ECO/372T Principles of Macroeconomics The Latest Version A+ Study Guide
********************************************** ECO 372 Entire Course Link https://uopcourses.com/category/eco-372/ ********************************************** ECO 372 Week 4 Apply: Money and the Federal Reserve Homework Review the Week 4 Money and the Federal Reserve Quiz in preparation for this assignment. Complete the Week 4 Money and the Federal Reserve Assignment in McGraw-Hill ConnectÂŽ. These are randomized questions. Note: You have only one attempt available to complete assignments. Grades must be transferred manually to eCampus by your instructor. Don't worry, this might happen after your due date.
Determine which of the Federal Reserve entities controls each of the following policy tools. a. The reserve requirement is determined by the: • New York Federal Reserve Bank. • Federal Open Market Committee. • Board of Governors. • 12 Federal Reserve Banks. b. Open market operations are determined by the: • Board of Governors. • Federal Open Market Committee. • 12 Federal Reserve Banks. • New York Federal Reserve Bank.
For each of the following scenarios, determine whether money is being used as a medium of account, store of value, or unit of account. a. Sam gives the grocery store clerk a $5 bill to pay for his purchase. • Store of value • Unit of account • Medium of exchange b. Bill looks at the $20 price tag on a clock to see how much money he would need to purchase it. • Unit of account • Store of value
• Medium of exchange c. Maria writes a check to pay her electric bill. • Unit of account • Store of value • Medium of exchange d. Susan transfers some of her wealth from her checking account into a certificate of deposit that earns interest. • Medium of exchange • Unit of account • Store of value
Suppose that Ava withdraws $300 from her savings account at Second Bank. The reserve requirement facing Second Bank is 10%. Assume the bank does not wish to hold any excess reserves of new deposits. Use this information to complete the balance sheet below to show how Second Bank's assets and liabilities change when Ava withdraws the $300 from the bank. Instructions: Enter your answers as a whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. A Simple Bank Balance Sheet Assets Liabilities Change in Reserves: $ -30 Change in Loans: $ -270
Change in Deposits: $ -300
Money is: • the gold and silver behind the currency and the coins that are issued by the government. • any good that buyers and sellers have a desire to purchase, use, or hold. • anything that both buyers and sellers will accept in exchange for goods and services. • only the printed paper currency and the coins that are produced by the government.
Suppose the Federal Reserve increases the amount of reserves by $100 million and the total money supply increases by $500 million. Instructions: Enter your answers as a whole number. a. What is the money multiplier?
b. Using the money multiplier from part a, how much will the money supply change if the Federal Reserve increases reserves by $50 million?
The part of the Federal Reserve that determines and implements the nation's monetary policy and controls the money supply to promote stable prices and
economic growth is the: • president of the Board of Governors. • Federal Open Market Committee. • 12 Federal Reserve District Banks. • Board of Governors.
Explain the changes in M1 and M2 for each of the following scenarios. a. When Lily transfers $100 from her savings account into her checking account, M1 increases by $ b. If Miguel deposits $200 cash into his money market mutual fund, M1 decreases by c. If Sam takes $1,000 from his savings account to
purchase Microsoft stock, M1 remains the same
Other things being equal, an expansion of commercial bank lending Multiple Choice • increases the money supply. • changes the composition, but not the size, of the money supply. • reduces the money supply. • is desirable during a period of demand-pull inflation.
Assets of the commercial banking system include Multiple Choice • reserves and loans. • reserves and deposits. • deposits. • loans and deposits.
Money is "created" when Multiple Choice • people use money to pay for stuff they buy from one
another. • a bank grants a loan to a customer. • someone lends money to a friend or a family member. • a depositor deposits money at the bank.
Use the following graph to answer the next question. Which line in the graph would best illustrate the supply of money curve? Multiple Choice • Line 1 • Line 2
• Line 4 • Line 3
A checkable deposit at a commercial bank is a(n) Multiple Choice • asset to both the depositor and the bank. • liability to the depositor and an asset to the bank. • asset to the depositor and a liability to the bank. • liability to both the depositor and the bank.
