question
store of value
answer
Brian has $1,574 in his checking account.
(means of transferring purchasing power from the present to the future. By keeping money in his checking account, Brian stores wealth until he is ready to make a purchase_
(means of transferring purchasing power from the present to the future. By keeping money in his checking account, Brian stores wealth until he is ready to make a purchase_
question
medium of exchange
answer
Brian writes a check for $1,299.
(providing an accepted method of payment for goods and services. In this case, Brian writes a check, and money is withdrawn from the checking account to pay the computer company $1,299 in exchange for a new computer.)
(providing an accepted method of payment for goods and services. In this case, Brian writes a check, and money is withdrawn from the checking account to pay the computer company $1,299 in exchange for a new computer.)
question
unit of account
answer
Brian can easily determine that the price of the computer is more than the price of the vacation.
(providing buyers and sellers a common reference point for valuing goods and services. The fact that the prices of both the computer and the vacation are listed in the same units (dollars) means that Brian can easily compare the prices of his options.)
(providing buyers and sellers a common reference point for valuing goods and services. The fact that the prices of both the computer and the vacation are listed in the same units (dollars) means that Brian can easily compare the prices of his options.)
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liquidity
answer
refers to how quickly an asset can be converted into a medium of exchange.
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commodity
answer
Suppose a period of continuous political instability leads people to believe that the economy will slide into a deep recession. As a result, people become more likely to accept ____________ money in exchange for goods and services.
question
fiat
answer
U.S. dollars are an example of __________ money.
question
making decisions regarding monetary policy
answer
Which of the following is a responsibility of the Federal Open Market Committee (FOMC)?
question
open market operations; buy
answer
The Federal Reserve's primary tool for changing the money supply is __________. In order to increase the number of dollars in the U.S. economy (the money supply), the Federal Reserve will _______ government bonds.
question
reserves
answer
A bank's ________ are any deposits that it holds that are not loaned out
question
increase; deposits
answer
Suppose a new customer adds $100 to his account at Northeastern Mutual Bank, which the owners of the bank then use to make $100 worth of new loans. This would increase the loans account and _________ the _________ account.
question
protect
answer
The intended goal is to _____ the interests of the depositors.
question
increases; increasing; rise
answer
The discount rate is the interest rate on loans that the Federal Reserve makes to banks. Banks occasionally borrow from the Federal Reserve when they find themselves short on reserves. A lower discount rate ________ banks' incentives to borrow reserves from the Federal Reserve, thereby _________ the quantity of reserves in the banking system and causing the money supply to _______.
question
increases; declines; decreases
answer
The federal funds rate is the interest rate that banks charge one another for short-term (typically overnight) loans. When the Federal Reserve uses open-market operations to buy government bonds, the quantity of reserves in the banking system ________, banks' need to borrow from each other __________, and the federal funds rate ___________.
question
savers to borrows
answer
At the broadest level, the financial system moves the economy's scarce resources from
question
decreases
answer
As the number of stocks in a person's portfolio increases, the risk of the portfolio ________, as indicated by the decreasing value of the standard deviation of the portfolio.
question
productivity
answer
Americans have a higher standard of living than Indonesians because American workers are more _______ than Indonesian workers.
question
fraction; reserve
answer
Banks are able to create money only when only a _______ of deposits are held in _______.
question
decreasing
answer
Diminishing marginal utility of wealth implies that the utility function has _________ slope and a person is risk averse.
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credit; lower
answer
We would expect the interest rate on Bond A to be lower than the interest rate on Bond B if the two bonds have identical characteristics except that the ________ risk associated with Bond A is ______ than the credit risk associated with Bond B.
question
banks; depositors
answer
Bank regulators impose capital requirements in order to ensure _____ can pay off _______
question
stock index
answer
average of a group of stock prices
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capital; productivity
answer
When a country saves a larger portion of its GDP than it did before, it will have more ______ and higher ________.
question
positive; greater; Y-C-G
answer
If national saving in a closed economy is greater than zero, which of the following must be true?
A. investment is _______
B. Either public saving or private saving must be ______ than zero
C. ________>0
A. investment is _______
B. Either public saving or private saving must be ______ than zero
C. ________>0
question
consumption; investment
answer
In an economy where net exports are zero, if saving rises in some period, then in that period, _______ falls and _______ rises
question
crowding out
answer
a decrease in investment that results from government borrowing, increase in the government budget deficit, or a decrease in government savings
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reduce; reduce
answer
Raising the Federal Funds Rate will ______ US money supply or _____ the growth rate of the US money supply.
question
sell bonds
answer
To increase the Fed Funds rate, the Fed will ______, which reduces the amount of dollars in circulation in the economy.
question
Increase in value of money, decrease in price level
answer
What effect on a graph would an increase in the Federal funds rate have on the long run equilibrium of money and the price level in the US?
question
long run
answer
classical dichotomy and neutrality of money describe the economy in the ________
question
velocity of money
answer
the rate at which money changes hands
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P x Y
answer
=nominal GDP=(price level)x(real GDP)
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M
answer
money supply
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V
answer
velocity
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v= (PxY/M)
answer
velocity formula
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M x V = P x Y
answer
quantity equation
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V
answer
is stable
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nominal
answer
A change in M causes ____ GDP (P x Y) to change by the same percentage
question
hyperinflation
answer
inflation exceeding 50% per month
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inflation tax
answer
revenue the government raises by creating (printing) money
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inflation tax
answer
like a tax on everyone who holds money
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fisher effect
answer
principle of monetary neutrality: an increase in the rate of money growth raises the rate of inflation but does not affect any real variable
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buyers pay more; sellers get more
answer
when prices rise:
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inflation
answer
_____ does not in itself reduce people's purchasing power
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inflation
answer
_____ causes the CPI and nominal wages to rise together over the long run
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shoeleather costs
answer
-resources wasted when inflation encourages people to reduce their money holdings
-can be substantial
-can be substantial
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menu costs
answer
-costs of changing prices
-inflation increases ____ that firms must bear
-inflation increases ____ that firms must bear
question
tax distortions
answer
-inflation makes nominal income grow faster than real income
question
tax distortions
answer
taxes are based on nominal income and some are not adjusted for inflation
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