Econ 20B: Basic Economics II Fall 2013: Jenkins November 13, Exam 2: Version A

Size: px
Start display at page:

Download "Econ 20B: Basic Economics II Fall 2013: Jenkins November 13, Exam 2: Version A"

Transcription

1 Econ 20B: Basic Economics II Name: Fall 2013: Jenkins November 13, 2014 Exam 2: Version A Instructions: Choose the best answer for each question. Mark your answers on this exam and on your scantron sheet. You may not use any outside materials: calculators, smartphones, scratch paper, etc. There are 40 questions. 1. Which of the following statements is correct? (a) The only way that GDP per capita in one country can increase is if the GDP per capita of another country decreases. (b) Countries with more capital per capita have lower GDP per person because the capital crowds people out of the workplace. (c) Countries with relatively high GDP per capita have relatively more hardworking workers. (d) Countries with relatively high GDP per capita have relatively more productive workers. 2. Which of the following is true about the U.S. since the end of World War 2? (a) GDP per capita and productivity have both grown at about 2% per year. (b) GDP per capita has grown at about 2% per year, but productivity has remained relatively constant since the end of World War 2. (c) GDP per capita has grown at about 2% per year but productivity has tended to grow at about 3% per year. (d) GDP per capita has grown at about 2% per year but productivity has only grown at about 1% per year. 3. Other things equal, if a country permanently increases its saving rate, then that country will experience a temporary: (a) decrease in real GDP per capita. (b) increase in the stock of physical capital per worker. (c) decrease in the growth rate of real GDP per capita. (d) increase in the growth rate of real GDP per capita. 4. Other things equal, if a country permanently increases its saving rate, then in the long-run: (a) both the level and growth rate of real GDP per capita are higher. (b) the level of real GDP per capita is higher but the growth rate of real GDP per capita is unchanged. (c) both the level and growth rate of real GDP per capita are unchanged. (d) the level of real GDP per capita is higher, but the growth rate of real GDP per capita is lower. 1

2 5. A financial institution through which savers can lend funds indirectly to borrowers is called a financial: (a) system. (b) financial planner. (c) market. (d) intermediary. 6. The German company BMW owns an automobile assembly plant in South Carolina. This is an example of: (a) foreign direct investment. (b) foreign portfolio investment. (c) foreign indirect investment. (d) indirect domestic investment. 7. If the government were to create a disincentive for private investment by increasing taxes for firms that purchase new capital, then in the market for loanable funds, (a) the supply of loanable funds would shift to the right. (b) the demand for loanable funds would shift to the left. (c) the supply of loanable funds would shift to the left. (d) the demand for loanable funds would shift to the right. 8. Suppose the government were to create an incentive for private saving by decreasing the tax on income earned from retirement savings. As a result, (a) both the real interest rate and investment would decrease. (b) the real interest rate would decrease and investment would increase. (c) the real interest rate would increase and investment would decrease. (d) both the real interest rate and investment would increase. 9. Money is: (a) gold. (b) the accumulated financial wealth of all residents citizens otherwise in an economy. (c) the set of assets in an economy that people regularly use to make transactions. (d) the accumulated financial wealth of all citizens in an economy. 2

3 10. Which of the following is typically true about a single house? (a) A house is a store of value but is neither a medium of exchange nor a unit of account. (b) A house is neither a store of value nor a medium of exchange nor a unit of account. (c) A house is a store of value, a medium of exchange, and a unit of account. (d) A house is a store of value and a medium of exchange but not a unit of account. 11. Which of the following is typically true about a dollar in a U.S. checking account? (a) A dollar in a U.S. checking account is a store of value, a medium of exchange, and a unit of account. (b) A dollar in a U.S. checking account is a store of value and a medium of exchange but not a unit of account. (c) A dollar in a U.S. checking account is neither a store of value nor a medium of exchange nor a unit of account. (d) A dollar in a U.S. checking account is a store of value but is neither a medium of exchange nor a unit of account. 12. Checking account deposits are included in: (a) M1 but not M2. (b) M1 and M2. (c) M2 but not M1. (d) neither M1 nor M Savings account deposits are included in: (a) M1 but not M2. (b) M1 and M2. (c) M2 but not M1. (d) neither M1 nor M You deposit $1,000 of currency that you found under your couch into your checking account. What happens as a result? (a) The amount of currency declines by $1,000, and M1 and M2 increase by $1,000 (b) The amount of currency declines by $1,000 and M1 and M2 are unchanged. (c) The amount of currency is unchanged and M1 and M2 increase by $1,000 (d) The amount of currency declines by $1,000, M1 increases by $1,000, and M2 is unchanged. 3

4 15. In which year what the Federal Reserve System founded? (a) (b) (c) (d) Who is the current chairman of the Board of Governors of the Federal Reserve System? (a) Ron Paul. (b) Janet Yellen. (c) Alan Greenspan. (d) Ben Bernanke. 17. Who is the current vice-chairman and nominee to be the next chairman of the Board of Governors of the Federal Reserve System? (a) Alan Greenspan. (b) Janet Yellen. (c) Ron Paul. (d) Ben Bernanke. 18. How long is the term of a member of the Board of Governors of the Federal Reserve System? (a) 14 years. (b) Life. (c) 4 years. (d) 6 years. 19. Which of the following statements about the Federal Reserve System is incorrect? (a) The president of the Federal Reserve Bank of New York is a permanent member of the FOMC. (b) The chairman of the Board of Governors must always conduct monetary policy how the President off the U.S. would like. (c) Each member of the Board of Governors must be nominated by the President of the U.S. and confirmed by the Senate. (d) The Federal Reserve System has 12 regional Federal Reserve Banks 4

