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AP Macro Money & Finance Flashcards | StudBud
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AP Macro Money & Finance
AP Macro Money & Finance
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Money, Fractional Reserve Banking & Monetary Policy
Flashcards
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Questions
25
Answers
1
If Americans decrease their savings rate what will happen on the LF graph?
Interest rates rise, Quantity LF decrease
Interest rates fall, Quantity LF Increase
Interest rates fall, Quantity decrease
Interest rates rise, Quantity LF increase
2
If The reserve ratio is 10%. When Theo withdraws $1000 from the First Madison Bank
eventually the money supply will fall by $1000
eventually the money supply will fall by $9000
eventually the money supply will fall by $900
eventually the money supply will fall by $10,000
3
The Federal Reserve System is the _______ for the United States.
government entity that collects taxes.
largest private banking corporation in the world.
independent central bank
government-owned bank
4
The United States today uses which kind of currency?
representative money
fiat money
scarce money
gold and silver
5
The reserve ratio is the:
fraction of deposits that are lent to borrowers.
fraction of deposits that banks must hold
government's holdings of gold at Fort Knox.
bank's holdings of gold.
6
Which combination of fiscal and monetary policy can fix a recession if reserves are limited?
raise government spending and decrease money supply
decrease government spending and decrease money supply
decrease taxes and increase money supply
increase taxes and increase a money supply
7
Bonds are
certificates of deposit.
loans or IOUs.
stocks.
dividends.
8
What is the Fed’s most important monetary policy tool when reserves are LIMITED?
open market operations
changing reserve requirements
borrowing money
changing the discount rate
9
The FED would perform the action in the graph in order to fight
stagflation
recession
hyperinflation
inflation
10
Which of the following would cause a decrease in the demand for money on this graph?
an decrease in the price level
All of the above
a decrease in real GDP
A decrease in transaction costs for electronic payments
11
In the SR, the price of previously purchased bonds will _____ if interest rates on new bonds ______.
Decrease / Decrease
Increase / Decrease
Increase / Increase
No change / Increase
12
If the Fed buys $500 in government securities (RR is 10%), the monetary base
initially
increases by $5000
increases by $50
increases by $500
increases by $4500
13
A financial system brings together
savers and borrowers
banks and mutual funds.
governments and businesses.
savers and consumers.
14
In WWII, prisoners of war used cigarettes as a form of currency. This is
Commodity Money
Fiat Money
Barter
Representative Money
15
In a banking system with AMPLE reserves, which action would the FED take to accomplish the shift in the graph?
lower rate on reserves (IOR) and discount rate
raise discount rate
buy bonds (OMO)
increase government spending
16
The reserve ratio is 20%. No ER are held. If Sam deposits $500 of cash into his checking account,
initially decrease the money supply by: $400
eventually increase the money supply by: $2,500.
initially increase the money supply by: $500.
eventually increase the money supply by: $2,000.
17
You transfer $500 from your savings account to put in CDs (higher interest assets). , M1 will __ and M2___.
increase; decrease
stay the same; decrease
decrease; will stay the same
decrease; decrease
18
Assets that have liquidity are
easy to convert to silver and gold.
easy to borrow or lend.
difficult to turn into cash.
easy to turn into cash and spend
19
If the government was in deficit because of an expansionary fiscal policy, on the LF graph
There would be a decrease in supply of LF
There would be a increase in supply of LF
There would be a decrease in Demand for LF
there would be an increase in Demand for LF
20
The money multiplier is equal to:
Reserve Ration + Excess Reserves / Reserve Ratio
1 / Reserve Ratio
1 / Excess Reserves
1 - Reserve Ratio
21
The interest earnings one gives up to hold more liquid assets are:
an asset of the company.
a transactions cost.
an opportunity cost.
stock dividends.
22
Which action by the Fed could cause the shift on the Money Market graph?
buy bonds
sell bonds
raise reserve ratio
raise discount rate
23
A bank is all loaned out & holding $100 in reserves (RR 20%), what is the $ value of the Demand Deposits?
$400
$900
$1000
$500
24
When you are using money to purchase a new MP3 player, money is serving as a:
unit of account.
medium of exchange
store of value.
unit of barter.
25
Where does the bulk of the supply of loanable funds ultimately come from in the U.S.?
Personal Savings
Foreign Deposits
Government Surplus
Business Reserves