Which of the following are liabilities to a bank? Multiple Choice • vault cash and demand deposits • capital stock and reserves • property and capital stock • demand and time deposits
Which definition(s) of the money supply include(s) only items that are directly and immediately usable as a
medium of exchange? Multiple Choice • M2 • M1 and M2 • M1 • neither M1 nor M2
The Federal Reserve System was established by the Federal Reserve Act of Multiple Choice • 1955.
• 1945. • 1933. • 1913.
Money eliminates the need for a coincidence of wants in trading primarily through its role as a Multiple Choice • unit of account. • medium of deferred payment. • store of value.
• medium of exchange.
The M2 measure of money consists of the sum of Multiple Choice • M1, savings deposits, small time deposits, and money market mutual funds. • currency, checking and savings deposits, and small time deposits. • savings deposits, small time deposits, and money market mutual funds. • M1, checking and savings deposits, and currency.
When a consumer wants to compare the price of one product with another, money is primarily functioning as a Multiple Choice • store of value. • medium of exchange. • checkable deposit. • unit of account.
Members of the Federal Reserve Board of Governors are Multiple Choice • selected by each of the Federal Reserve banks for 4-year terms. • appointed by the president to staggered 14-year terms. • selected by the Federal Open Market Committee for 4year terms. • appointed by Congress to staggered 14-year terms.
A bank's required reserves can be calculated by Multiple Choice • multiplying its checkable-deposit liabilities by its excess reserves. • dividing its excess reserves by its required reserves. • multiplying its checkable-deposit liabilities by the reserve ratio. • dividing its required reserves by its excess reserves.
If the reserve requirement is 20% and commercial bankers decide to hold additional excess reserves equal to 5% of any newly acquired checkable deposits, then the effective monetary multiplier for the banking system
will be Multiple Choice • 4. • 6. • 3. • 5.
The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for Multiple Choice • issuing currency and acting as the fiscal agent for the
federal government. • setting the Fed's monetary policy and directing the purchase and sale of government securities. • supervising banks to make sure that markets are open to all and remain competitive. • maintaining cash reserves that can be used to settle international transactions.
The coupon rate is the Multiple Choice • regular payment of interest to a bondholder. • maximum interest rate that can be paid on a bond.
• amount originally lent. • interest rate promised when a bond is issued.
The Federal Open Market Committee (FOMC) Multiple Choice • provides advice on banking stability to the Fed. • sets policy on the sale and purchase of government bonds by the Fed. • monitors regulatory banking laws for member banks. • follows the actions and operations of financial markets to keep them open and competitive.
If you put a $20 bill in the pocket of your winter coat at the beginning of spring so that you will be surprised when you find it again next winter, you are using money as Multiple Choice • a unit of account. • a store of value. • a medium of exchange. • bank reserves.
The equilibrium rate of interest in the market for money is determined by the intersection of the Multiple Choice • supply-of-money curve and the asset-demand-formoney curve. • supply-of-money curve and the total-demand-for-money curve. • supply-of-money curve and the transactions-demandfor-money curve. • investment-demand curve and the total-demand-formoney curve.
The M1 measure of money consists of the sum of Multiple Choice • checking deposits and travelers' checks. • currency and travelers' checks. • currency, checking deposits, and travelers' checks. • currency, checking deposits, and savings deposits.
If the reserve requirement were 15% percent, the value of the monetary multiplier would be Multiple Choice • 8.54.
• 7.32. • 6.67. • 5.50.
Money functions as a store of value if it allows you to Multiple Choice • delay purchases until you want the goods. • measure the value of goods in a reliable way. • increase your confidence in money. • make exchanges in a more efficient manner.