5 Use the following information to answer the next 2 questions. Suppose the banking system has $15 trillion in deposit liabilities. Assume that banks have no other liabilities and that their only assets are reserves and loans. The required reserve ratio is 5%. 20. If the banking system has $2.25 trillion of reserves, what is the quantity of excess reserves i.e., reserves in excess of the required minimum held by banks? (a) $1.5 trillion. (b) $.15 trillion. (c) $7.5 trillion. (d) $0.75 trillion. 21. What is the quantity of bank loans that must have been issued by the banking system? (a) $13.5 trillion. (b) $12.75 trillion. (c) $14.25 trillion. (d) $7.5 trillion. Use the following information to answer the next 2 questions. Suppose that banks do not hold excess reserves and that the public does not hold currency. The required reserve ratio is 20% and the quantity or reserves in the banking system is $20 billion. 22. What is the money multiplier in this case? (a) 5. (b) 20. (c) (d) If the Federal Reserve were to increase the quantity of bank reserves by $10 billion, what would be new quantity of money in circulation? (a) $600 billion. (b) $100 billion. (c) $150 billion. (d) $50 billion. 5

6 24. Historically, which of the following policy tools has been the primary monetary policy tool for the Federal Reserve? (a) Reserve requirements. (b) Open market operations. (c) Interest on reserves. (d) The discount rate. 25. Other things equal, an increase in the interest rate on reserves will: (a) decrease the reserve ratio. (b) decrease the quantity of bank reserves. (c) increase the quantity of bank reserves. (d) increase the reserve ratio. 26. Other things equal, an increase in the interest rate on reserves will: (a) decrease the money supply. (b) increase the money supply. (c) have no effect on the money supply. (d) either increase or decrease the money supply. 27. Other things equal, an open market purchase will: (a) increase the reserve ratio. (b) increase the quantity of bank reserves. (c) decrease the quantity of bank reserves. (d) decrease the reserve ratio. 28. Suppose that the reserve ratio is 5% and that the public does not hold currency. If the Fed conducts an open market sale of $10 million, by how much does the money supply in the U.S. change? (a) The money supply decreases by $200 million. (b) The money supply increases by $200 million. (c) The money supply decreases by $50 million. (d) The money supply increases by $50 million. 6

7 29. Suppose that the reserve ratio is 10% and that the public does not hold currency. If the Fed conducts an open market purchase of $50 million, by how much does the money supply in the U.S. change? (a) The money supply decreases by $500 million. (b) The money supply increases by $5 million. (c) The money supply increases by $500 million. (d) The money supply decreases by $5 million. 30. The federal funds rate is: (a) the interest rate that the Federal Reserve changes banks on direct loans. (b) the interest rate the the federal government charges recipients of subsidized student loans. (c) the interest rate in the market for overnight interbank loans. (d) the interest rate that the Fed charges the U.S. government on direct loans. 31. The FOMC has announced an increase in the federal funds rate. What is the FOMC signaling to the public? (a) The Fed intends to conduct open market sales, reducing the quantity of bank reserves and the money supply. (b) The Fed intends to conduct open market purchases, reducing the quantity of bank reserves and the money supply. (c) The Fed intends to conduct open market purchases, increasing the quantity of bank reserves and the money supply. (d) The Fed intends to conduct open market sales, increasing the quantity of bank reserves and the money supply. 32. According to the quantity theory of money an increase in the money supply, other things equal, will: (a) reduce the real value of money and the price level. (b) increase the real value of money and the price level. (c) reduce the real value of money and increase the price level. (d) increase the real value of money and reduce the price level. 33. According to the quantity theory of money an increase in real GDP, other things equal, will: (a) reduce the real value of money and the price level. (b) increase the real value of money and the price level. (c) increase the real value of money and reduce the price level. (d) reduce the real value of money and increase the price level. 7

8 34. The velocity of money is best understood as: (a) The interest rate that a central bank changes banks on direct loans. (b) The rate at which a unit of money in an economy changes hands. (c) The growth rate of money supply. (d) The growth rate of nominal GDP in a country. 35. Assuming that the velocity of money is constant, if real GDP grows at at rate of 3% per year and the money supply grows at a rate of 6% per year, what rate of inflation is implied by the quantity theory of money? (a) 2%. (b) -2%. (c) -3%. (d) 3%. 36. Assume that the velocity of money is constant and that real GDP grows at at rate of 2% per year. According to the quantity theory of money, at what rate of growth must the money supply expand for the inflation rate to be equal to 2%? (a) 2%. (b) 0%. (c) -2%. (d) 4%. 37. The Fisher effect implies that, other things equal, an increase in the long-run rate of inflation will lead to (a) higher nominal interest rates and lower real interest rates. (b) lower nominal interest rates and higher real interest rates. (c) lower nominal interest rates and lower real interest rates. (d) higher nominal interest rates but unchanged real interest rates. 38. Assume that the velocity of money is constant and that real GDP grows at at rate of 3% per year and that the rate of money growth is 7% per year. According to the quantity theory of money and the Fisher effect, if the real interest rate is 2%, then what is the nominal interest rate? (a) 4%. (b) 5%. (c) 3%. (d) 6%. 8

9 39. Which of the following is an example of a shoe leather cost? (a) You have a hard time planning your personal finances because you do not know what the inflation rate will be over the next year. (b) The cash that you have collected in a jar over the years has lost purchasing power. (c) Before every transaction that you make, you take time to transfer just enough funds from your savings account into your checking account because your savings account pays such high interest. (d) A local pizza restaurant has to print new menus so that its prices keep up with inflation. 40. When the rate of inflation is lower than expected, (a) the cost of repaying outstanding loans is less than expected and so real wealth is transferred from lenders to borrowers. (b) the cost of repaying outstanding loans is greater than expected and so real wealth is transferred from borrowers to lenders. (c) the cost of repaying outstanding loans is greater than expected and so real wealth is transferred from lenders to borrowers. (d) the cost of repaying outstanding loans is less than expected and so real wealth is transferred from borrowers to lenders. 9

10 Scratch Paper 10

PRACTICE- Unit 6 AP Economics

PRACTICE- Unit 6 AP Economics PRACTICE- Unit 6 AP Economics Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The term liquid asset means: A. that the asset is used in a barter exchange.

