Money & Banking
If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as ______
a medium of exchange.
What does it mean when economists say that home buyers are "underwater" on their mortgages?
Buyers owe more on their mortgage than the properties are worth.
An increase in nominal GDP increases the demand for money because
more money is needed to finance a larger volume of transactions
In the United States, monetary policy is the responsibility of the
Board of Governors of the Federal Reserve System.
Countries engaged in international trade specialize in production based on
comparative advantage
In defining money as M1, economists exclude time deposits because
they are not directly or immediately a medium of exchange.
_________________sets policy on the sale and purchase of government bonds by the Fed.
The Federal Open Market Committee (FOMC).
The securities held as assets by the Federal Reserve Banks consist mainly of
Treasury bills, Treasury notes, and Treasury bonds.
Open-market operations include
repos and reverse repos.
buying or selling securities.
If two nations have straight-line production possibilities curves, there will be a basis for mutually advantageous trade provided
the slopes differ.
___________________ is made up of the seven members of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Bank presidents on a rotating basis.
The Federal Open Market Committee (FOMC)
_________ are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare.
The 12 Federal Reserve Banks
Who is the current Chair of the Board of Governors of the Federal Reserve System
Jerome H. Powell
The sale of government bonds by the Federal Reserve Banks to commercial banks will ______ aggregate demand.
decrease
Excise taxes on imported goods that help shield domestic producers of the good are called
protective tariffs.
___________ are bonds backed by mortgage payments
"mortgage-backed securities"
The Federal Reserve does not set the federal funds rate, but historically has influenced it through the use of
its open-market operations.
_____________change commercial bank reserves but not the size of the monetary multiplier.
Open-market operations
If a nation has a comparative advantage in the production of X, this means the nation ___________ than other nations in producing a unit of X.
must give up less of other goods
The use of tariffs and quotas for trade protection results in _____________ in the economy.
less efficiency
Michelle transfers $4,000 from her savings account to her checking account. What effect is this change likely to have on M1 and M2?
M1 increases and M2 stays the same
The transactions demand for money is most closely related to money functioning as a
medium of exchange.
Repo transactions involve _____________, while reverse repo transactions _________
an overnight collateralized loan from the Fed to a bank; involve the Fed borrowing from the bank.
As it relates to international trade, __________is the practice of selling goods in a foreign market at less than cost.
dumping
If the United States government were to impose a quota on wristwatches imported from Switzerland, then the total quantity of wristwatches (domestic and imported) purchased would ____________
decline as prices rose.