdraw their funds due to fears of a bank failure (ex: in the movie "What a Wonderful Life", the scene where everyone is at the bank demanding their money)
question
Bank Regulation- A system designed to protect depositors and the economy against bank runs, has four main features:
answer
1. deposit insurance 2. capital requirements 3. reserve requirements 4. the discount window
question
Deposit insurance
answer
guarantees that a bank's depositors will be paid even if the bank can't come up with the funds, up to a maximum amount per account.
question
Capital Requirements
answer
To reduce the incentive for excessive risk taking, regulators require that the owners of banks hold substantially more assets than the value of bank deposits. (ex: gold/silver)
question
Reserve Requirements
answer
rules set by the Federal Reserve that specify the minimum reserve ratio for banks. (ex: in the US, the minimum reserve ratio for checkable bank deposits is 10%)
question
the Discount Window
answer
is an arrangement in which the Federal Reserve stands ready to lend money to banks in trouble (*Fed act as a lender of last resort*)
question
Excess reserves
answer
are a bank's reserves over and above its required reserves
question
The Federal Reserve controls the *sum* of bank reserves and currency in circulation, called the
answer
monetary base
question
Money Multiplier
answer
is equal to the money supply divided by the monetary base.
question
If the reserve ratio is 10 percent, the money multiplier is
answer
10 1/0.1= 10
question
The Federal Reserve is a *central bank*:
answer
an institution that oversees and regulates the banking system and controls the monetary base.
question
If the central bank in some country lowered the reserve requirement, then the money multiplier for that country would
answer
increase.
question
The Federal Reserve system consists of two parts:
answer
1. the Board of Governors (7) 2. the regional Federal Reserve Banks (12)
question
The Board of Governors is constituted like a government agency: its 7 members are appointed by the president and must be approved by the Senate (14-year terms)
answer
***
question
The 12 Federal Reserve Banks each serve a region of the country, proving various banking/supervisory services. One of their jobs, is to audit the books of private-sector banks to ensure their financial health. Each regional bank is run by a board of directors chosen from the local banking and business community.
answer
***
question
The Federal Reserve Bank of New York plays a special role: it carries out
answer
Open-market operations (usually the main tool of monetary policy).
question
Decisions about *monetary policy* are made by which group within the Federal Reserve System?
answer
the FOMC (the Federal Open Market Committee)
question
FOMC consists of:
answer
the Board of Governors plus five of the regional bank presidents.
question
The Fed has three main policy tools at its disposal:
answer
1. reserve requirements 2. the discount rate 3. open-market operations (most important)
question
the Federal Funds Market
answer
allows banks that fall short of the reserve requirement to borrow funds/reserves from banks with excess reserves.
question
the Federal Funds Rate
answer
the interest rate determined in the federal funds market (plays a key role in modern monetary policy)
question
interest rate
answer
the price of borrowing money
question
Discount Rate
answer
is the rate of interest the Fed charges on loans to banks (banks can borrow from the Fed)
question
To increase the money supply, the Fed could
answer
decrease the discount rate (or decrease the reserve requirements)
question
The Federal Reserve holds its *asset* mostly in short-term government bonds called
answer
U.S. Treasury bills (left side of T-account)
question
The Fed liabilities are the
answer
monetary base- currency in circulation + bank reserves (right side of T-account)
question
The Federal Reserve's Assets and Liabilities T-account

answer
question
when the Fed buys or sells short term government bonds, Treasury Bills (normally through a transaction with commercial banks)
answer
open market operations
question
an Open-Market Operation
answer
is a purchase or sale of government debt by the Fed.
question
An open-market purchase
answer
*increases* the number of *dollars* in the hands of the public and *decreases* the number of *bonds* in the hands of the public.
question
Feds open-market purchase implies?
answer
an *increase in money supply* and *fall of interest rate*
question
The Glass-Steagall Act of 1933 separated banks into two categories:
answer
1. Commercial banks 2. Investment banks
question
commercial banks
answer
accepts deposits and is covered by deposit insurance.