More information

ECON 4110: Money, Banking and the Macroeconomy Midterm Exam 2

ECON 4110: Money, Banking and the Macroeconomy Midterm Exam 2 ECON 4110: Money, Banking and the Macroeconomy Midterm Exam 2 Name: SID: MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following

More information

Practice Problems Mods 25, 28, 29

Practice Problems Mods 25, 28, 29 Practice Problems Mods 25, 28, 29 Multiple Choice Identify the choice that best completes the statement or answers the question. Scenario 25-1 First National Bank First National Bank has $80 million in

More information

The Federal Reserve System. The Structure of the Fed. The Fed s Goals and Targets. Economics 202 Principles Of Macroeconomics

The Federal Reserve System. The Structure of the Fed. The Fed s Goals and Targets. Economics 202 Principles Of Macroeconomics Economics 202 Principles Of Macroeconomics Professor Yamin Ahmad The Federal Reserve System The Federal Reserve System, or the Fed, is the central bank of the United States. Supplemental Notes to Monetary

More information

Econ 202 Section 4 Final Exam

Econ 202 Section 4 Final Exam Douglas, Fall 2009 December 15, 2009 A: Special Code 00004 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Section 4 Final Exam 1. Oceania buys $40

More information

3. a. If all money is held as currency, then the money supply is equal to the monetary base. The money supply will be $1,000.

3. a. If all money is held as currency, then the money supply is equal to the monetary base. The money supply will be $1,000. Macroeconomics ECON 2204 Prof. Murphy Problem Set 2 Answers Chapter 4 #2, 3, 4, 5, 6, 7, and 9 (on pages 102-103) 2. a. When the Fed buys bonds, the dollars that it pays to the public for the bonds increase

More information

What three main functions do they have? Reducing transaction costs, reducing financial risk, providing liquidity

What three main functions do they have? Reducing transaction costs, reducing financial risk, providing liquidity Unit 4 Test Review KEY Savings, Investment and the Financial System 1. What is a financial intermediary? Explain how each of the following fulfills that role: Financial Intermediary: Transforms funds into

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Study Questions 5 (Money) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The functions of money are 1) A) medium of exchange, unit of account,

More information

Macroeconomics, 8e (Parkin) Testbank 1

Macroeconomics, 8e (Parkin) Testbank 1 Macroeconomics, 8e (Parkin) Testbank 1 Chapter 9 Money, the Price Level, and Inflation 9.1 What is Money? 1) The functions of money are A) medium of exchange and the ability to buy goods and services.

More information

The Banking System and the Money Supply. 2003 South-Western/Thomson Learning

The Banking System and the Money Supply. 2003 South-Western/Thomson Learning The Banking System and the Money Supply 2003 South-Western/Thomson Learning What Counts as Money MONEY Anything that is widely accepted as a means of payment What Counts as Money MONEY Anything that is

More information

Some Answers. a) If Y is 1000, M is 100, and the growth rate of nominal money is 1%, what must i and P be?

Some Answers. a) If Y is 1000, M is 100, and the growth rate of nominal money is 1%, what must i and P be? Some Answers 1) Suppose that real money demand is represented by the equation (M/P) d = 0.25*Y. Use the quantity equation to calculate the income velocity of money. V = 4. 2) Assume that the demand for

More information

Homework 5: The Monetary System and Inflation

Homework 5: The Monetary System and Inflation Homework 5: The Monetary System and Inflation Solutions 1. Be sure to read your copy of the Wall Street Journal every weekday, looking especially for items related to the material in this course. Find

More information

Chapter 29: The Monetary System Principles of Economics, 7 th Edition N. Gregory Mankiw Page 1

Chapter 29: The Monetary System Principles of Economics, 7 th Edition N. Gregory Mankiw Page 1 Page 1 1. Introduction a. This is a fairly descriptive chapter, but it contains some important material for understanding the world that we live in. b. Money is important for facilitating trade. c. Paper

More information

Econ 202 Section H01 Midterm 2

Econ 202 Section H01 Midterm 2 , Spring 2010 March 16, 2010 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Section H01 Midterm 2 Multiple Choice. 2.5 points each. 1. What would

More information

QUIZ IV Version 1. March 24, 2004. 4:35 p.m. 5:40 p.m. BA 2-210

QUIZ IV Version 1. March 24, 2004. 4:35 p.m. 5:40 p.m. BA 2-210 NAME: Student ID: College of Business Administration Department of Economics Principles of Macroeconomics O. Mikhail ECO 2013-0008 Spring 2004 QUIZ IV Version 1 This closed book QUIZ is worth 100 points.

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Survey of Macroeconomics, MBA 641 Fall 2006, Quiz 4 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The central bank for the United States

More information

_FALSE 1. Firms react to unplanned inventory investment by increasing output.

