Econ 211 - Final Exam

Front 1

Econiomics is:

Back 1

The study of the material reproduction of society that examines the forces and relations of production in their institutional framework.

Front 2

The cost of changing something is always measured in terms of what you gave up, this is referring to:

Back 2

the Opportunity Cost

Front 3

All man made aids to production are considered

Back 3

capital

Front 4

This occurs when we operate inside the PPC due to failure to maintain full employment

Back 4

Demand Side Waste

Front 5

Occurs when we operate inside the PPC due to underemployment.

Back 5

Supply Side Waste

Front 6

Formula for Change in Money Supply (or how much the money supply will expand)

Back 6

1/RR x Change in Excess Revenue

Front 7

Money Multiplier Formula

Back 7

1/RR

Front 8

Excess Reserves =

Back 8

Actual Reserves - Required Reserves

Front 9

T/F - State chartered banks are required to join the Federal Reserve?

Back 9

False, only federally chartered banks are required to join, but state chartered banks can join if they wish.

Front 10

(3) Benefits of joining the Federal Reserve:

Back 10

1. Image of soundness
2. Check clearing privileges
3. Borrowing at the discount window (which is on an overnight basis)

Front 11

(3) BASIC Requirements of joining the Federal Reserve:

Back 11

1. Must meet the reserve requirement at all times
2. Must purchase stock in the Fed
3. Must meet all other regulations, requirements and guidelines.

Front 12

The Federal Reserve is a _______________ institution.

Back 12

Quasi-Public, meaning that it is public and not for profit but also privately owned by member banks.

Front 13

The Federal Reserve was crated through what means?

Back 13

An act of Congress, "The Federal Reserve Act of 1913"

Front 14

The Fed has how many district banks?

Back 14

12

Front 15

The Federal Reserve Board (FRB) has how many members?

Back 15

7

Front 16

Members of the FRB can server for how many years in one term?

Back 16

14 years

Front 17

The chair of the FRB serves how many years in a term?

Back 17

4, not in conjunction with the president.

Front 18

The former chair of the FRB was:

Back 18

Alan Greenspan

Front 19

Current chair of the FRB

Back 19

Ben Bernanke

Front 20

How many members serve on the Federal Open Market Committee?

Back 20

12 (7 from FRB + 5 district bank presidents who serve in rotations)

Front 21

What are the (3) tools of monetary policy?

Back 21

1. Discount Rate
2. Reserve Requirement
3. Open Market Operations

Front 22

The discount rate is set by who?

Back 22

The board of directors of the district banks, subject to review and determination of the FRB.

Front 23

Discount Rate is:

Back 23

where banks borrow at the 'discount window' on an overnight basis.

Front 24

If the discount rate increases, the change in the money supply will be:

Back 24

A decrease in the MS.

Front 25

If the discount rate decreases, the change in borrowing amounts will:

Back 25

Borrowing will increase.

Front 26

% of demand deposits banks are required to keep on reserve either in the vault or at the Fed is the:

Back 26

Reserve Requirement

Front 27

The reserve requirement is set by who?

Back 27

The FRB.

Front 28

What is the most powerful tool in monetary policy???

Back 28

Reserve Requirement

Front 29

What is the least frequently tool used in monetary policy???

Back 29

Reserve Requirement

Front 30

What is the most frequently tool used in monetary policy???

Back 30

Open Market Operations

Front 31

The buying and selling of government (treasury) bonds is:

Back 31

Open Market Operations

Front 32

Money that has no value as a commodity is:

Back 32

Fiat Money

Front 33

The ___________ theory would support:
1. Increases to Government Spending
2. Decreases in Taxes
3. Increasing the Money Supply

Back 33

Keynesian

Front 34

When the interest rate is high, people expect it to fall, therefore they:

Back 34

Hold small cash balances and high amounts of bonds.

Front 35

When the interest rate is low, people expect it to rise, therefore they:

Back 35

Hold large amounts of cash balances and low amounts of bonds.

Front 36

3 Contractionary monetary policy tools:

Back 36

1. Increase Reserve Requirement
2. Increase Discount Rate
3. Sell Bonds in the Open Market

Front 37

An excess supply of money = ____________ demand bonds

Back 37

excess

Front 38

Does expansionary monetary policy reduce unemployment?

Back 38

Yes

Front 39

Government Spending and Taxes = ___________ Policy

Back 39

Fiscal

Front 40

Investment Spending = _____________ Policy

Back 40

Monetary Policy

Front 41

This refers to the existence of simultaneous inflation and unemployment.

Back 41

Stagflation

Front 42

Short Run Aggregate Supply Model is:

Back 42

Upward Sloping (output and prices adjust)

Front 43

Long Run Aggregate Supply Model is:

Back 43

a Vertical Line (only prices adjust)

Front 44

What is the liquidity trap?

Back 44

It explains why monetary policy may not result in an expansion in output when used to decrease a recessionary gap, the demand for money may be perfectly elastic at low interest rates.