question
investment bank
answer
trades in financial assets and is not covered by deposit insurance.
question
a Savings and Loan (thrift)
answer
is another type of deposit-taking bank, usually specialized in issuing home loans.
question
In the _______(thrift) crisis of the 1970s and 1980s, insufficiently regulated S&Ls incurred huge losses from risky speculation.
answer
savings and loan (S&L) crisis
question
During the mid-1990s, the hedge fund LTCM used huge amounts of ______ to speculate in global markets, incurred massive losses, and collapsed.
answer
leverage
Federal Open Market Committee
Federal Reserve Banks
Federal Reserve System
Principles Of Economics: Macroeconomics
Troubled Asset Relief Program
Macro Test Chapter 32 , 33 68 terms

Brandon Ruffin
68 terms
Preview
Macro Test Chapter 32 , 33
question
what function of money enables society to gain the benefits of geographic and labor specialization
answer
medium of exchange
question
paper money or currency in the us is essentially a debt of a
answer
government agency
question
the paper currencies of the us
answer
federal reserve notes
question
federal reserve banks are owned by
answer
member banks
question
money supply m1 does not include the currency held by
answer
commercial banks
question
what is most liquid
answer
checkable deposits
question
members of the federal reserve board of governers are appointed by the president to
answer
staggered 14 year terms
question
sets policy on the sale and purchase of government bonds by the fed
answer
federal open market committee
question
does the federal reserve system provide banking services to the general public
answer
no
question
what is one consequence of fractional reserve system
answer
bank runs
question
checkable deposits ar considered blank to banks
answer
liabilities
question
properties are considered blank to banks
answer
assets
question
a bank is in the position to make loans when required reserves are blank actual reserves
answer
less than
question
primary reason commercial banks must keep required reserves on deposit at the fed is to allow the fed to control the amount of
answer
bank lending
question
federal funds rate is the rate that banks pay for loans from
answer
other banks
question
equal tp excess reserved times the money multiplier
answer
maximum checkable deposit expansion
question
the multiple by which commercial banking system can expand the money supple equals the reciprocal of the
answer
reserve ratio
question
when bankers hold excess reserves, the money creating potential of the banking system
answer
decreases
question
money that is usable for buying and selling goods and services
answer
medium of exchange
question
society used monetary units as yardsticks for measuring rlative worth of goods
answer
unit of account
question
money that enables people to transfer purchasing power from the present to the future
answer
store of value
question
an assets ease with whivh it can be converted to cash with no purchasing power lost
answer
liquidity
question
what does the m1 consist of
answer
currency checkable deposits
question
cash and coins
answer
currency
question
all deposits in commercial banks or thrift institutions on whcih checks of any size can be drawn
answer
checkable deposits
question
bills or coins for which the amount printed on the currency bears no relationship to the value of paper or metal
answer
token money
question
highly liquid financial assets that do not fully function as a medium of exchange but can easily be converted to currency or checkable deposits
answer
near monies
question
what does the m2 money supply include
answer
m1 noncheckable savings accounts small time deposits individual money market mutual fund balances
question
a deposit in a commercial bank or thrift institution on which interest payments are received
answer
savings account
question
interest bearing accounts offered by commercial banks and thrift institutions that invest deposited funds into a variety of short term securities
answer
money market deposit account
question
an interest earning deposit in a commercial bank or thrift institution that invest deposited funds into a variety of short term securities
answer
time deposit
question
mutual funds that invest in short term securities by using the combined funds of individual shareholders to buy interest bearing short term credit instruments
answer
money market mutual funds
question
any form of currency that by law must be accepted by creditors for the settlement of a financial debt
answer
legal tender
question
what is another name for creditors
answer
lenders
question
the us central bank consisting of the board of governors and the 12 federal reserve banks, that controls the lending activity of banks and thrifts and thus the money supply
answer
federal reserve system
question
the seven member group that supervises and controls te money and banking system of the us
answer
board of governors
question
the 12 banks chartered by the us gov that collectively act as the central bank of the us
answer