_FALSE 1. Firms react to unplanned inventory investment by increasing output. Macro Exam 2 Self Test -- ANSWERS Dr. McGahagan WARNING -- Be sure to take the self-test before peeking at the answers. Chapter 8 -- Aggregate Expenditure and Equilibrium Output _FALSE 1. Firms react to

More information

Macroeconomics, 10e, Global Edition (Parkin) Chapter 25 Money, the Price Level, and Inflation. 1 What is Money?

Macroeconomics, 10e, Global Edition (Parkin) Chapter 25 Money, the Price Level, and Inflation. 1 What is Money? Macroeconomics, 10e, Global Edition (Parkin) Chapter 25 Money, the Price Level, and Inflation 1 What is Money? 1) The functions of money are A) medium of exchange and the ability to buy goods and services.

More information

Economics 152 Solution to Sample Midterm 2

Economics 152 Solution to Sample Midterm 2 Economics 152 Solution to Sample Midterm 2 N. Das PART 1 (84 POINTS): Answer the following 28 multiple choice questions on the scan sheet. Each question is worth 3 points. 1. If Congress passes legislation

More information

Econ 202 Final Exam. Table 3-1 Labor Hours Needed to Make 1 Pound of: Meat Potatoes Farmer 8 2 Rancher 4 5

Econ 202 Final Exam. Table 3-1 Labor Hours Needed to Make 1 Pound of: Meat Potatoes Farmer 8 2 Rancher 4 5 Econ 202 Final Exam 1. If inflation expectations rise, the short-run Phillips curve shifts a. right, so that at any inflation rate unemployment is higher. b. left, so that at any inflation rate unemployment

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The government agency that oversees the banking system and is responsible for the conduct

More information

Chapter 11 Money and Monetary Policy Macroeconomics In Context (Goodwin, et al.)

Chapter 11 Money and Monetary Policy Macroeconomics In Context (Goodwin, et al.) Chapter 11 Money and Monetary Policy Macroeconomics In Context (Goodwin, et al.) Chapter Overview In this chapter, you will be introduced to a standard treatment of the banking system and monetary policy.

More information

Macroeconomics, Fall 2007 Exam 3, TTh classes, various versions

Macroeconomics, Fall 2007 Exam 3, TTh classes, various versions Name: _ Days/Times Class Meets: Today s Date: Macroeconomics, Fall 2007 Exam 3, TTh classes, various versions Read these Instructions carefully! You must follow them exactly! I) On your Scantron card you

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. ECON 4110: Sample Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Economists define risk as A) the difference between the return on common

More information

Chapter 13 Money and Banking

Chapter 13 Money and Banking Chapter 13 Money and Banking Multiple Choice Questions Choose the one alternative that best completes the statement or answers the question. 1. The most important function of money is (a) as a store of

More information

Describe the functions of the Federal Reserve System (the Fed).

Describe the functions of the Federal Reserve System (the Fed). The Monetary System Chapter CHAPTER CHECKLIST Define money and describe its functions. Money is any commodity or token that is generally accepted as a means of payment. Money serves as a medium of exchange,

More information

Homework (Chapter 11)

Homework (Chapter 11) EC 2113 Principles of Macroeconomics Instructor: Erdenechimeg Eldev-Ochir Name:_ ID: Homework (Chapter 11) Multiple Choice Identify the letter of the choice that best completes the statement or answers

More information

Econ 202 H01 Final Exam Spring 2005

Econ 202 H01 Final Exam Spring 2005 Econ202Final Spring 2005 1 Econ 202 H01 Final Exam Spring 2005 1. Which of the following tends to reduce the size of a shift in aggregate demand? a. the multiplier effect b. the crowding-out effect c.

More information

4. The minimum amount of owners' equity in a bank mandated by regulators is called a requirement. A) reserve B) margin C) liquidity D) capital

4. The minimum amount of owners' equity in a bank mandated by regulators is called a requirement. A) reserve B) margin C) liquidity D) capital Chapter 4 - Sample Questions 1. Quantitative easing is most closely akin to: A) discount lending. B) open-market operations. C) fractional-reserve banking. D) capital requirements. 2. Money market mutual

More information

Econ 202 Section 2 Midterm 2

Econ 202 Section 2 Midterm 2 Douglas, Fall 2009 November 3, 2009 A: Special Code 0000 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Section 2 Midterm 2 1. The sale of stocks

More information

THE MEANING OF MONEY. The Functions of Money. Money has three functions in the economy: The Functions of Money. The Functions of Money

THE MEANING OF MONEY. The Functions of Money. Money has three functions in the economy: The Functions of Money. The Functions of Money In this chapter, look for the answers to these questions: What assets are considered money? What are the functions of money? The types of money? 11 What is the Federal Reserve? What role do banks play

More information

Practice Problems on Money and Monetary Policy

Practice Problems on Money and Monetary Policy Practice Problems on Money and Monetary Policy 1- Define money. How does the economist s use of this term differ from its everyday meaning? Money is the economist s term for assets that can be used in

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Econ 111 Summer 2007 Final Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The classical dichotomy allows us to explore economic growth

More information

CHAPTER 5 Review... Page 1

CHAPTER 5 Review... Page 1 CHAPTER 5 Review... 1. The rate of inflation is the: A) median level of prices. B) average level of prices. C) percentage change in the level of prices. D) measure of the overall level of prices. 2. If

More information

Econ 202 Final Exam. Douglas, Fall 2007 Version A Special Codes 00000. PLEDGE: I have neither given nor received unauthorized help on this exam.

