Chapter 25 example #35348

An asset would be usable as a medium of exchange for all of the following reasons ​except:

Which of the following would be the least desirable candidate to be a good medium of​ exchange?

The use of money

Money serves as a unit of account when

Money serves as a standard of deferred payment when

The Federal Reserve uses two definitions of the money​ supply, M1 and​ M2, because

Look carefully at the following list. a. The coins in your pocket. b. The funds in your checking account. c. The funds in your savings account. d. The​ traveler's check that you have left over from a trip. e. Your Citibank Platinum MasterCard. Which of the things above are NOT included in the M1 definition of the money​ supply?

The M2 definition of the money supply includes

What are the largest asset and the largest liability of a typical​ bank?

How do the banks​ "create money"?

Excess reserves

Suppose the required reserve ratio is 13​% and a bank has the following balance​ sheet: Assets. Liabilities Reserves $2,400 Deposits $12,000 Loans $9,600 This bank keeps required reserves of ​$ blank and excess reserves of ​$ blank

Congress passed legislation to create the Federal Reserve System in 1913 in order to

The most important role of the Federal Reserve in​ today's U.S. economy is

When the Federal Reserve purchases Treasury securities in the open​ market,

When the Federal Reserve sells Treasury securities in the open​ market,

The​ (FOMC) Federal Open Market Committee

The Federal Reserve Bank of New York is always a voting member of the FOMC because

Which of the following is a monetary policy tool used by the Federal Reserve​ Bank?

Which of the following policy tools is the Federal Reserve least likely to use in order to actively change the money​ supply?

Reserve requirements are changed infrequently because

In the securitization​ process,

In addition to the Federal Reserve​ Bank, what other economic actors influence the money​ supply?

If the money supply is growing at a rate of 6 percent per​ year, real GDP​ (real output) is growing at a rate of 0 percent per​ year, and velocity is​ constant, what will the inflation rate​ be? If the money supply is growing at a rate of 6 percent per​ year, real GDP​ (real output) is growing at a rate of 0 percent per​ year, and velocity is growing at 3 percent per year instead of remaining​ constant, what will the inflation rate​ be?

Which of the following is true with respect to Irving​ Fisher's quantity​ equation, M*V=P*Y

The average number of times each dollar in the money supply is used to purchase goods and services is called

Evidence shows that the quantity equation is correct over the long​ run, which implies that the

According to the quantity theory of money inflation results from which of the​ following?

What is a banking​ panic?

Which of the following best explains how the Federal Reserve acts to help prevent banking​ panics?

Which of the following is NOT a monetary policy goal of the Federal Reserve bank​ (the Fed)?

The Federal Reserve has multiple economic goals for monetary policy to​ achieve, ​ However, it can be difficult to manage all of the goals at once. Which of the following is not true regarding the multiple goals of the​ Fed?

Which of the following is a monetary policy target used by the​ Fed?

The Fed uses policy targets of interest rate​ and/or money supply because

The federal funds rate is

​Additionally, the federal funds rate is

In the graph of the money market shown on the​ right, what could cause the money supply curve to shift from MS1 to MS2​?

In the graph of the money market shown on the​ right, what could cause the money demand curve to shift from MD1 to MD2​?

When the Federal Reserve increases the required reserve ratio as a part of a contractionary monetary​ policy, there​ is:

If the Fed believes the economy is about to fall into​ recession, it should

If the Fed believes the inflation rate is about to​ increase, it should

Consider the following​ statement: ​"In the dynamic AD and AS​ model, contractionary monetary policy causes the price level to​ fall." The statement is

For more than 20​ years, the Fed has used the federal funds rate as its monetary policy target. It has not targeted money supply at the same time because the

What is inflation​ targeting?

Nobel laureate Milton Friedman and his followers belong to a school of thought known as monetarism. What do the monetarists argue the Fed should​ target?