federal reserve banks
question
set monetary policy and regulate the private banking system under the direction of the board of governors and federal open market committee
answer
federal reserve banks
question
12 member group that decides monetary policy and how it is executed through open market operations
answer
federal open market committee
question
high interest rate loans to home buyers with above average credit risk
answer
subprime mortgage loans
question
bonds that represent claims to all or part of the monthly mortgage payments from the pools of mortgage loans made by leaders to borrowers to help purchase residential property
answer
mortgage backed securities
question
the process of aggregating many individual financial debts into a pool and then issuing new securities backed by the pool
answer
securitization
question
federal program that authorized the us treasury tp loan up tp 700 billion to critical financial institutions and other us firms that were in extreme financial trouble
answer
troubled asset relief program
question
the possibility that individuals or institutions will change their behavior as the result of a contract or agreement
answer
moral hazard
question
banks supported by tax payer money
answer
quasi public banks
question
the value or purchasing powerr is blank related to the price level
answer
inversely
question
backed by the governments ability to keep value stable
answer
money supply
question
state and national banks that provide checking and savings accounts and make loans
answer
commercial banks
question
savings and loan, mutual savings, credit unions that offer checking and saving accounts and make loans
answer
thrifts
question
offer policies with which individuals pay premiums to insure against loss
answer
insurance companies
question
pool costumer deposits to purchase stocks or bonds
answer
mutual fund companies
question
collect savings from workers and then invest funds to pay retirement benefits
answer
pension funds
question
offer security advice and buy and sell stocks and bonds for clients
answer
securities firms
question
firms that help corporations and governments raise money by selling stocks and bonds
answer
investment banks
question
only a portion of checkable deposits are backed up by reserves of currency in bank vaults pr deposits at the central bank
answer
fractional reserve banking
question
a statement of assets, liabilities, and net worth of a firm or individual at some given time
answer
balance sheet
question
the currency a bank has on hand in its vault and cash drawers
answer
vault cash
question
the funds that each commercial bank and thrift institution must deposit eith its local federal reserve bank or hold as vault cash
answer
required reserves
question
reserve ratio
answer
required reserves divided by liabilities
question
what does excess reserves equal
answer
actual minus required
question
the interest rate that us banks charge one another on overnight loans made out of their excess reserves
answer
federal funds rate
question
the reserve ratio for all commercial banks is
answer
20 percent
question
the multiple of its excess reserves by which the banking system can expand checkable deposits and thus the money suoply by making new loans
answer
monetary multiplier
question
the money multiplier equals
answer
one divided by required reserve ratio
question
stored gold and gave a receipt to be used as money by public
answer
goldsmiths
question
maximum amount of new money created by a single dollar of excess reserves
answer
money multiplier
question
the use of borrowed money to magnify profits and losses
answer
leverage
question
does a $200 deposit into checking account create new money
answer
no
Economics
Federal Open Market Committee
Federal Reserve Board Of Governors
Federal Reserve Notes
Federal Reserve System
ECON Ch. 31 True/False; I got 61/67 correct. take your chances 67 terms

Charlotte Small
67 terms
Preview
ECON Ch. 31 True/False; I got 61/67 correct. take your chances
question
The Federal Reserve is responsible for issuing currency
answer
True
question
Checkable deposits held in saving and loan institutions, mutual savings banks, and credit unions are part of the M1 definition of the money supply
answer
True
question
\"Legal tender\" is another name for fiat money
answer
True
question
The Federal Reserve System has twelve Federal Reserve Districts
answer
True
question
Mutual Savings Banks were owned by the depositors.
answer
True
question
A small time deposit is one that is less than $100,000.
answer
True
question
A checking account is another name for a time deposit.
answer
False
question
There are about 50,000 commercial banks in the United States.
answer
False
question
One of the three basic functions of money is to serve as legal tender.
answer
false
question
A new member to the Board of Governors is appointed every two years
answer
True
question
Without an acceptable domestic currency to serve as a medium of exchange, a nation might try to substitute a more stable currency from another nation.