Econ 202 Final Exam. Douglas, Fall 2007 Version A Special Codes 00000. PLEDGE: I have neither given nor received unauthorized help on this exam. , Fall 2007 Version A Special Codes 00000 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Final Exam 1. On average over the past 50 years, the U.S.

More information

Money: Definition. Money: Functions. Money: Types 2/13/2014. ECON 3010 Intermediate Macroeconomics

Money: Definition. Money: Functions. Money: Types 2/13/2014. ECON 3010 Intermediate Macroeconomics Money: Definition ECON 3010 Intermediate Macroeconomics Chapter 4 The Monetary System: What It Is and How It Works Money is the stock of assets that can be readily used to make transactions. Money: Functions

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Suvey of Macroeconomics, MBA 641 Fall 2006, Final Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Modern macroeconomics emerged from

More information

Money. 1 What is money? Spring 2013. 3 functions of money: Store of value Unit of account Medium of exchange

Money. 1 What is money? Spring 2013. 3 functions of money: Store of value Unit of account Medium of exchange Money Spring 2013 1 What is money? 3 functions of money: Store of value Unit of account Medium of exchange Whether something is money is not always so clear: Physical bills and coins Balances on checking

More information

Currency: The paper money and coins owned by people and business firms

Currency: The paper money and coins owned by people and business firms WHAT IS MONEY? Things acceptable as a means of payment 2 TYPES OF MONEY 1. COMMODITY MONIES: 2. FIAT MONIES (TOKEN MONIES): DECREED BY THE GOV T AS LEGAL TENDER. The gov t promises the public that will

More information

Refer to Figure 17-1

Refer to Figure 17-1 Chapter 17 1. Inflation can be measured by the a. change in the consumer price index. b. percentage change in the consumer price index. c. percentage change in the price of a specific commodity. d. change

More information

Exam 1 Review. 3. A severe recession is called a(n): A) depression. B) deflation. C) exogenous event. D) market-clearing assumption.

Exam 1 Review. 3. A severe recession is called a(n): A) depression. B) deflation. C) exogenous event. D) market-clearing assumption. Exam 1 Review 1. Macroeconomics does not try to answer the question of: A) why do some countries experience rapid growth. B) what is the rate of return on education. C) why do some countries have high

More information

2.If actual investment is greater than planned investment, inventories increase more than planned. TRUE.

2.If actual investment is greater than planned investment, inventories increase more than planned. TRUE. Macro final exam study guide True/False questions - Solutions Case, Fair, Oster Chapter 8 Aggregate Expenditure and Equilibrium Output 1.Firms react to unplanned inventory investment by reducing output.

More information

Econ 202 Section 2 Final Exam

Econ 202 Section 2 Final Exam Douglas, Fall 2009 December 17, 2009 A: Special Code 0000 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Section 2 Final Exam 1. The present value

More information

Chapter 13 Money and Banking

Chapter 13 Money and Banking Chapter 13 Money and Banking After reading Chapter 13, MONEY AND BANKING, you should be able to: Explain the three functions of money: Medium of Exchange, Unit of Account, Store of Value. Understand the

More information

Untangling F9 terminology

Untangling F9 terminology Untangling F9 terminology Welcome! This is not a textbook and we are certainly not trying to replace yours! However, we do know that some students find some of the terminology used in F9 difficult to understand.

More information

real r = nominal r inflation rate (25)

real r = nominal r inflation rate (25) 3 The price of Loanable Funds Definition 19 INTEREST RATE:(r) Charge per dollar per period that borrowers pay or lenders receive. What affects the interest rate: inflation. risk. taxes. The real interest

More information

Discussion of Government and Central Bank Balance Sheets, Inflation and Monetary Policy by Christopher A. Sims

Discussion of Government and Central Bank Balance Sheets, Inflation and Monetary Policy by Christopher A. Sims Discussion of Government and Central Bank Balance Sheets, Inflation and Monetary Policy by Christopher A. Sims Timothy Cogley May 16, 2009 Questions about the Fed s Balance Sheet Does the vast expansion

More information

Econ 202 Final Exam. Douglas, Spring 2006 PLEDGE: I have neither given nor received unauthorized help on this exam.

Econ 202 Final Exam. Douglas, Spring 2006 PLEDGE: I have neither given nor received unauthorized help on this exam. , Spring 2006 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Final Exam 1. When the government spends more, the initial effect is that a. aggregate

More information

Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS. Peter N. Ireland Department of Economics Boston College. irelandp@bc.edu

Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS. Peter N. Ireland Department of Economics Boston College. irelandp@bc.edu Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS Peter N. Ireland Department of Economics Boston College irelandp@bc.edu http://www2.bc.edu/~irelandp/ec261.html Chapter 17a: The Tools of Monetary

More information

ECON 3312 Macroeconomics Exam 3 Fall 2014. Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

ECON 3312 Macroeconomics Exam 3 Fall 2014. Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. ECON 3312 Macroeconomics Exam 3 Fall 2014 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Everything else held constant, an increase in net

More information

1 Multiple Choice - 50 Points

1 Multiple Choice - 50 Points Econ 201 Final Winter 2008 SOLUTIONS 1 Multiple Choice - 50 Points (In this section each question is worth 1 point) 1. Suppose a waiter deposits his cash tips into his savings account. As a result of only

More information

Introduction to Macroeconomics 1012 Final Exam Spring 2013 Instructor: Elsie Sawatzky

Introduction to Macroeconomics 1012 Final Exam Spring 2013 Instructor: Elsie Sawatzky Introduction to Macroeconomics 1012 Final Exam Spring 2013 Instructor: Elsie Sawatzky Name Time: 2 hours Marks: 80 Multiple choice questions 1 mark each and a choice of 2 out of 3 short answer question

More information

Douglas, Spring 2008 February 21, 2008 PLEDGE: I have neither given nor received unauthorized help on this exam.