Recall that​ "securitization" is the process of turning a​ loan, such as a​ mortgage, into a bond that can be bought and sold in secondary markets. An article in the Economist ​notes: That securitization caused more subprime mortgages to be written is not in doubt. By offering access to a much deeper pool of​ capital, securitization helped to bring down the cost of mortgages and made​ home-ownership more affordable for borrowers with poor credit histories. ​Source: "Ruptured​ Credit," Economist​, May​ 15, 2008. What is a​ "subprime mortgage," and would a subprime borrower be likely to pay a higher or a lower interest rate than a borrower with a better credit​ history?

Why would securitization give mortgage borrowers access to a deeper pool of​ capital?

In​ 2015, Richard​ Fuld, the last CEO of Lehman​ Brothers, gave a talk in which according to an article in the Wall Street​ Journal,​ "He outlined what he called the​ 'perfect storm' of events that led to the financial​ crisis, saying​ 'it all started with the​ government' and policies that subsidized cheap loans for people to buy homes in order to help them chase the American​ dream." ​Source: Maureen​ Farrell, "Lehman's Fuld Says It​ Wasn't His​ Fault," Wall Street Journal​, May​ 28, 2015. The events that led to the financial crisis include

Government policies that could have been said to have been subsidizing cheap loans included

The introduction of Fannie Mae and Freddie Mac into the​ mortgage-backed securities market by the government

Which of the following is a monetary policy response to the economic recession of 2007dash2009 and the accompanying financial​ crisis?

What is fiscal​ policy?

Who is responsible for fiscal​ policy?

Government spending and taxes that increase or decrease without any actions taken by the government are referred to as

Which of the following are examples of discretionary fiscal​ policy? ​(Check all that​ apply.)

Which of the following are categories of federal government​ expenditures?

The largest and​ fastest-growing category of federal expenditures is

The federal​ government's day-to-day activities include running federal agencies like the Environmental Protection​ Agency, the​ FBI, the National Park​ Service, and the Immigration and Customs Enforcement. Spending on these types of activities make up

If Congress and the president decide an expansionary fiscal policy is​ necessary, what changes should they make in government spending or​ taxes?

What changes should they make if they decide a contractionary fiscal policy is​ necessary?

Is it possible for Congress and the president to carry out an expansionary fiscal policy if the money supply does not​ increase?

Why does a​ $1 increase in government purchases lead to more than a​ $1 increase in income and​ spending?

Consider the following​ statement: ​"Real GDP is currently​ $17.7 trillion, and potential real GDP is​ $17.4 trillion. If Congress and the president would decrease government purchases by​ $300 billion or increase taxes by​ $300 billion, the economy could be brought to equilibrium at potential​ GDP." If government purchases were to decrease by​ $300 billion or if taxes were increased by​ $300 billion, the equilibrium level of real GDP would decrease by

Which can be changed more​ quickly: monetary policy or fiscal​ policy?

What is meant by crowding​ out?

Which of the following best describes the difference between crowding out in the short run and in the long​ run?

What is the difference between the federal budget deficit and federal government​ debt?

How does a budget deficit act as an automatic stabilizer and reduce the severity of a​ recession?

When actual GDP is below potential GDP the budget deficit increases because​ of:

If the government increases expenditure without raising​ taxes, this will

The national debt is best measured as

It would seem that both households and businesses would benefit if the federal income tax were simpler and tax forms were easier to fill out. ​However, tax laws have become increasingly complicated because

Suppose a political candidate hired you to develop two arguments in favor of a flat tax. Consider the following list of arguments about changing to a flat​ tax: A. There would be a reduction in paperwork and the compliance cost of the tax system. B. The complexities in the current tax code allow the government to pursue other policy goals. C. A change in the tax code would result in a more unequal distribution of income because the marginal tax rate on​ high-income taxpayers would be reduced. D. There are potential increases in labor​ supply, savings, and investment from a lower marginal tax rate. Which two out of the above list of arguments would you advance in favor of a flat​ tax?

Consider the same list of arguments about changing to a flat tax. Which two out of the above list of arguments would you advance against a flat​ tax?