answer
True
question
There are 25 branch bank cities in the Federal Reserve System.
answer
False
question
Currency and coins held by banks are part of the M1 definition of money supply.
answer
False
question
Credit cards are treated as money because they facilitate transactions.
answer
False
question
The 12 Federal Reserve Districts issue paper money called Federal Reserve Notes
answer
True
question
The current chairman of the Federal Reserve system is Alan Greenspan
answer
False
question
The President of the New York Federal Reserve District is a permanent member of the Federal Open Market Committee.
answer
True
question
The M2 money supply may be larger or smaller than the M1 money supply depending on the size of small time deposit balances and Money Market Mutual Fund balances held by individuals.
answer
false
question
The Federal Open Market Committee (FOMC) is made up of the presidents of the Federal Reserve Banks, the Secretary of the Treasury, and the chair of the President's Council of Economic Advisers.
answer
False
question
The value of money in the United States is based on the stocks of precious metals held by the United States government.
answer
False
question
Thrifts are known as \"banker's banks\" because they lend money to commercial banks
answer
False
question
Too much money in the nation's economy leads to a general rise in prices, or deflation.
answer
False
question
Depository institutions are a major source of money in the U.S. economy.
answer
True
question
One function of the Federal Reserve System is supplying check to banks and their customers.
answer
False
question
The M2 money supply is larger than the M1 money supply.
answer
True
question
If a coin is token money, its face value is greater than its intrinsic value.
answer
True
question
Each member of the Board of Governors serves a 14 year term.
answer
True
question
Approximately $450 billion of U.S. currency is circulating in foreign countries.
answer
False
question
The United States Treasury Department has a checking account with the Federal Reserve System.
answer
True
question
The twelve Federal Reserve Banks are governmentally owned but privately controlled
answer
False
question
The percentage share of total U.S. financial assets held by commercial banks and thrifts has increased since 1980.
answer
False
question
Federal Reserve Banks are bankers' banks
answer
True
question
The United States Treasury is the only source of money in the U.S. economy.
answer
False
question
Money held as cash earns interest.
answer
false
question
Assets are anything of value that a bank may own.
answer
false. not just a bank can have assets
question
The number of U.S. banks has increased since 1990.
answer
False
question
The M1 money supply is composed of currency, checkable deposits, and time deposits.
answer
False
question
The Department of the Treasury is responsible for manufacturing money.
answer
True
question
A savings account is another name for a demand deposit.
answer
false
question
The gold standard is a system in which a nation's paper currency is backed by gold.
answer
True
question
The chairman of the Federal Reserve System serves a four year term and may be reappointed by the President of the United States.
answer
True
question
\"The Fed\" is the common name for the Federal Reserve system.
answer
True
question
Electronic money and smart cards will increase the problems for the Federal Reserve in controlling the money supply.
answer
True
question
The Federal Deposit Insurance Corporation covers bank deposits up to $250,000.
answer
true
question
A bank statement of assets and liabilities is called a balance sheet.
answer
True
question
M2 assets are also called near money.
answer
true
question
Required reserves is that percentage of deposits that banks have to keep in the bank at all times.
answer
True
question
Houston is the headquarters city of District 11 of the Federal Reserve System.
answer
False
question
Open market operations are the most commonly used tool of Fed monetary policy.
answer
True
question
Fidelity, Putnam, Dreyfus, and Kemper are examples of mutual fund companies.
answer
True
question
All nationally chartered banks in the United States are required to join the Federal Reserve System.
answer
True
question
Since the 1980s, banks and thrifts have lost their share of the financial services industry and control over financial assets.
answer
True
question
The President of the United States appoints the chairmen of the Federal Reserve System and the nominee must be confirmed by the Supreme Court.
answer
False
question
The Federal Open Market Committee (FOMC) serves as the fiscal agent for the U.S. government.
answer
False
question
Savings and Loans are also called thrifts.
answer
True
question
The currency owned by commercial banks is included in the money supply.