Douglas, Spring 2008 February 21, 2008 PLEDGE: I have neither given nor received unauthorized help on this exam. , Spring 2008 February 21, 2008 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 202 Midterm 1 1. What will happen to the equilibrium price of hamburgers

More information

University of Lethbridge Department of Economics ECON 1012 Introduction to Macroeconomics Instructor: Michael G. Lanyi

University of Lethbridge Department of Economics ECON 1012 Introduction to Macroeconomics Instructor: Michael G. Lanyi University of Lethbridge Department of Economics ECON 1012 Introduction to Macroeconomics Instructor: Michael G. Lanyi CH 24 Money Price Inflation 1) Money is A) currency plus coins. B) the same as gold.

More information

Pre-Test Chapter 12 ed17

Pre-Test Chapter 12 ed17 Pre-Test Chapter 12 ed17 Multiple Choice Questions 1. A $20 bill is a: A. gold certificate. B. Treasury note. C. Treasury bill. D. Federal Reserve Note. 2. Which of the following is not part of the M2

More information

Savings, Investment Spending, and the Financial System

Savings, Investment Spending, and the Financial System Savings, Investment Spending, and the Financial System 1. Given the following information about the closed economy of Brittania, what is the level of investment spending and private savings, and what is

More information

4 Macroeconomics LESSON 4

4 Macroeconomics LESSON 4 4 Macroeconomics LESSN 4 The Federal Reserve System and Its Tools Introduction and Description The focus of this lesson is the Federal Reserve System: how its actions relate to the money creation process

More information

1. Firms react to unplanned inventory investment by increasing output.

1. Firms react to unplanned inventory investment by increasing output. Macro Exam 2 Self Test -- T/F questions Dr. McGahagan Fill in your answer (T/F) in the blank in front of the question. If false, provide a brief explanation of why it is false, and state what is true.

More information

MACROECONOMICS. The Monetary System: What It Is and How It Works. N. Gregory Mankiw. PowerPoint Slides by Ron Cronovich

MACROECONOMICS. The Monetary System: What It Is and How It Works. N. Gregory Mankiw. PowerPoint Slides by Ron Cronovich 4 : What It Is and How It Works MACROECONOMICS N. Gregory Mankiw Modified for EC 204 by Bob Murphy PowerPoint Slides by Ron Cronovich 2013 Worth Publishers, all rights reserved IN THIS CHAPTER, YOU WILL

More information

EC2105, Professor Laury EXAM 2, FORM A (3/13/02)

EC2105, Professor Laury EXAM 2, FORM A (3/13/02) EC2105, Professor Laury EXAM 2, FORM A (3/13/02) Print Your Name: ID Number: Multiple Choice (32 questions, 2.5 points each; 80 points total). Clearly indicate (by circling) the ONE BEST response to each

More information

Solution. Solution. Money, Banking, and the Federal Reserve System. macroeconomics. economics

Solution. Solution. Money, Banking, and the Federal Reserve System. macroeconomics. economics KrugmanMacro_SM_Ch13.qxp 10/27/05 3:20 PM Page 155 Money, Banking, and the Federal Reserve System 1. For each of the following transactions, what is the effect (increase or decrease) on M1? on M2? a. You

More information

MONEY, INTEREST, REAL GDP, AND THE PRICE LEVEL*

MONEY, INTEREST, REAL GDP, AND THE PRICE LEVEL* Chapter 11 MONEY, INTEREST, REAL GDP, AND THE PRICE LEVEL* The Demand for Topic: Influences on Holding 1) The quantity of money that people choose to hold depends on which of the following? I. The price

More information

International Monetary Policy

International Monetary Policy International Monetary Policy 2 Preliminary concepts 1 Michele Piffer London School of Economics 1 Course prepared for the Shanghai Normal University, College of Finance, April 2011 Michele Piffer (London

More information

How do Central Banks Determine Interest Rates?

How do Central Banks Determine Interest Rates? TELLUS Something New How do Central Banks Determine Interest Rates? A Macro Update by Torgeir Høien, Portfolio Manager of SKAGEN Tellus January 3, 2011 Overview Central banks try to control inflation by

More information

chapter: Solution Money, Banking, and the Federal Reserve System

chapter: Solution Money, Banking, and the Federal Reserve System Money, Banking, and the Federal Reserve System 1. For each of the following transactions, what is the initial effect (increase or decrease) on M1? or M2? a. You sell a few shares of stock and put the proceeds

More information

Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS. Peter N. Ireland Department of Economics Boston College. irelandp@bc.edu

Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS. Peter N. Ireland Department of Economics Boston College. irelandp@bc.edu Lecture Notes on MONEY, BANKING, AND FINANCIAL MARKETS Peter N. Ireland Department of Economics Boston College irelandp@bc.edu http://www2.bc.edu/~irelandp/ec261.html Chapter 15a: Introduction to the Money

More information

This is Interest Rate Determination, chapter 7 from the book Policy and Theory of International Finance (index.html) (v. 1.0).