The required-reserve ratio is equal to a commercial bank’s Multiple Choice • required reserves divided by its checkable-deposit liabilities. • excess reserves divided by its required reserves. • checkable-deposit liabilities multiplied by its excess reserves. • checkable-deposit liabilities divided by its required reserves.
The reason for the Fed being set up as an independent agency of government is to Multiple Choice • let it be able to compete with other financial institutions. • protect it from political pressure. • allow it to earn profits like private firms. • make it be managed and controlled by member banks.
Cash held by a bank in its vault is a part of the bank’s
Multiple Choice • money supply. • liabilities. • net worth. • reserves.
A bank has $2 million in checkable deposits. In the bank's balance sheet, this would be part of Multiple Choice • assets. •
capital stock. • liabilities. • net worth.
Fractional reserve banking refers to a system where banks Multiple Choice • grant loans to their borrowing customers. • accept a portion of their deposits in checkable accounts. • deposit a fraction of their reserves at the central bank. • hold only a fraction of their deposits in their reserves.
A wealthy executive is holding money, waiting for a good time to invest in the stock market. This action would be an example of the Multiple Choice • creation of fiat money. • transactions demand for money. • use of money as a medium of exchange. • asset demand for money.
Which of the following items are included in money supply M2 but not M1? Multiple Choice • savings deposits • checkable deposits • coins • Federal Reserve notes
Traditionally, the Federal Reserve can give emergency loans only to Multiple Choice •
securities firms. • commercial banks. • manufacturing firms. • investment banks.
A bank’s net worth is equal to its Multiple Choice • profits plus its assets. • assets minus its liabilities. • liabilities minus its assets. •
assets plus its liabilities.
A consumer holds money to meet spending needs. This would be an example of the Multiple Choice • asset demand for money. • use of money as legal tender. • use of money as a measure of value. • transactions demand for money.
The transactions demand for money is least likely to be a
function of the Multiple Choice • price level. • frequency of wage and salary payments. • interest rate. • level of national income.
Assume that the required reserve ratio is 20%. A business deposits a $50,000 check at Bank A; the check is drawn against Bank B. What happens to the reserves at Bank A and Bank B? Multiple Choice
• increase by $50,000 at Bank A and decrease by $50,000 at Bank B • Reserves stay the same in both banks. • increase by $10,000 at Bank A and decrease by $50,000 at Bank B • increase by $10,000 at Bank A and decrease by $10,000 at Bank B
Use the following graph to answer the next question. Which line in the graph above would best illustrate the asset demand for money curve? Multiple Choice
• Line 1 • Line 4 • Line 3 • Line 2
What function is money serving when you deposit it in a savings account? Multiple Choice • a medium of exchange • a store of value • a checkable deposit
• a unit of account
The main function of the Federal Reserve System is to Multiple Choice • clear checks from member banks. • control the money supply. • set reserve requirements of banks. • serve as the fiscal agent for the federal government.
Which group is responsible for the policy decision of changing the money supply? Multiple Choice • Federal Advisory Council • Federal Open Market Committee • Office of Management and Budget • Thrift Advisory Council
Credit card balances are not considered to be money primarily because they Multiple Choice •
are rarely used to make purchases. • do not represent an obligation to pay someone else. • are not part of people's wealth. • are an asset used in making transactions.
The functions of money are to serve as a Multiple Choice • factor of production, exchange, and aggregate supply. • unit of account, a store of value, and a medium of exchange. • determinant
of
consumption,
government spending. •
investment,
and
resource allocator, a method for accounting, and a means of income distribution.
One hundred percent reserve banking refers to a situation in which banks' reserves equal One hundred percent of their Multiple Choice • loans. • profits. • income. • deposits.
One year before maturity the price of a bond with a principal amount of $1,000 and a coupon rate of 5% paid annually fell to $981. The one year interest rate must be Multiple Choice • 1.9%. • 8.5%. • 7.0%. • 5.0%.