Money!
The United States Dollar is an example of which type of money?
What is a fiat currency?
The United States Central Bank's name.
The Federal Reserve
The vertical money supply curve Sm is controlled by what government body?
What is the Federal Reserve?
The difference between nominal and real interest rates is..
What is inflation?
Points inside the production possibilities frontier represent
Inefficiency or unemployment (or both)
Equation for the Money Multipier
1/rr rr=reserve requirement
Which of the following is true regarding the central bank's use of open market operations?
A-Decreasing the discount rate will increase the money supply.
B-Interest rates will decrease when the central bank buys bonds
B-Interest rates will decrease when the central bank buys bonds
FOMC stands for...
What is the Federal Open Market Committee. They decide Open Market Operations.
Loaners are ____________ and borrowers are ____________ in the market for loanable funds.
What are suppliers... demanders of loanable funds.
The word stagflation describes a situation in which a higher price level occurs simultaneously with
lower employment (higher unemployment)
All is true regarding money except
A-Medium of Exchange
B-Commodity money is used more than fiat money
C-The money system is more efficient than the barter system.
B-Commodity money is used more than fiat money
Where do banks keep their excess reserves? two possible answers.
What is in their vaults and the Federal Reserve?
List 2 of the 3 Tools of Monetary policy
Reserve Ratios, Discount Rates,Open Market Operations
When the government runs a budget deficit and must borrow money to meet its spending needs, the equilibrium interest rate soars. This then causes a market phenomenon called?
What is the crowding out effect?
What are 2 fiscal policies of the Government?
What is government spending and taxes?
When a financial transaction or trade is made using a currency. That currency is acting as a...
What is a medium of exchange?
Assume a customer deposits $5,000; what is the maximum possible increase to the money supply if the bank lends out all of its excess reserves and the reserve requirement is 10%.
Answer = 45,000 ($5,000 X 10 % = 500 reserves $4,500 to loan out. 1/.10 = 10 deposit multiplier 4,500 X 10 = 45,000.)
If the FED increases the reserve requirement what happens to the money supply and interest rates?
Money supply decreases and interest rates increase. -
An increase in savings will have what impact on the supply of loanable funds?
What is increasing the supply of loanable funds?
If the fed buys bonds on the open market, what will happen to the money supply?
What is they it will increase.
The reserve ratio is 10%, central bank sells $2mill in bonds to banks. If all excess reserves are loaned out, what will happen to the money supply?
It will decrease by 20 million.
1/.1 = 10
10* 2 million = 20 million
Assume a customer deposits $5,000 into his bank, what is the initial change in the money supply?
There is no initial change.
To fight a recession and close the recessionary gap the FED could increase the money supply. What effect would this have on AD and unemployment?
AD would INCREASE or shift right. Unemployment would DECREASE (because real output increases)
The two Shifters of Demand for Loanable Funds
1. Changes in perceived business opportunities 2. Changes in government borrowing
Name the shifters of Aggregate Demand
G + I + C + Xn