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Exam 9: Money, The Federal Reserve, and Global Financial Markets

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Question 91

Multiple Choice

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From the point of view of a particular country, capital inflows are:

A) purchases of domestic goods or services by foreigners.
B) purchases of domestic assets by foreigners.
C) purchases of foreign goods or services by domestic households or firms.
D) purchases of foreign assets by domestic households or firms.

E) B) and C)
F) None of the above

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Question 92

Multiple Choice

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Credit card balances are not considered to be money primarily because they:

A) are rarely used to make purchases.
B) are not part of people's wealth.
C) are an asset used in making transactions.
D) do not represent an obligation to pay someone else.

E) A) and C)
F) All of the above

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Question 93

Multiple Choice

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The Federal Reserve consists of ______ regional banks, ______ governors on the Board of Governors, and ______ voting members of the Federal Open Market Committee.

Money serves as a basic yardstick for measuring economic value (a unit of account) , allowing:

The three functions of money are:

Suppose you have $200 with which you can buy shares of stock from two companies: ABC Hot Chocolate Company and XYZ Lemonade. Each company's stock currently sells for $100 per share. If the temperature next year is lower than average, the stock price for ABC will increase by $20, and the stock price for XYZ will not change. If the temperature next year is higher than average, the stock price for XYZ will increase by $20, and the stock price for ABC will not change. There is a 50% chance that it will be colder than average next year, and a 25% chance that it will be warmer than average. If you purchase two shares of XYZ stock and no shares of ABC stock, your expected gain will be ______.

The money supply is 2,000 of which 500 is currency held by the public. Bank reserves are 150. The existing reserve/deposit ratio equals:

The money supply in Macroland is currently 2,500, bank reserves are 200, currency held by public is 500, and banks' desired reserve/deposit ratio is 0.10. Assuming the values of the currency held by the public and the desired reserve/deposit ratio do not change, if the Central Bank of Macroland wishes to increase the money supply to 3,000, then it should conduct an open-market ______ government bonds.

International capital flows are:

The U.S. trade deficit has been mainly caused by:

There is $5,000,000 of currency in Econland, all held by banks as reserves. The public does not hold any currency. If the banks' desired reserve/deposit ratio is 0.25, then the money supply equals:

Commercial banks create new money:

If bank reserves are 200, the public holds 400 in currency, and the desired reserve/deposit ratio is 0.20, the deposits are ______ and the money supply is _____.

M1 differs from M2 in that:

The maturation date of a bond is the date at which:

One hundred percent reserve banking refers to a situation in which banks' reserves equal 100 percent of their:

The most important tool of monetary policy is:

The sum of national saving and capital inflows from abroad must equal:

A trade deficit occurs when:

Holding constant risk and the real returns available abroad, lower domestic real interest rates ______ capital inflows, ______ capital outflows, and ______ net capital inflows.