ECO 112 Exam 3 - Page: 1 ECOllZ — Macroeconomics Name...

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Unformatted text preview: Page: 1 ECOllZ — Macroeconomics Name Test 3, Chapters 14 &‘15 Professor Redlo 1. Barter is the: direct exchange of goods and services. exchange of goods, but not services. system that does not depend on a coincidence of wants. system used in advanced economies. QOO'KD 2. Buying a cup of coffee with a dollar bill represents the use of money as a: a. medium of exchange. b. unit of account. c. store of value. d. all of the above. 3. Comparing how many dollars it takes to attend college each year to annual earnings on a job represents the use of money as a: medium of exchange. unit of account. store of value. all of the above. CLOUD: 4. One hundred dollars on deposit in a checking account represents the use of money as a: medium of exchange. store of value. unit of account. all of the above. (100‘!!! 5. Which of the following is not a store of value? a. Dollar bills. b. Credit card loan limit. c. Coins. ‘ d. Gold. 6. Which of the following is the best description of fiat money? Coins made of gold and silver. Paper money that can be redeemed for gold or silver. Legal tender that has no intrinsic value. Checking accounts and debit cards. QOC‘Q’ EC0112 — Macroeconomics Test 3, Chapters 14 & 15 7. 10. 11. Page: In prisoner-of-war camps, cigarettes were used as a medium of exchange, unit of account, and store of value. In this situation, best classified as: QOU‘W legal tender. fiat money. near money. commodity money. Anything can be money if it acts as a: 000'!” unit of account. store of value. medium of exchange. All of the above. Which one of the following statements is true? QDO‘W Money must be relatively "scarce" if it is to have value. Money must be divisible and portable. M1 is the narrowest definition of money. All of the above. Credit cards are: (DQOU'DJ The (DCLOU'DJ M1 money. M2 and M3 money. M3 money. near money. not money. characteristics that money should have include: portability, durability, and flexibility. durability, flexibility and stability. durability, portability, and non-homogeneity. portability, durability and stability. portability, homogeneity, and flexibility. cigarettes are 2 Page: ECOllZ — Macroeconomics Test 3, Chapters 1} & 15 12. 13. 14. 15. 16. Credit cards such as Visa and Mastercard are: a. accepted like money as a medium of exchange, and therefore are money. used like money as a medium of exchange and are issued by financial institutions, and therefore they are money. accepted by merchants as if they were money, and therefore are money. as easy to use as cash, and therefore are money. not money because the bill has to be paid off eventually by using either currency or a demand deposit. Which of the following assets is the most liquid? QOO'ID Money market mutual fund shares. Certificates of deposit. Dollars. Passbook savings deposits. The ease with which an asset can be converted into a medium of exchange is known as: (DQOO‘ID volatility. liquidity. currency. Gresham's Law. speculative exchange. Which of the following statements is false? Round stones with holes in the center can serve as money. Money eases the process of exchanging goods and services in a modern economy. .Money serves as a measure of value only when it is backed by gold or silver. Money is used as a measure of the relative value of goods and services in an economy. ‘ Which one of the following is part of the M2 definition of the money supply, but not part of M1? CLOUW Travelers' checks. Currency held in banks. Currency in circulation. Small time deposits. 3 Page: EC0112 - Macroeconomics Test 3, Chapters 14 & 15 17. 18. 19. 20. 21. Which definition of the money supply includes credit cards or plastic money? (DQOU'DI M1. M2. M3. All of the above. None of the above. The money supply known as M3: a. b. c. d. does not include credit union accounts. excludes certificates of deposit. includes M2 + large denomination time deposits and repurchase agreements. excludes travelers' checks. Members of the Federal Reserve Board of Governors serve one nonrenewable term of: a. 4 years. b. 7 years. c. 14 years. d. life. Decisions regarding purchases and sales of government securities by the Fed are made by the: CLOUD! Federal Funds Committee. Discount Committee. Federal Open Market Committee. FDIC. Who was appointed as the Chair of the Board of Governors by President Reagan and was reappointed by Presidents Bush and Clinton? CLOUD) Robert Reich. Alan Greenspan. John Maynard Keynes. Milton Friedman. 4 ECOllZ - Macroeconomics Test 3, 22. 23. 24. 25. 26. Chapters 14 & 15 With respect to controlling the money supply, the law requires the Fed to take orders from: the President. the Speaker of the House. the Secretary of the Treasury. no one—the Fed is an independent agency. QOO’KD Which of the following is not part of the Federal Reserve System? Council of Economic Advisors. Board of Governors. Federal Open Market Committee. 12 Federal Reserve District Banks. Federal Advisory Council. (DQOO’W The Fed is often considered the bankers' bank because it: demands much more currency than it has available. no longer has a monopoly on printing paper currency. lowers the discount rate in order to restrict the money supply. holds bankers reserves, provides banks with currency and loans, and clears their checks. e. refuses to uses its power of open market operations when a quorum of state-chartered bankers petitions it. QOU'DJ The main purpose of the Fed is to: serve as the bankers' bank for member banks. regulate interest rates. print Federal Reserve Notes. regulate financial institutions. maintain the proper functioning of our money system. (DQOU'DJ In its function of controlling the money supply, the Fed does all but which one of the following? Buys and sells 0.8. government securities. Sets the legal reserve requirement. Sets the discount rate. Engages in open market operations. Prints currency. (130.0.U'0J Page: ECOllZ — Macroeconomics Test 3, Chapters 14 &.15 27. The rate of interest that the Fed charges member banks to borrow money is called the: ’ prime rate. federal funds rate. discount rate. federal reserve rate. federal bank rate. (110.060) 28. Which of the following is not a protection against bank collapse? The gold and silver that backs Federal Reserve notes. The Federal Reserve Open Market Committee. The Federal Deposit Insurance Corporation. The Federal Reserve. CLOUD) 29. The Monetary Control Act of 1980: required banks to make home loans. eliminated many forms of competition among financial institutions. created sharper distinctions among various financial institutions. none of the above. QOUO: 30. A bank's "required reserves" are: held as deposits with the Federal Reserve System. equal to its demand deposits. equal to its transactions deposits. none of the above. 