answer
False
question
The Federal Reserve is prohibited from lending money to banks and thrifts.
answer
False
question
The Federal Reserve System was created by Congress in 1913.
answer
True
question
M1 consists of assets that can be used as or directly converted to cash.
answer
True
question
The Federal Reserve Note is the paper currency of the United States.
answer
True
question
In the United States, all money is essentially the debt of government, commercial banks, and thrift institutions.
answer
True
question
When you use money to purchase groceries, money is functioning as a store of value.
answer
False
question
Tightening the money supply cause interest rates to decrease.
answer
False
question
From 1980 to 2005, pension funds, insurance companies, and securities-related firms increased their share of financial assets relative to banks and thrifts.
answer
False
question
The Federal Open Market Committee (FOMC) regulates markets and enforces antitrust laws to keep markets open and competitive
answer
False
question
The M2 money supply equals M1 minus small time deposits plus Money Market Mutual Fund balances held by individuals.
answer
false
question
The value of money varies inversely with the price level.
answer
True
Economics
Federal Open Market Committee
Personal Finance
Money, Banking, and Finance 53 terms

Deloris Connelly
53 terms
Preview
Money, Banking, and Finance
question
MAP Using information on the flowchart, which group makes decisions about the growth of the money supply and the level of interest rates
answer
The Federal open market committee
question
MAP Chicago district is represented by which number on the map
answer
7
question
MAP The information shown in the graft on the personal saving rates indicates that
answer
As the wealth of Americans increased the rate of personal savings decreased
question
MAP Your grandparents obtained a mortgage on a house at some point between 1972 and 2004. According to the graph what would have been the worst possible year for them to have obtained a loan to buy a house during those decades
answer
1981
question
MAP US currency is part of
answer
M1 M2 and M3
question
Money is useful to people because it is
answer
A medium of exchange
question
Gold, olive oil and cattle even beer have been used as money. This type of money is
answer
Commodity money
question
The paper currency in the United States has value because
answer
The federal government says it has value
question
The first bank of the United States was
answer
The first national bank of the United States government
question
When was the Federal Reserve system established
answer
1913
question
Following the great depression, the Federal Reserve
answer
Imposed restrictions on the interest rate that banks could pay depositors
question
Federal Reserve system is in charge of
answer
monetary policy
question
Which of the following banking activities was prohibited to commercial banks by the glass Steagall act of 1933
answer
Underwriting stocks
question
Credit risk is the risk that the borrower will not
answer
Repay all the money owed
question
financial intermediary
answer
Facilitates the transfer of funds from savers to borrowers
question
Companies raise funds to expand their business by
answer
All of the above
question
Liquidity risk is
answer
The chance that investors will not be able to turn investments back into cash quickly enough to meet their financial needs
question
The government of the United States borrows most of the money it needs by
answer
Selling treasury bills and treasury bonds
question
Inflation risk is the prospect of
answer
Inflation reducing the value of investors financial assets
question
Yield to maturity is
answer
The annual return on a bond held to maturity
question
Credit unions
answer
Are fairly small and specialize in home mortgages and car loans
question
Finance companies
answer
Make loans to consumers
question
The Federal deposit insurance Corporation
answer
Insures customer deposits if I think fails
question
M1
answer
Represents money that people have easy and immediate access to
question
A prospectus
answer
Provides potential investors with information on performance of mutual fund portfolio's
question
Many markets are markets where
answer
Securities with less than a year to maturity are traded
question
Capital markets are markets where
answer
Securities with more than a year to maturity are traded
question
Diversification is an investment strategy to
answer
Reduce risk by spreading investments among several assets
question
For countries money loses its function as a store of value
answer
All of the above???
