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89 Cards in this Set
- Front
- Back
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An increase in aggregate demand will cause ....
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an increase in real GDP and inflation.
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An increase in aggregate supply will cause ....
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an increase in real GDP and deflation.
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What will cause a decrease in aggregate demand?
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a decrease in the velocity of money
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If the economy is experiencing both recession and inflation, what has occurred?
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a decrease in aggregate supply
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A barter system is inefficient because ...
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too many resources are devoted to transactions.
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When says that a shirt costs $5.00, that person is using money as a ....
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measure of value.
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GDP
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Gross Domestic Product
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Nominal GDP is equal to ...
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the price level times real GDP, (P X Q).
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What is GDP?
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the dollar value of all final goods and services produced in an economy in 1 year.
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GDP =
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C + I + G + (X - M)
"NOT" C + G + T + (X - M) |
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What is not a desirable physical characteristic of money?
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It should be easily counterfeited.
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What are desirable physical characteristics of money?
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It should be portable, cheap to produce, and easily recognized.
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The Board of Governors of the Federal Reserve ....
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are appointed by U. S. Presidents.
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The Federal Reserve System ...
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serves as the U. S. central bank.
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The means most often used by the Board of Governors to control the money supply is ...
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open market operations.
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If the Feds decided to increase the money supply they could ....
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lower the discount rate, lower the reserve requirement, or buy bonds.
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What does a tight money policy include?
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an increase in the discount rate, an increase in the reserve requirement, or the selling of bonds.
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A purchase of $20,000 worth of bonds by the Federal Reserve can increase the potential money supply by up to .....
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$100,000 if the reserve requirement is 20%
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A decrease in the reserve requirement by the Federal Reserve....
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increases the amount of money that banks can loan.
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`A decrease in the discount rate may increase the money supply because ....
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it encourages banks to borrow more money from the Federal Reserve
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An increase in the transactions demand for cash will ....
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decrease the money supply.
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Banks that are members of the Federal Reserve System must be ...
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members of FDIC.
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Members of the Board of Governors are also member of ....
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the Open Market Committee.
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The members of the Board of Governors are appointed by ...
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the president (or past presidents) of the U. S.
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The central bank of the U. S. is not operated by the ....
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U. S. Treasury Department.
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What is the simple money multiplier (l/r) used for?
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to predict the potential money supply from a given monetary base.
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An increase in the reserve requirement by the Federal Reserve ....
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decreases the simple money multiplier.
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To lower interest rates, the Federal Reserve may ....
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lower the discount rate.
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If the reserve requirement is 15% and a bank has $100 million in demand deposits, then how much must that bank hold in reserve?
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$15 million
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If a bank has $15,000 in reserve, $200,000 in demand deposits, and the reserve requirement is 20%, then ...
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the bank is in an illegal reserve position.
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Suppose that banks borrowed $5 million at the discount window. By how much will the banking industry eventually increase the money supply if the currency/deposit ratio is 0.20 and the reserve ratio is 0.40?
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$10 million
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If the Federal Reserve wished to increase aggregate demand, which of the following would it do?
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lower the reserve requirement
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If the Federal Reserve wished to lower interest rates, which of the following would it do?
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lower the discount rate
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`If you deposit $1,000. in your checking account and the reserve requirement is 15%, then your bank will be able to increase its loans by ....
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$850.
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If a bank has no excess reserves and a customer comes in to borrow more money, what does the bank do?
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borrows from the discount window
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A tight money policy will ....
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decrease the supply of loanable funds.
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What are the functions of money?
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A store of value, a medium of exchange, and a standard measure of value.
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What is not a function of money?
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a means of capital accumulation
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Banks create money when ....
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they take in deposits and make loans.
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Interest rates are determined in the market for ....
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loanable funds
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aggregate demand
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The total amount of goods and services demanded in the economy at a given overall price level and in a given time period.
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aggregate demand formula
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Aggregate Demand (AD) = C + I + G + (X-M) C = Consumers' expenditures on goods and services. I = Investment spending by companies on capital goods. G = Government expenditures on publicly provided goods and services. X = Exports of goods and services. M = Imports of goods and services
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aggregate supply
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The total supply of goods and services produced within an economy at a given overall price level in a given time period
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When someone save $5 in their piggy bank, that person is using money as a ....
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store of value
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An easy money policy will ....
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increase aggregate demand and increase the supply of loanable funds.
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If the economy is experiencing both growth and deflation, then what has occurred?
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an encrease in aggregate supply
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If the economy is experiencing both growth and inflation, then what has occurred?
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an increase in aggregate demand
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What will cause an increase in aggregate demand?