0.05m 31. Which of the following is a valid statement? a. Excess reserves = total reserves minus required reserves. Required reserves = the minimum reserves required by the Fed. c. Required-reserve ratio = required reserves as a percentage to total deposits. d. All of the above. 0‘ « 32. Banks normally hold few excess reserves because this practice is: subject to an excess-reserves tax. not profitable. against Fed policy. illegal. (LOUD! EC0112 - Macroeconomics Test 3, 33. 34. 35. 36. Chapters 14 & 15 A bank faces a required reserve ratio of 5 percent. If the bank has $200 million of checkable deposits and $15 million of total reserves, then new large are the bank's excess reserves? a. $0. b. $5 million. c. $10 million. d. $15 million. Imagine that Odyssey National is a brand new bank, and that its legal reserve requirement is 10 percent. If it accepts a $1,000 deposit, then its excess reserve balance will be: $0. $90. $100. $900. $910. (DQOU‘Q) If loans are $300,000, checkable deposits are $600,000, reserve requirement is 40 percent, and the legal then excess reserves are: a. $360,000. b. $240,000. c. $120,000. d. $60,000. e. $30,000. The money supply will grow faster through deposit creation when the legal reserve requirement is: high and banks hold excess reserves. high and banks cannot find good customers to lend to. low and banks are able to lend out all of their excess reserves. low and banks are unable to loan out all of their excess reserves. high and banks are not able to loan out all of their excess reserves. ‘ (DQOU'D’ Page: ECOllZ — Macroeconomics Test 3, Chapters 14 & 15 37. 38. 39. 40. 41. If a bank has actual reserves of $40,000 and a 20 percent reserve requirement, then the maximum amount of checkable deposits the bank can have if excess reserves are zero is: $100,000. $80,000. $300,000. $20,000. $200,000. (DQOU‘DJ If the required-reserve ratio is a uniform 25 percent on all deposits, the money multiplier will be: a. 4.00. b. 2.50. c. 0.40. d. 0.25. Assume a simplified banking system subject to a 20 percent required—reserve ratio. If there is an initial increase in excess reserves of $100,000, the money supply: a. increases $100,000. b. increases $500,000. c. increases $600,000. d. decreases $500,000. In a simplified banking system with a 20 percent required-reserve ratio, a $1,000 open—market sale by the Fed would cause the money supply to: increase decrease decrease increase by $200. by $200. by $5,000. by $5,000. QOU‘D) Which of the following events would reduce the size of the "real—world" money multiplier? Banks hold more excess reserves. Households hold less currency. The Fed increases the discount rate. The Fed reduces the required reserve ratio. (100‘!!! 8 Page: ECOllZ - Macroeconomics Test 3, Chapters 14 & 15 42. If a bank keeps some of its excess reserves, the money multiplier: a. increases. b stays the same. c. goes to zero. d. decreases. e. increases, then decreases. 43. If the banking system's money multiplier is 4, then a $2,000 increase in checkable deposits when banks hold excess reserves will result in which of the following events? The money supply will decrease. The money supply will not change. The money supply will increase by exactly $8,000. The money supply will increase by more than $8,000. The money supply will increase by less than $8,000. (UCLOU'OJ 44. Which of the following policy actions by the Fed would cause the money supply to increase? An open—market sale of government securities. An increase in required-reserve ratios. An increase in the discount rate. An open’market purchase of government securities. QOO'O) 45. When the Fed conducts open market operations, it buys and sells: stocks. government securities. foreign currency gold. O-OU'OJ 46. 3’ bank will be able to make fewer loans if it: sells bonds to the Fed. calls in loans. increases loans from excess reserves. borrows money in the federal funds market. buys bonds from the Fed. 00.050! ECOllZ — Macroeconomics Test 3, Chapters 14 & 15 47. 48. 49. 50. The cost to a member bank of borrowing from the Federal Reserve is measured by the: a. b. c d reserve requirement. price of securities in the open market. discount rate. yield on government bonds. The federal funds rate is the interest rate charged by: a. b. c. d. banks for loans to other banks. the Fed for overnight loans. the Fed for borrowed reserves. the federal government on loans to member banks. Which of the following actions by the Fed would increase the money supply? QOU'DJ Increasing the required-reserve ratio. Selling government bonds in the open market. Increasing the discount rate. Reducing the required-reserve ratio. The Fed's countercyclical policy during expansion and prosperity includes: a . raising the legal reserve requirement, raising the discount rate, and selling government bonds on the open market. raising the legal reserve requirement, raising the discount rate, and buying government bonds on the open market. raising the legal reserve requirement, cutting the discount rate, and selling government bonds on the open market. raising the legal reserve requirement, cutting the discount rate, and buying government bonds on the open market. lowering the legal reserve requirement, cutting discount rates, and buying government bonds on the open market. N . pa 0 1/; exec/h 3 gfiswm /<6>/ O O O o O O O O O o . . . . . . . ..O.,1 123¢3670911 AABELCTZA a7 c o o n o o o o o o o c o o c _a_c_3_cZ 37:7?771; ...
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This note was uploaded on 05/20/2008 for the course ACCOUNTING ACC102 taught by Professor Murphy during the Spring '07 term at Monroe CC.

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ECO 112 Exam 3 - Page: 1 ECOllZ — Macroeconomics Name...

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