question
The expiration of the charter of the first bank of the United States in 1811 resulted in
answer
Currencies that lost value
question
The panic of 1907 was caused by
answer
The continuing problems with the nations banking system because state charter banks did not have enough gold to exchange for the paper money they issued
question
Which of the following factors worsen the effects of the Great Depression in 1933
answer
Massive bank failures
question
The Glass-Steagall act passed by Congress in 1933
answer
Prohibited commercial banks from underwriting stocks and bonds
question
An investor will purchase bonds that are rated AAA because they
answer
Very low risk debt securities
question
Thanks make a profit by
answer
All of the above
question
The late 1980s savings and loan crisis resulted primarily from
answer
Regulation in a high interest-rate environment
question
The repeal of the glass Steagall act by Congress in 1999
answer
Paved the way for banks to sell financial assets such as stocks and bonds
question
John wants to invest his savings and highly liquid investments. Which of the following financial assets serve this financial goal
answer
Money market funds
question
Jamaal wants to die versify his investments. Which of the following investments should Jamall invest in to best serve his financial goal
answer
A portfolio of stocks, bonds, and precious metals
question
An increase in savings
answer
Provides more funds for investments
question
An increase in investment
answer
Expands the productive capacity of the economy
question
James has purchased a 10-year-old bond that pays a $50 coupon. If interest rates go up
answer
The bond price will go down
question
Increasing and decreasing the money supply through monetary policy is generally done by
answer
Federal Reserve
question
When the Federal Reserve puts money into the banking system
answer
Short-term interest rates fall
question
Tanyika needs a loan to buy furniture for her house. She can get a loan from all the following except
answer
Federal Reserve
question
Rosa expects interest rates to fall for the next 10 years, she should invest her money in
answer
10 year bonds
question
If Ted wants to buy a house and believes the interest rates will rise, he should
answer
ApPly for a fixed rate mortgage
question
Fiscal policies are actions taken by the government to influence the economy through texting or spending. To assist the economy to come out of the recession, Congress can pursue a fiscal policy that
answer
Lowers taxes
question
In 1791, the US Congress created the Bank of America. The creation of the bank was part of a three-part plan to strengthen the US economy. Who is responsible for presenting the plan to Congress
answer
Alexander Hamilton
question
In 1791, the conflict over the bank of the United States led to the foundation of two rival political parties. These two parties were the
answer
Federalist and the Democratic Republican Party's
question
During the 1800s, the nation supply of current sea was tied to its national reserves of either gold or silver. In 1900, and act was passed by Congress that would set the standard by which US Currensy is valued. The standard was set by the
answer
Gold standard act
question
In 1913, Congress passed the Federal Reserve act. The purpose of this act was to
answer
Make the federal government responsible for the regulation of interest rates in the supply of money
question
A large bill out of savings and loans institutions became necessary in 1990 when it was discovered that nearly 2000 of them were in solvent and facing closure. One of the causes of this crisis was the
answer
Reckless financial speculation following the big Deregulation of the 1980s
Economics
Federal Open Market Committee
Macroeconomics
money and the banking system 41 terms

Brenda Gannon
41 terms
Preview
money and the banking system
question
Most observers nowadays see monetary policy as much less important than fiscal policy.
answer
ANS: F
question
In September 2007 the British bank Northern Rock which specialized in home mortgages experienced a noteworthy bank run.
answer
ANS: T
question
A bank run involves a large inflow of money into commercial banks.
answer
ANS: F
question
Barter transactions involve a double coincidence of wants.
answer
ANS: T
question
Barter transactions typically take place between two individuals with the same goods to supply.
answer
ANS: F
question
When people trade goods for money, money is being used as a medium of exchange.
answer
ANS: T
question
When prices for goods and services are quoted in money terms, this is an example of money being used as a store of value.
answer
ANS: F
question
Inflation increases the use of money as a store of value.
answer
ANS: F
question
Gold and silver have historically been the most common form of commodity money.
answer
ANS: T
question
The only major disadvantage of paper money is that it is hard to divide into smaller denominations.
answer
ANS: F
question
The new $20 bills were designed with features to make counterfeiting more difficult.
answer
ANS: T
question
Money that is backed solely by a government decree is referred to as fiat money.
answer
ANS: T
question
Modern paper money is fiat money because it is backed only by the faith the holder has in the government that issued it.
