Macroeconomic Policy Review and Quiz Insights
Dive into a comprehensive review of monetary and fiscal policies with a focus on money markets, banks, and policy implications. Test your knowledge with insightful quiz questions on the functions of money, money supply changes, and interpreting money market graphs.
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Exam 3 Review This web quiz may appear as two pages on tablets and laptops. I recommend that you view it as one page by clicking on the open book icon at the bottom of the page.
Unit 3 Macroeconomic Policy MONETARY POLICY Chapter 14 - Money, Money Markets, the Fed Chapter 15 - How Banks Create Money Chapter 16 - Monetary Policy FISCAL POLICY Chapter 10 - The Spending Multiplier Chapter 13 - Fiscal Policy
1. Which is NOT one of the functions of money? 1. A store of value 2. A unit of account 3. A legal tender 4. A medium of exchange
1. Which is NOT one of the functions of money? 1. A store of value 2. A unit of account 3. A legal tender 4. A medium of exchange
2. If I take a $10 bill out of my pocket and put in in my savings account, what happened to M1 and M2? 1. Both increase 2. M1 increases, M2 decreases 3. M1 decreases, M2 stays the same 4. Both decrease
2. If I take a $10 bill out of my pocket and put in in my savings account, what happened to M1 and M2? 1. Both increase 2. M1 increases, M2 decreases 3. M1 decreases, M2 stays the same 4. Both decrease
3. In the above series of graphs showing the MONEY MARKET, graph 2 is: 1. Asset demand for money 2. Transactions demand for money 3. Money supply 4. Total money demand
3. In the above series of graphs showing the MONEY MARKET, graph 2 is: 1. Asset demand for money 2. Transactions demand for money 3. Money supply 4. Total money demand
4. Which is NOT true about the Federal reserve banks? 1. They are bankers banks 2. They are quasi public 3. They are the country s central bank 4. They are thrift institutions 5. They are the government s bank
4. Which is NOT true about the Federal reserve banks? 1. They are bankers banks 2. They are quasi public 3. They are the country s central bank 4. They are thrift institutions 5. They are the government s bank
5. Goldsmiths created money when they: 1. Accepted deposits of gold for safe storage 2. Charged people who deposited their gold 3. Used deposited gold to produce products for sale to others 4. Issued paper receipts for the gold they held
5. Goldsmiths created money when they: 1. Accepted deposits of gold for safe storage 2. Charged people who deposited their gold 3. Used deposited gold to produce products for sale to others 4. Issued paper receipts for the gold they held
6. Which is NOT an ASSET for a commercial bank? 1. Net worth 2. Reserves 3. Loans 4. Securities 5. Property
6. Which is NOT an ASSET for a commercial bank? 1. Net worth 2. Reserves 3. Loans 4. Securities 5. Property
7. Banks use ER for all of the following EXCEPT 1. Making loans 2. Loaning to the Fed 3. Buying securities 4. Paying back depositors
7. Banks use ER for all of the following EXCEPT 1. Making loans 2. Loaning to the Fed 3. Buying securities 4. Paying back depositors
Assets Liabilities + Net Worth Checkable deposits $100,000 Stock shares 460,000 Reserves Loans 70,000 Securities Property 400,000 $ 40,000 50,000 8. If the RR= 10%, then what are the ER? 1. $10,000 2. $20,000 3. $30,000 4. $40,000 5. $50,000
Assets Liabilities + Net Worth Checkable deposits $100,000 Stock shares 460,000 Reserves Loans 70,000 Securities Property 400,000 $ 40,000 50,000 8. If the RR= 10%, then what are the ER? 1. $10,000 2. $20,000 3. $30,000 4. $40,000 5. $50,000
MONETARY POLICY FORMULAS Change in Money Supply = ER x Money Multiplier Total Reserves = Cash in bank + Deposits at Fed Required Reserves = RR x Liabilities Excess Reserves = Total Reserves - Required Reserves Money Multiplier = 1 / RR
Assets Liabilities + Net Worth Checkable deposits $100,000 Stock shares 460,000 Reserves Loans 70,000 Securities Property 400,000 $ 40,000 50,000 9. If the RR= 10%, then what is the largest loan that this bank could safely make? 1. $10,000 2. $20,000 3. $30,000 4. $40,000 5. $50,000
Assets Liabilities + Net Worth Checkable deposits $100,000 Stock shares 460,000 Reserves Loans 70,000 Securities Property 400,000 $ 40,000 50,000 9. If the RR= 10%, then what is the largest loan that this bank could safely make? 1. $10,000 2. $20,000 3. $30,000 4. $40,000 5. $50,000
Assets Liabilities + Net Worth Demand deposits (DD) $100,000 Stock shares 460,000 Reserves Loans 70,000 Securities Property 400,000 $ 40,000 50,000 10. RR= 10%. If this bank made the largest loan it could safely make the MS will increase by how much? 1. $10,000 2. $30,000 3. $100,000 4. $300,000