This is Interest Rate Determination, chapter 7 from the book Policy and Theory of International Finance (index.html) (v. 1.0). This is Interest Rate Determination, chapter 7 from the book Policy and Theory of International Finance (index.html) (v. 1.0). This book is licensed under a Creative Commons by-nc-sa 3.0 (http://creativecommons.org/licenses/by-nc-sa/

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Chatper 34 International Finance - Test Bank MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The currency used to buy imported goods is A) the

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The Fed uses three policy tools to manipulate the money supply:, which affect reserves

More information

Monetary Policy Bank of Canada

Monetary Policy Bank of Canada Bank of Canada The objective of monetary policy may be gleaned from to preamble to the Bank of Canada Act of 1935 which says, regulate credit and currency in the best interests of the economic life of

More information

April 4th, 2014. Flow C was 9 trillion dollars, Flow G was 2 trillion dollars, Flow I was 3 trillion dollars, Flow (X-M) was -0.7 trillion dollars.

April 4th, 2014. Flow C was 9 trillion dollars, Flow G was 2 trillion dollars, Flow I was 3 trillion dollars, Flow (X-M) was -0.7 trillion dollars. Problem Session I April 4th, 2014 Reference: Parkin, Introduction to economics, 2011 1. The rm that printed your Introduction to economics textbook bought the paper from XYZ Paper Mills. Was this purchase

More information

12.1 Introduction. 12.2 The MP Curve: Monetary Policy and the Interest Rates 1/24/2013. Monetary Policy and the Phillips Curve

12.1 Introduction. 12.2 The MP Curve: Monetary Policy and the Interest Rates 1/24/2013. Monetary Policy and the Phillips Curve Chapter 12 Monetary Policy and the Phillips Curve By Charles I. Jones Media Slides Created By Dave Brown Penn State University The short-run model summary: Through the MP curve the nominal interest rate

More information

Econ 330 Exam 1 Name ID Section Number

Econ 330 Exam 1 Name ID Section Number Econ 330 Exam 1 Name ID Section Number MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If during the past decade the average rate of monetary growth

More information

Mishkin ch.14: The Money Supply Process

Mishkin ch.14: The Money Supply Process Mishkin ch.14: The Money Supply Process Objective: Show how the Fed controls stocks of money; focus on M1. - Macro theory simply assumes that the Fed can set M via open market operations. - Point here:

More information

Chapter 7 The Asset Market, Money, and Prices

Chapter 7 The Asset Market, Money, and Prices Chapter 7 The Asset Market, Money, and Prices Multiple Choice Questions 1. A disadvantage of the barter system is that (a) no trade occurs. (b) people must produce all their own food, clothing, and shelter.

More information

Econ 102 Economic Growth Solutions. 2. Discuss how and why each of the following might affect US per capita GDP growth:

Econ 102 Economic Growth Solutions. 2. Discuss how and why each of the following might affect US per capita GDP growth: Econ 102 Economic Growth Solutions 2. Discuss how and why each of the following might affect US per capita GDP growth: a) An increase of foreign direct investment into the US from Europe is caused by a

More information

EDICT OF THE PRESIDENT OF THE REPUBLIC OF BELARUS. August 29, 2008 No. 460 Minsk

EDICT OF THE PRESIDENT OF THE REPUBLIC OF BELARUS. August 29, 2008 No. 460 Minsk EDICT OF THE PRESIDENT OF THE REPUBLIC OF BELARUS August 29, 2008 No. 460 Minsk On Approval of the Republic of Belarus Monetary Policy Guidelines for 2009 1. To approve the Republic of Belarus Monetary

More information

Measuring the Aggregate Economy

Measuring the Aggregate Economy CHAPTER 25 Measuring the Aggregate Economy The government is very keen on amassing statistics... They collect them, add them, raise them to the n th power, take the cube root and prepare wonderful diagrams.

More information

Lecture 7: Savings, Investment and Government Debt

Lecture 7: Savings, Investment and Government Debt Lecture 7: Savings, Investment and Government Debt September 18, 2014 Prof. Wyatt Brooks Problem Set 1 returned Announcements Groups for in-class presentations will be announced today SAVING, INVESTMENT,

More information

University of Lethbridge Department of Economics ECON 1012 Introduction to Macroeconomics Instructor: Michael G. Lanyi

University of Lethbridge Department of Economics ECON 1012 Introduction to Macroeconomics Instructor: Michael G. Lanyi University of Lethbridge Department of Economics ECON 1012 Introduction to Macroeconomics Instructor: Michael G. Lanyi CH 25 Exch Rate & BofP 1) Foreign currency is A) the market for foreign exchange.

More information

Chapter 07 Interest Rates and Present Value

Chapter 07 Interest Rates and Present Value Chapter 07 Interest Rates and Present Value Multiple Choice Questions 1. The percentage of a balance that a borrower must pay a lender is called the a. Inflation rate b. Usury rate C. Interest rate d.

More information

Finance (Basic) Ludek Benada Department of Finance Office 533 75970@mail.muni.cz

Finance (Basic) Ludek Benada Department of Finance Office 533 75970@mail.muni.cz Finance (Basic) Ludek Benada Department of Finance Office 533 75970@mail.muni.cz Structure of lectures Introduction to finance Financial markets Banks and bank systems Other financial institutions Present

More information

Chapter 4 Consumption, Saving, and Investment

Chapter 4 Consumption, Saving, and Investment Chapter 4 Consumption, Saving, and Investment Multiple Choice Questions 1. Desired national saving equals (a) Y C d G. (b) C d + I d + G. (c) I d + G. (d) Y I d G. 2. With no inflation and a nominal interest

More information

2 0 0 0 E D I T I O N CLEP O F F I C I A L S T U D Y G U I D E. The College Board. College Level Examination Program