answer
ANS: T
question
The U.S. government will probably return soon to a system of paper money backed by gold.
answer
ANS: F
question
On the Micronesian island of Yap, it is easier to make purchases with stone wheel currency than it is to make purchases with paper currency including the U.S. dollar.
answer
ANS: T
question
The lion's share of purchases and transactions in the U.S. economy are made with coins and paper money.
answer
ANS: F
question
When you pay for some purchase with a check, cash must be transferred to another account to pay for the check
answer
ANS: F
question
The amount of money held in checking accounts is significantly greater than money in the form of currency.
answer
ANS: T
question
The composition of M2 as of April 2010 includes saving deposits at savings banks and credit unions.
answer
ANS: T
question
The main advantage of money market deposit accounts over traditional checking accounts is the ease of check writing.
answer
ANS: F
question
Many economists believe that the difference between savings accounts and checking accounts is disappearing.
answer
ANS: T
question
Liquidity refers to the ability of an asset to hold its value in periods of inflation.
answer
ANS: F
question
E-cash cards are considered a major portion of the modern money supply.
answer
ANS: F
question
Fractional reserve banking began as a result of the search for additional profits
answer
ANS: T
question
Fractional reserve banking has three crucial features: bank profitability, bank discretion over the money supply, and bank exposure to runs.
answer
ANS: T
question
Bank runs are \"contagious\" in that they often spread to other banks.
answer
ANS: T
question
A banker motivated by profit maximization may make decisions that destabilize the banking system.
answer
ANS: T
question
Most banks in the United States are owned by the government and operate as nonprofit institutions.
answer
ANS: F
question
Due to the private nature of bank ownership, there is often a difference between bankers' goals and macroeconomic objectives.
answer
ANS: T
question
Most bank deposits in the United States are insured by the Federal Deposit Insurance Corporation (FDIC).
answer
ANS: T
question
Unlike recent events in England, the United States has no recent history of bank failures.
answer
ANS: F
question
Banks in the United States may create new money equal to their amount of required reserves.
answer
ANS: F
question
To a bank, an asset is an obligation that it owes to someone else.
answer
ANS: F
question
If you have a checking account at Citibank, the account is a liability of the bank.
answer
ANS: T
question
Net worth increases in the same proportion as liabilities increase.
answer
ANS: F
question
Banks try to keep their excess reserves at a maximum in order to maximize profits.
answer
ANS: F
question
The money multiplier process is based on the principle of fractional reserve banking.
answer
ANS: T
question
The value of the deposit multiplier is 1 divided by the required reserve ratio.
answer
ANS: T
question
The value of the deposit multiplier is increased if individuals hold all their money in cash.
answer
ANS: F
question
Systemic risks would be most prevalent at larger banks like Bank of America and Citibank.
answer
ANS: T
question
During the 2007-2009 financial crisis, the U.S. government decided that Lehman Brothers was not too big to fail and that AIG was too big to fail.
answer
ANS: T
Commercial Banks And Thrift Institutions
Economics
Federal Open Market Committee
Federal Reserve Notes
Chapter 10 – Money & Banking 20 terms

Sarah Adrian
20 terms
Preview
Chapter 10 – Money & Banking
question
What are the three uses of money?
answer
A medium of exchange, a unit of account, a store of value
question
What are the six characteristics of money?
answer
Durability, portability, divisibility, uniformity, limited supply, acceptability
question
What is the source of money's value?
answer
Commodity, representative, fiat
question
Describe the shifts between centralize and decentralized banking before the Civil War.
answer
The Federalists, led by Alexander Hamilton, believed that a centralized banking system was a key to promoting industry and trade. They proposed a national bank. The Antifederalists, led by Thomas Jefferson, opposed this plan. They feared that the wealthy would gain control of the bank and use its resources to increase their power.
question
How did government reforms stabilize the banking system in the later 1800s?
answer
The first paper currency since the Continental was issued; The National Banking Acts of 1863 and 1864 gave the federal government the power to charter banks, issue currency, and hold gold and silver reserves to cover bank notes; adopted the gold standard.