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an increase in either the money supply or the velocity of money
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In making transactions, money solves the problem of ...
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a double coincidence of wants
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Gross Domestic Product is equal to ...
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monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis.
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What is the gross domestic product formula?
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C + I + G + (X - imports_
C=total spending by customers I = total investments by businesses G = total spending by govt. X = exports |
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The simple money multiplier (1/r) ....
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is used to predict the potential money supply from a given monetary base.
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If the reserve requirement is 20%, a purchase of $1 million worth of bonds by the Federal Reserve can increase the potential money supply by up to ....
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$5 million
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An increase in the reserve requirement by the Federal Reserve .....
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increases banks reserves
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A purchase of government securities by the Federal Reserve may not expand the money supply by the full amount predicted by the simple money multiplier (1/r) because ....
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people may not deposit all of the money in banks.
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A decrease in the transactions demand for cash will .....
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decrease the currency - deposit ratio.
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The Federal Reserve System is owned by ....
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large private banks
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If a bank is "loaned up" ...
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then its actual reserves are equal to its required reserves.
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If the Federal Reserve wished to increase the money supply it may ....
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lower the reserve requirement
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If the reserve requirement is 20% and a bank has $40 million in demand deposits, then how much must that bank hold in reserve?
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$8 million
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If a bank has $40,000 in reserve, $100,000 in demand deposits, and the reserve requirement is 30%, then ....
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the bank may loan out $10,000. more.
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Suppose the currency/deposit ratio is 0.20, the reserve ratio is 0.10, and the monetary base is $100 million. What is the actual money supply?
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$400 million
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Suppose that banks borrowed $1 million at the discount window. By how much will the banking industry evenually increase the money supply if the currency/deposit is 0.20 and reserve ratio is 0.10?
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$4 million
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What is the equation of exchange?
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MV=PQ
M=money supply V=velocity of money P=Price level Q=quantity of real goods sold |
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If a bank is loaned up and the Federal Reserve increases the reserve requirement, then the bank .....
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may have to borrow money from another bank
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If you deposit $1000. in your checking account and the reserve requirement is 30%, then your bank will be able to increase its loans by ....
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$700.
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The Board of Governors of the Federal Reserve ....
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are members of the Federal Open Market Committee.
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Growth in real GDP and inflation are caused by ....
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an increase in aggregate demand.
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An increase in the discount rate may decrease the money supply because ....
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it encourages banks to borrow less money from the Federal Reserve.
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The Federal Reserve System ...
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serves as the U. S. central bank.
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Simultaneous inflation and recession are caused by ....
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a decrease in aggregate supply.
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When the Federal Reserve injects new cash into the banking system, the money supply may not expand by the full amount indicated by the simple money multiplier because ....
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some of this new cash is held by individuals rather than deposited in banks.
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The discount rate is the ....
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interest rate that banks pay the Federal Reserve for loans.
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Suppose the currency/deposit ratio is 0.20, the reserve ratio is 0.20, and the Open Market Committee wants to increase the money supply by $9 million. What must it do?
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purchase $4.5 million worth of bonds.
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A bank that has demand deposits equal to $200 million and reserve requirements of 20% must hold reserves of ....
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$40 million and may loan $160 million.
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A money system is more efficient than a barter system because ....
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money solves the problem of a double coincidence of wants.
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When a person agrees to pay someone else $5.00 plus interest at the end of one year, that person is using money as a .....
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standard for deferred payment.
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The simple money multiplier ....
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is inversely related to the reserve requirement.
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A purchase of $1,000 worth of bonds by the Federal Reserve can increase the potential money supply by up to ....
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$20,000 if the reserve requirement is 5%.
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An increase in the transactions demand for cash will ....
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increase the currency-deposit ratio.
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The Federal Reserve System ( not the central bank of the U. S.) is ....
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actually 12 district banks.
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In what instance is the effect upon equilibrium price indeterminate?
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supply decreases and demand increases
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If the equilibuium price of goods X falls and its equilibrium quantity falls, then we know that ....
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a decrease in demand has occurred
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If you notice that the equilibrium price of X has remained constant over a period of time, but the equilibrium quantity has fallen, then what do you know has happened in the market for X?
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both the demand and supply have decreased.
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An effective minimum wage...
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causes unemployment.
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If the equilibrium price of goods X is $5.00 and the government imposes a price support at $6.00, then ....
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a surplus will result.
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What are the goals of macro-economics policies?
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price stability, sustained growth in real GDP, and low stable rates of unemployment.
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A price ceiling on wheat below the equilibrium price of wheat will ...
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result in a shortage of wheat
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If you wanted to maximize the amount of corn that people consumed, what would you recommend?
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A price support on corn.
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