Assets Liabilities + Net Worth Demand deposits (DD) $100,000 Stock shares 460,000 Reserves Loans 70,000 Securities Property 400,000 $ 40,000 50,000 10. RR= 10%. If this bank made the largest loan it could safely make the MS will increase by how much? 1. $10,000 2. $30,000 3. $100,000 4. $300,000
Assets Liabilities + Net Worth Demand deposits (DD) $100,000 Stock shares 460,000 Reserves Loans 70,000 Securities Property 400,000 $ 40,000 50,000 11. RR= 10%. If this bank balance sheet was for the commercial banking system, rather than a single bank, the MS could increase by how much? 1. $10,000 2. $30,000 3. $100,000 4. $300,000
Assets Liabilities + Net Worth Demand deposits (DD) $100,000 Stock shares 460,000 Reserves Loans 70,000 Securities Property 400,000 $ 40,000 50,000 11. RR= 10%. If this bank balance sheet was for the commercial banking system, rather than a single bank, the MS could increase by how much? 1. $10,000 2. $30,000 3. $100,000 4. $300,000
Assets Liabilities + Net Worth Demand deposits (DD) $100,000 Stock shares 460,000 Reserves Loans 70,000 Securities Property 400,000 $ 40,000 50,000 12. Raise RR to 20%. If this bank balance sheet was for the commercial banking system, the MS could increase by how much? 1. $10,000 2. $30,000 3. $100,000 4. $300,000
Assets Liabilities + Net Worth Demand deposits (DD) $100,000 Stock shares 460,000 Reserves Loans 70,000 Securities Property 400,000 $ 40,000 50,000 12. Raise RR to 20%. If this bank balance sheet was for the commercial banking system, the MS could increase by how much? 1. $10,000 2. $30,000 3. $100,000 4. $300,000
13. Which is correct when the Fed increases the MS? An increase in the MS CAUSES ________ 1. I up CAUSES int. rates down CAUSES AD up 2. AD up CAUSES I up CAUSES int. rates down 3. AD down CAUSES int rates down CAUSES I up 4. Int rates down CAUSES I up CAUSES AD up
13. Which is correct when the Fed increases the MS? An increase in the MS CAUSES ________ 1. I up CAUSES int. rates down CAUSES AD up 2. AD up CAUSES I up CAUSES int. rates down 3. AD down CAUSES int rates down CAUSES I up 4. Int rates down CAUSES I up CAUSES AD up
14. Assume the required reserve ratio is 25 percent. If the Federal Reserve buys $50 million in government securities directly from commercial bank, then the money supply will potentially: 1. Decrease $50 million 2. Increase $50 million 3. Decrease $200 million 4. Increase $200 million
14. Assume the required reserve ratio is 25 percent. If the Federal Reserve buys $50 million in government securities directly from commercial bank, then the money supply will potentially: 1. Decrease $50 million 2. Increase $50 million 3. Decrease $200 million 4. Increase $200 million
15. Assume the required reserve ratio is 25 percent. If the Federal Reserve buys $50 in government securities from the public, then the money supply will immediately increase by: 1. nothing, and potential increase in MS is $50 2. nothing, and potential increase in MS is $200 3. $50, and potential increase in MS is $50 4. $50, and potential increase in MS is $200
15. Assume the required reserve ratio is 25 percent. If the Federal Reserve buys $50 in government securities from the public, then the money supply will immediately increase by: 1. nothing, and potential increase in MS is $50 2. nothing, and potential increase in MS is $200 3. $50, and potential increase in MS is $50 4. $50, and potential increase in MS is $200
16. If you read in the news that the Fed will increase the Fed Funds Rate then you know they are using the _________. 1. DR tool to fight UE 2. OMO tool to fight IN 3. RR tool to fight UE 4. OMO tool to fight UE
16. If you read in the news that the Fed will increase the Fed Funds Rate then you know they are using the _________. 1. DR tool to fight UE 2. OMO tool to fight IN 3. RR tool to fight UE 4. OMO tool to fight UE
17. The tools of the Fed change the money supply by changing the ____ of banks. 1. Liabilities 2. Stock shares 3. Net worth 4. Excess reserves
17. The tools of the Fed change the money supply by changing the ____ of banks. 1. Liabilities 2. Stock shares 3. Net worth 4. Excess reserves
18. MPC = ? 1. 1/4 2. 1/3 3. 1/2 4. 2/3
18. MPC = ? 1. 1/4 2. 1/3 3. 1/2 4. 2/3
19. MPS = ? 1. 1/4 2. 1/3 3. 1/2 4. 2/3
19. MPS = ? 1. 1/4 2. 1/3 3. 1/2 4. 2/3
20. What is the simple multiplier? 1. 1 2. 2 3. 3 4. 4
20. What is the simple multiplier? 1. 1 2. 2 3. 3 4. 4
21. If G increases by $20 then AD will increase by ________. 1. $20 2. $40 3. $60 4. $80
21. If G increases by $20 then AD will increase by ________. 1. $20 2. $40 3. $60 4. $80
22. If Taxes decrease by $20 then AD will increase by: 1. $20 2. $40 3. $60 4. $80
22. If Taxes decrease by $20 then AD will increase by: 1. $20 2. $40 3. $60 4. $80
23. If G increases by $20 and Taxes increase by $20 then AD will increase by: 1. $20 2. $40 3. $60 4. $80