question
What were the developments in banking in the early 1900s?
answer
Federal Reserve System; Federal Reserve Banks; Member banks; Federal Reserve Board; Short-Term Loans; Federal Reserve Notes
question
What were the causes of two recent banking crises?
answer
Savings and Loan Crisis - the deregulation of several industries Subprime Mortgage Crisis - people couldn't pay back their loans and had to foreclose on their houses
question
How is the money supply in the United States measured?
answer
M1: traveler's checks, currency, demand deposits, and other checkable deposits M2: savings deposits, retail money market funds, small denomination time deposits, and everything in M1
question
What are the functions of financial institutions?
answer
To provide electronic services; to issue credit cards; to make loans to businesses; to provide mortgages to prospective home buyers; to manage ATM machines
question
What are the different types of financial institutions?
answer
Commercial Banks, Savigs and Loan Associations, Saving Banks, Credit Unions, Financial Companies
question
What changes were brought about by electronic banking?
answer
Automated Teller Machines (ATMs), debit cards, and home banking
question
What is money?
answer
Anything that is generally accepted as final payment for goods and services
question
What is a medium of exchange?
answer
Anything that is used to determine value during the exchange if goods and services
question
What is barter?
answer
The direct exchange of one set of goods or services for another without involving money
question
What is a unit of account?
answer
A means for comparing the values of goods and services
question
What is a store of value?
answer
Something that keeps it's value if it is stored rather than spend
question
What is currency?
answer
Coins and paper bills used as money
question
What is specie?
answer
Coins made of gold
question
What is a bank run?
answer
A situation in which many depositors simultaneously decide to withdraw money from a bank
question
What is liquidity?
answer
A measure of the ease with which an asset can be converted into money without significant loss of value
Communism And Socialism
Economics
Federal Open Market Committee
Health Care Policy
Principles Of Economics: Macroeconomics
Principles Of Marketing
Chapter 10 Study Guide Personal Financial Planning 24 terms

Chad Lipe
24 terms
Preview
Chapter 10 Study Guide Personal Financial Planning
question
economy
answer
the ways in which nations make decisions to allocate their resources
question
goods
answer
physical items that is produced and can be weighed and measured
question
inflation
answer
rise in the level of prices for goods and services over time
question
liquidity
answer
the ability to easily convert financial assets into cash without loss of money
question
personal financial planning
answer
arranging to spend, save, and invest money to live comfortably, have financial security, and achieve goals
question
values
answer
the beliefs and principles you consider important, correct, and desirable
question
consumable
answer
something that can be used up by consumers
question
intangible
answer
assets that are saleable though not material or physical
question
durable
answer
serviceable for a long time
question
economics
answer
the study of the decisions that go into making, distributing, and using goals and services
question
services
answer
a task that a person or machine performs for you
question
goals
answer
the things one wants to accomplish
question
opportunity costs
answer
what is given up when making one choice instead of another
question
present value
answer
the amount of money one would need to deposit now in order to have a desired amount in the future
question
future value
answer
the amount an original deposit will be worth in the future based on earning a specific interest rate over a specific period of time
question
time value of money
answer
the increase of an amount of money due to earned interest or dividends
question
consumer
answer
a person who purchases and uses goods or services
question
annuity
answer
a series of equal regular deposits
question
interest
answer
the price that is paid for the use of another's money
question
principal
answer
the original amount of money on deposit
question
What economic factors and conditions might influence a person's financial planning?
answer
1. life situations 2. personal values 3. economic factors
question
What are the six steps of financial planning?
answer
1. determine current financial situation 2. develop financial goals 3. identify alternative courses of action 4. evaluate alternatives 5. create and use financial plan of action 6. review and revise plan
question
What are the 4 parameters of a financial goal?
answer
1. realistic 2. specific 3. set within clear time frame 4. helps one decide what type of action to be taken
question
What are the consequences of financial decisions?
answer
1. personal opportunity costs 2. financial opportunity costs