ECON 2301 Final Exam3 – If a bank receives a deposit

ECON 2301Exam31. If a bank receives a deposit of $100,000, and the legal reserve requirement is 20 percent, then thebank can lend outa. $20,000b. $100,000c. $400,000d. $80,000.2. The ease with which an asset can be converted into money is known asa. volatilityb. liquidityc. currencyd. exchange.3. The interest rate that banks charge each other that borrow reserves overnight is thea. federal funds rateb. discount ratec. reserve rated. prime rate.4. The current Discount rate isa. 0.75 percentb. 0.50 percentc. 0.25 percentd. 0.00 percent.5. If banks lend all their excess reservesa. the multiplier is higherb. the multiplier is smallerc. the multiplier is the samed. required reserves increase.6. The number of times per year a dollar is used to transact an exchange is known asa. liquidity of moneyb. velocity of moneyc. the Quantity theory of moneyd. the Equation of exchange.7. When the Fed purchases government securities, thisa. increases banks’ reserves and makes possible an increase in the money supplyb. decreases banks’ reserves and makes possible a decrease in the money supplyc. raises the discount rated. lowers the discount rate.8. The letter preceding the serial number on every US bank note indicates thea. location where the currency was printedb. current reserve requirementc. district bank issuing the bill into circulationd. Washington, DC address of the different Fed offices.9. A bank makes loans via itsa. demand depositsb. total reservesc. excess reservesd. required reserves. ECON 2301 Exam 3 p 2/5 10. A bank creates money when ita. receives a cash depositb. has a loan paid offc. makes a loan from excess reservesd. lowers the discount rate.11. When the reserve requirement ratio is raised,a. the money multiplier increases, and the amount of excess reserves increasesbanking systemb. the money multiplier decreases, and the amount of excess reserves increasesbanking systemc. the money multiplier decreases, and the amount of excess reserves decreasesbanking systemd. the money multiplier increases, and the amount of excess reserves decreasesbanking system. in thein thein thein the 12. The amount of assets than every bank must hold at all times is determined by thea. bank’s total reservesb. reserve requirement ratioc. the discount rated. incentive to borrow.13. With a money multiplier of 7, a $3,000 (million) increase in total reserves could increase aggregatespending bya. $3,000b. $9,000c. $15,000d. $18,000.14. According to the quantity theory of money, if the quantity of goods and services within the economy is$10,000b, velocity is 5 and the money supply is $2,000b, thena. the price level is 0b. the price level is 100c. nominal GDP is $50 000d. the price level is 200.15. Which city does not have a Federal Reserve District Bank?a. Dallasb. Richmondc. Minneapolisd. Denver16. The most effective & frequently used tool by the Fed to change the economy’s money supply isa. open-market operationb. the discount ratec. the reserve requirement ratiod. the federal funds rate.17. With excess reserves of $5,000 and a reserve requirement of 25 percent, the money supply willincrease bya. $15,000b. $20,000c. $25,000d. $10,000. ECON 2301 Exam 3 p 3/5 18. The current Federal funds rate isa. 0.25 percentb. 0.50 percentc. 0.75 percentd. 0.00 percent.19. The Fed isa. an agency of the US governmentb. privately-ownedc. owned by the Fed District banksd. a division of the US Treasury Department.20. What are the 3 policy tools the Fed uses to control the money supply?a. Taxes, the reserve requirement & the federal funds rateb. Federal spending, the discount rate & open-market operationsc. The reserve requirement, the discount rate & federal spendingd. Open-market operations, the reserve requirement & the discount rate.21. If banks have no excess reserves & the reserve requirement is raised, the amount banks can lenda. decreases & the money supply contractsb. decreases & the money supply expandsc. increases & the money supply contractsd. increases & the money supply expands.22. When the reserve requirement ratio is lowereda. the money multiplier & excess reserves increaseb. the money multiplier & excess reserves decreasec. the money multiplier increases & excess reserves decreased. the money multiplier decreases & excess reserves increase.23. An increase in the money supplya. lowers the interest rate causing a decrease in investment & a decrease in GDPb. raises the interest rate causing a decrease in investment & a decrease in GDPc. lowers the interest rate causing a increase in investment & an increase in GDPd. raises the interest rate causing a increase in investment & an increase in GDP.24. The principal decision-making body of the Fed is thea. District Bank of NYb. Board of Governorsc. Federal Open Market Committeed. US Treasury.25. The interest rate that the Fed charges banks that borrow reserves from it is thea. federal funds rateb. discount ratec. reserved rated. investment rate.26. When the Fed sells government securities, ita. increases banks’ reserves and makes possible an increase in the money supplyb. decreases banks’ reserves and makes possible a decrease in the money supplyc. raises the discount rated. lowers the discount rate. ECON 2301 Exam 3 p 4/5 27. If a bank has total reserves of $250,000 & the reserve requirement ration is 15 percent, the bank canlenda. $212,500b. $100,000c. $450,000d. $160,000.28. If a bank receives a deposit of $50,000, and the legal reserve requirement is 20 percent, then themoney supplya. decreases by $20,000b. increases by $100,000c. increases by $200,000d. remains unchanged.29. If the banking system as a whole has total reserves of $1,750 million & the reserve requirement is 10percent, GDP (potentially) willa. increase $15,750mb. increase $10,000mc. increase $1,750md. decrease $7,500m.30. The (original) Phillips Curve illustrates a negative relationship betweena. output and unemploymentb. output and employmentc. inflation and outputd. inflation and unemployment.31. According to Neo-classical macroeconomic theory, no mater what the government does to affect realeconomic behavior, in the long run thea. economy will have a zero inflation rateb. inflation rate will tend to its natural ratec. economy will have a zero unemployment rated. unemployment rate will tend to its natural rate32. An increase in expected inflation shifts thea. long-run Phillips curve upb. long-run Phillips curve downc. short-run Phillips curve upd. short-run Phillips curve down.33. The long- & short-run Phillips curves intersecta. at equilibrium in the goods’ marketb. at equilibrium in the factors’ marketc. where expected inflation is greater than expected inflationd. where expected inflation equals actual inflation.34. According to Neo-classical macroeconomic theory, the actual unemployment rate is above the naturalrate whena. unemployment is greater than inflationb. unemployment is less than inflationc. actual inflation is less than expected inflationd. actual inflation is greater than expected inflation. ECON 2301 Exam 3 p 5/5 35. According to the Phillips curve equation, if the natural rate of unemployment is 6%, actual & expectedinflation is 10% & 8% respectively & the Phillips curve has a slope of 45 degrees, actual unemployment isa. 4%b. 8%c. 10%d. 2%.36. According to the Phillips curve equation, if the natural rate of unemployment is 8%, actual & expectedinflation is 5% & 9% respectively & the Phillips curve has a slope of 45 degrees, actual unemployment isa. 6%b. 3%c. 12%d. 10%.37. Shifts in the Phillips curve result froma. a movement along the intermediate-run AS curveb. a shift in the intermediate-run AS curvec. a movement along the long-run AS curved. a shift in the long-run AS curve.38. An decrease in expected inflation shifts thea. long-run Phillips curve upb. long-run Phillips curve downc. short-run Phillips curve upd. short-run Phillips curve down. 39. Refer to Graph 33-1. If the economy starts at c and 1, then in the short run a decrease in the moneysupply growth rate moves the economy toa. a, 1b. d, 3c. b, 2d. c, 2.40. Refer to Graph 33-1. If the economy starts at c and 1, then in the short run an increase in governmentexpenditures moves the economy toa. b, 3b. d, 2c. d, 3d. b, 2.