Part 3 example #21163

9 July 2024
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27 test answers

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If market interest rates increase, the prices of existing bonds will
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d. decrease. Correct
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The curve that illustrates the relationship between tax rates and tax revenue is called the
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a. Laffer curve. Correct
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Assume that the economy is at full employment. If the Fed increases the growth rate of the money supply, and if the effects of this policy change are unanticipatedthis will cause
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c. GDP to increase and unemployment to decrease in the short run Correct
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Which of the following statements about the Federal Reserve System is not correct?
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a. the Fed's main responsibility is to set U.S. tax rates Correct
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Your employer has just given you a check for $500 which you now deposit in your checking account. On your bank's balance sheet
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b. excess reserves will increase by $450 Correct
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Assume that the economy is in recession. Which of the following would no economist recommend as a way of dealing with the recession?
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c. Increase taxes Correct
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Consider a bank that has reserves of $300 million and deposits of $2,500 million. This bank
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e. Can make an additional $50 million worth of new loans Correct
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If you hear that the Fed is engaging in open market sales of government securities this means that
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a. the Fed is draining reserves from the banking system Correct c. the fed funds rate will tend to be pushed up Correct
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Consider an economy that is at full employment in the standard AD-AS model. If the Fed engages in open market purchases of government securities and the effects of these operations are notanticipated
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d. in the short run, national output will increase and unemployment will decrease Correct
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Assume that the required reserve ratio is .1. If the Fed purchases $10 billion dollars worth of government securities the money supply will eventually, after banks have made all of the loans that they can legally make,
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b. increase by $100 billion Correct
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The government is experiencing a structural budget deficit
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d. If the federal budget is in deficit even though the economy is operating at full employment Correct
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If the Fed decides to purchase a significant amount of government securities, and the effects of this action are not anticipated, in the short run this will probably lead to
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c. a fall in interest rates Correct
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The M1 measure of the money supply
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c. includes deposits at commercial banks on which checks can be written Correct
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Assume that the Fed purchases $100 million worth of government securities from an individual. This individual receives a check for $100 million from the Fed and deposits it into his checking account at First National Bank. The required reserve ratio is .2. This transaction will
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d. increase total reserves of the banking system by $100 million Correct
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Which of the following statements is true?
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a. The U.S. dollar is an example of fiat money Correct
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Checking deposits at most banks are insured by
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a. the Federal Deposit Insurance Corporation Correct
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The "discount" rate refers to the interest rate that
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b. banks pay when they borrow from the Fed Correct
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If the Fed announces that it has cut its target for the fed funds rate by 50 basis points this imples that
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d. it is engaging in expansionary monetary policy Correct e. banks will be able to lend more now than before Correct f. it plans to engage in open market purchases of government securities Correct h. it plans to add reserves to the banking system Correct
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Assume that the Fed has just given someone $50,000 worth of new currency. They deposit this currency into their bank. Eventually, after all banks have made all of the loans that they can legally make, the nation's money supply
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a. Will have increased by $500,000 Correct
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If the Fed wants to decrease the money supply it could accomplish this by
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b. increasing the required reserve ratio Correct
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If the Fed unexpectedly decides to increase the required reserve ratio this would
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a. reduce output in the short run b. ultimately reduce the money supply c. all of the above Correct d. cause aggregate demand to decrease (shift left) e. reduce the amount of loans that banks can make
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If $100 of currency is deposited into a checking account at First National Bank this will
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a. cause the bank's reserves to increase by $100 Correct
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Theoretically, to eliminate a recessionary gap, the Fed could use __________ monetary policy, and to eliminate an inflationary gap, the Fed could use __________ monetary policy.
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d. expansionary; contractionary Correct
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The value, or purchasing power, of money
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a. is determined by the supply of money and the demand for money Correct
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Which of the following statements is not correct?
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c. the Federal Open Market Committee includes 7 presidents of the Federal Reserve District banks Correct e. members of the Board of Governors are appointed for 6 year terms Correct g. the Fed chairman most responsible for bringing inflation down after the 1970s was Alan Greenspan Correct
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If the Fed reduces the required reserve ratio this will
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c. increase the level of excess reserves held by commercial banks Correct
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If a bank has excess reserves of $1,000 this bank will be able to make new loans totaling
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d. $1,000 Correct