2 0 0 0 E D I T I O N CLEP O F F I C I A L S T U D Y G U I D E. The College Board. College Level Examination Program 2 0 0 0 E D I T I O N CLEP O F F I C I A L S T U D Y G U I D E College Level Examination Program The College Board Principles of Macroeconomics Description of the Examination The Subject Examination in

More information

Economics 101 Multiple Choice Questions for Final Examination Miller

Economics 101 Multiple Choice Questions for Final Examination Miller Economics 101 Multiple Choice Questions for Final Examination Miller PLEASE DO NOT WRITE ON THIS EXAMINATION FORM. 1. Which of the following statements is correct? a. Real GDP is the total market value

More information

Fixed Exchange Rates and Exchange Market Intervention. Chapter 18

Fixed Exchange Rates and Exchange Market Intervention. Chapter 18 Fixed Exchange Rates and Exchange Market Intervention Chapter 18 1. Central bank intervention in the foreign exchange market 2. Stabilization under xed exchange rates 3. Exchange rate crises 4. Sterilized

More information

Flow of Funds - Overview of Japan, US, and the Euro area -

Flow of Funds - Overview of Japan, US, and the Euro area - Flow of Funds - Overview of, US, and the - September 30, 201 Research and Statistics Department Bank of *In this paper, major sectors are compared either among, the, and the or between and the. Ⅰ. Overview:,

More information

With lectures 1-8 behind us, we now have the tools to support the discussion and implementation of economic policy.

With lectures 1-8 behind us, we now have the tools to support the discussion and implementation of economic policy. The Digital Economist Lecture 9 -- Economic Policy With lectures 1-8 behind us, we now have the tools to support the discussion and implementation of economic policy. There is still great debate about

More information

Econ 303: Intermediate Macroeconomics I Dr. Sauer Sample Questions for Exam #3

Econ 303: Intermediate Macroeconomics I Dr. Sauer Sample Questions for Exam #3 Econ 303: Intermediate Macroeconomics I Dr. Sauer Sample Questions for Exam #3 1. When firms experience unplanned inventory accumulation, they typically: A) build new plants. B) lay off workers and reduce

More information

Finance, Saving, and Investment

Finance, Saving, and Investment 23 Finance, Saving, and Investment Learning Objectives The flows of funds through financial markets and the financial institutions Borrowing and lending decisions in financial markets Effects of government

More information

Chapter 11 The Central Bank Balance Sheet and the Money Supply Process

Chapter 11 The Central Bank Balance Sheet and the Money Supply Process Chapter 11 The Central Bank Balance Sheet Problems and Solutions 1. In an effort to diversify, the Central Bank of China has decided to exchange some of its dollar reserves for euros. Follow the impact

More information

BPE_MAC1 Macroeconomics 1 Spring Semester 2011

BPE_MAC1 Macroeconomics 1 Spring Semester 2011 Masaryk University - Brno Department of Economics Faculty of Economics and Administration BPE_MAC1 Macroeconomics 1 Spring Semester 2011 Tutorial Session 4-18.03.2011, 11:05-11:50 a.m. Matching a. financial

More information

Chapter 17. Fixed Exchange Rates and Foreign Exchange Intervention. Copyright 2003 Pearson Education, Inc.

Chapter 17. Fixed Exchange Rates and Foreign Exchange Intervention. Copyright 2003 Pearson Education, Inc. Chapter 17 Fixed Exchange Rates and Foreign Exchange Intervention Slide 17-1 Chapter 17 Learning Goals How a central bank must manage monetary policy so as to fix its currency's value in the foreign exchange

More information

7. Which of the following is not an important stock exchange in the United States? a. New York Stock Exchange

7. Which of the following is not an important stock exchange in the United States? a. New York Stock Exchange Econ 20B- Additional Problem Set 4 I. MULTIPLE CHOICES. Choose the one alternative that best completes the statement to answer the question. 1. Institutions in the economy that help to match one person's

More information

Chapter 1 THE MONEY MARKET

Chapter 1 THE MONEY MARKET Page 1 The information in this chapter was last updated in 1993. Since the money market evolves very rapidly, recent developments may have superseded some of the content of this chapter. Chapter 1 THE

More information

http://angel.bfwpub.com/section/content/default.asp?wci=pgt...

http://angel.bfwpub.com/section/content/default.asp?wci=pgt... Hmwk 14 1. Let's find out what counts as money. In this chapter, we used a typical definition of money: A widely accepted means of payment. Under this definition, which people are using money in the following

More information

Macroeconomics Series 2: Money Demand, Money Supply and Quantity Theory of Money

Macroeconomics Series 2: Money Demand, Money Supply and Quantity Theory of Money Macroeconomics Series 2: Money Demand, Money Supply and Quantity Theory of Money by Dr. Charles Kwong School of Arts and Social Sciences The Open University of Hong Kong 1 Lecture Outline 2. Determination

More information

(a) Using an MPC of.5, the impact of $100 spent the government will be as follows: 1 100 100 2 50 150 3 25 175 4 12.5 187.5 5 6.25 193.

(a) Using an MPC of.5, the impact of $100 spent the government will be as follows: 1 100 100 2 50 150 3 25 175 4 12.5 187.5 5 6.25 193. S5 Solutions 24 points Chapter 2: Fiscal policy. If the marginal propensity to save is.5, how large is the multiplier? If the marginal propensity to save doubles to., what happens to the multiplier? With

More information

Nominal, Real and PPP GDP

Nominal, Real and PPP GDP Nominal, Real and PPP GDP It is crucial in economics to distinguish nominal and real values. This is also the case for GDP. While nominal GDP is easier to understand, real GDP is more important and used

More information