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Unit 5 Econ Review Flashcards | StudBud
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Unit 5 Econ Review
Unit 5 Econ Review
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1
Bank reserves are:
The mortgages banks make to home buyers.
The fraction of deposits kept in gold with the Federal Reserve.
The deposits lent to finance illiquid investments.
The currency kept in the bank vault plus deposits with the Federal Reserve.
2
The difference between M1 and M2 is that
M2 includes checkable deposits, but M1 does not.
M1 includes checkable deposits, but M2 does not.
M2 includes savings deposits and time deposits, but M1 does not.
The dollar amount of M1 is much larger than the dollar amount of M2.
3
If there is an opening on the FED Gov Board. The President nominates an individual, and the House of Reps confirms them
False
True
4
The federal funds rate is the IR at which banks borrow excess reserves from other banks
True
False
5
“Tuition at a private school this year is $14,000.” Which function of money does this statement best illustrate?
Unit of Account
Store of Value
Medium of Exchange
6
The FED buys $25M in bonds from banks. If required reserves is 10%, the monetary supply might eventually increase by..
$500M
$250M
$200M
$300M
7
What happens to the Money Multiplier as the Required Reserve Ratio decreases?
The money multiplier is unchanged
The money multiplier decreases
The reserve ratio does not impact the money multiplier
The money multiplier increases
8
Suppose the reserve ratio is 20%. If LeBron deposits $1,000 into his checking account, his bank can increase loans by:
$1,000
$200
$800
$600
9
The reserve requirement is 20%, and Ava deposits a $500 check into checkings. HOW MUCH IS THE BANK REQUIRED TO KEEP?
$500
$300
$200
$100
10
The Money Multiplier is equal to-- 1 / Excess Reserves
True
False
11
The reserve requirement is 20%, and Ava deposits a $500 check into checkings. HOW MUCH CAN THE BANK LEND?
$100
$400
$200
$300
12
When you go to Tony's to buy groceries for your family, money is playing the role of a:
Store of Value
Unit of Account
Medium of Exchange
13
A Bank Run is an economic form of a marathon
True
False
14
You get paid and decide to put your paycheck into a savings account. Money is then playing the role of…
Unit of Account
Medium of Exchange
Liquidity of Assets
Store of Value
15
An increase in the demand for money would result from...
An increase in the price level
A decrease in real GDP
A decrease in the price level
A decrease in nominal GDP
16
You really want to buy a new gaming system. You transfer $800 from your savings to your checkings. What describes this?
M1 increases by $800, but M2 does not change
M1 decreases by $800, and M2 is increased by $800
M1 increased by $800, and M2 is decreased by $800M
M1 and M2 remain unchanged
17
If the FED conducts an open-market sale:
Bank reserves decrease and the money supply increases.
Bank reserves decrease and the money supply decreases.
Bank reserves increase and the money supply does not change.
Bank reserves increase and the money supply increases.
18
Crowding out negatively affects the economy by:
Decreasing government deficits.
Reducing investment spending on physical capital.
Decreasing government borrowing.
Decreasing consumption.
19
The primary difference between M1 and M2 is that:
M1 includes savings deposits, M2 does not
M1 includes checkable deposits, but M2 does not
M2 includes savings deposits and time deposits, but M1 does not
M2 includes checkable deposits, but M1 does not
20
The reserve requirement is 20%, and Bo deposits a $500 check into checkings. HOW MUCH CAN THE MONEY SUPPLY GROW BY?
$2,000
$2,250
$4,000
$5,000
21
The amount of money you would be willing to lend today, in exchange for money paid to you one year from now is known as
Present Value
Future Value
Inflated Value
Invested Value
22
Banks create money when they do this...
Make Loans
Hold excess reserves
Collect on interest
Banks cant just create money?
