ECON 2301 Exam 4 Review

What is the main source of a bank's income?

How does the Fed change the interest rate?

If the MPC is .75, What is the multiplier?

If people are moving lots of money from M1 to M2, the economy is likely going into a RECESSION

Recessions/expansions, price level changes, and financial innovations are all money demand shifters

Which property of money allows us to pay for things in cash?

How do Keynesians view policy?

How many Board of Governors vote?

Fiat money is backed by gold

As interest rates INCREASE, what happens to money demand?

What does the velocity of money measure?

How do we fight an inflationary gap using monetary policy?

Banks are allowed to hold reserves under the required reserve ratio as long as they are FDIC insured

What is liquidity?

Cost-push inflation initially creates a recessionary gap

What are excess reserves

What do classical economists think is true regarding wages?

Marginal propensity to consume (MPC) and marginal propensity to save (MPS) always equal 1 when combined

Banks holding excess reserves speeds up money multiplication

If the required reserve ratio (RRR) is 10% and the bank has $40,000 in deposits, how much reserves are required?

Which of these is NOT a liability for a bank?

Money creation depends largely on the required reserve ratio (RRR)

What type of gap is initially created if the price of oil significantly decreases?

Which of the following is true about credit unions?

How much money is created if the RRR is 6% and there is $700 of new money to be multiplied (A)?

How does the Fed INCREASE the money supply?

Which branch always votes?

How much does the FDIC insure?

What is money demand (MD)?

Who is the current president of the Board of Governors?

Which is not considered M1

The discount rate is the rate that banks pay the Fed, and it is usually HIGHER than the FFR

How does M1 and M2 change if you move $100 from savings to cash?

The FDIC prevents banks from acting risky

Any time we use policy, the AD curve shifts

How many district banks are there?

Which are the only two SAS shifters?

Who do banks pay the Federal Funds Rate to?

Assets are things we own and things that are owed to us

How can we fight a recessionary gap with monetary policy?

AD shifters are things that change our GDP

How many Board of Governers are there?

What type of gap is created in America if Mexico has a deep recession?

Demand-pull inflation is initally caused by:

If the multiplier is 5 and investment spending increases by 200, what is the total impact?