AP Econ Unit IV

Combination that can increase investment without raising GDP

What relationship exists between bond prices and interest rates?

When inflation occurs, the purchasing power of our currency

If the Fed sells bonds, what will happen to aggregate demand?

Reserve requirement 20%. A customer deposits $100, how much of the deposit can the bank lend (excess reserves)?

Which of the following is considered the most liquid asset?

Contractionary monetary policy will increase

Reserve requirement is 20%. What is the multiplier?

Which of the following reduces inflation?

Reserve requirement is 20%. If the Fed sells $2 million in securities (long-run effect)...

How do banks create money?

Reserve requirement 10%. Deposit of $100,000. How much of this deposit can a bank initially lend?

Which combination of policies could fight a recession?

Which of the following can change the demand for money?

If there is an increase in nominal income, which of the following will most likely occur?

The relationship between the quantity of money demanded and interest rates

Why would the Fed raise interest rates?

Monetary base (M0) includes

If the Fed buys bonds on the open market,

In order to fight a recession, the central bank should

An increase in the money supply will (in the short run)

Fiat money has value because

If the Fed increases administered interest rates, it is likely battling

The Fed buying bonds

A commercial bank's ability to create money depends on

Which combination of policies would decrease aggregate demand?

The actual inflation rate is less than expected, who benefits?

The quantity theory of money states that MV=PY. If the money supply is 10 and the RGDP is 60, what is the value of V?

An increase in government spending will cause

A contraction of the money supply will cause

If the Fed sells bonds, what will happen to interest rates?

If the Fed lowers the discount rate,

If the crowding out effect raises interest rates, how can the Fed counteract it?

An increase in the money supply will

Which of the following would increase investment by decreasing interest rates?

Reserve requirement 10%. The Fed buys $400,000 worth of bonds. How much can the money supply expand?

open market operations

Placing money in savings

Reserve requirement 25%. What is the money multiplier?

When the Fed sells bonds, which of the following decreases?

In a system with ample reserves, the primary tool of monetary policy is

A contraction of the money supply will cause

How does contractionary monetary policy affect output and price level?

M2 is a different measure of the money supply because it includes

Which of the following would be a liability to a commercial bank?

The opportunity cost of holding onto currency is

Because of the reserve requirement, banks must

According to the quantity theory of money, it is important that

M1 is

Which of these is contractionary monetary policy?

If inflation is 0%, what will be the relationship between nominal and real interest rates?

When inflation occurs, the demand for money will

Expansionary monetary policy shifts aggregate demand

If the central bank buys bonds, what would happen to interest rates and bond prices?

Reserve requirement 20%. $1 million deposit. If the bank doesn't loan out all of its excess reserves, then

In a system with ample reserves, open market operations can increase or decrease the equilibrium policy rate.

In a system with ample reserves, the central bank uses open market operations to

Banks charge one another for short-term loans