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Econ Prac Exam 3

QuestionAnswer
A bank has no excess reserves. Then it receives a new deposit for $100,000. If it has a desired reserve ratio of 20 percent, by how much can it increase its loans? $80,000
Checking deposits are included in M1 and M2.
A highly liquid asset can be converted into a means of payment easily without loss of value.
The main policy-making organ of the Federal Reserve System is the Federal Open Market Committee.
The Federal Reserve System.. conducts the nation's monetary policy and regulates the nation's financial institutions.
Which of the following is true regarding the required reserve ratio? The ratio determines the legally required amount of reserves a bank must hold.
Open market operations are buying and selling U.S. government securities by the Fed.
If an increase in the monetary base of $8 billion increases the quantity of money by $64 billion, then the money multiplier is equal to ________. 8
Commercial banks are able to create money by Making loans.
The opportunity cost of holding money is the interest rate
The quantity theory of money states that in the long run an increase in the quantity of money results in an equal percentage increase in the price level.
In the short run, firms expand their production when the price level rises because the money wage rate remains constant so the higher prices for their product makes it profitable for firms to expand production.
An increase in the amount of human capital ________ the short-run aggregate supply curve and ________ the long-run aggregate supply curve. shifts; shifts
One reason that the aggregate demand curve has a negative slope is because people buy fewer goods and save more when the price level rises because their real wealth decreases.
People expect that the El Nino effect will cause drought in Australia in coming years. If most firms expect their profits will fall during the next five years, Australia's ________ this year aggregate demand will decrease
In the short run, a rightward shift of the short-run aggregate supply curve ________ real GDP and ________ the price level. increases; lowers
If the aggregate demand curve shifts ________ faster than the long-run aggregate supply curve, then ________ occurs. rightward; inflation
If the Federal Reserve purchases government securities banks' reserves will increase.
When the Fed lowers the federal funds rate investment expenditures increase.
If the Fed fears inflation it will undertake an open market ________ of securities, the federal funds rate will ________ and the long-term real interest rate will ________ sale; rise; rise
Created by: 642136984
 

 



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