AP Macro Unit 4 Review

Front

If the reserve ratio is 25%, what are the deposits? Options: $5,000., $15,000., $60,000., $80,000.

Back

$80,000.

Front

What is the initial effect of an individual making a $10,000 cash deposit in a bank? Options: The money supply would rise by $10,000., The money supply would fall by $10,000., The money supply would not be affected by the deposit., The money supply would fall, but by less than the $10,000 deposit.

Back

The money supply would not be affected by the deposit.

Front

Suppose an economy has $200,000 of demand deposits and $40,000 of excess reserves with a 10% required reserve ratio. If the monetary authorities raise the required reserve ratio to 20%, then which of the following will likely follow?

Back

Excess reserves will decrease by $20,000.

Front

If the banking system does NOT hold excess reserves and the reserve ratio is 20%, how much can the banking system increase the money supply if Sam deposits $500 into his checking account?

Back

$2,000.

Front

The discount rate is the interest rate the Fed charges on loans to:

Back

banks.

Front

To _______ the money supply, the Fed could ________.

Back

increase; lower the reserve requirements

Front

Suppose the Federal Reserve were to engage in open-market operations by buying $100 million of U.S. Treasury bills. What would be the end result of such an action?

Back

The money supply would increase by more than $100 million.

Front

If the reserve ratio is 25%, and the money supply increases by $100,000, what was the initial reserve injection by Federal Reserve?

Back

$25,000.

Front

The federal funds rate is the rate: one bank would pay another bank for a loan.

Back

one bank would pay another bank for a loan.

Front

When the government spends more money than they take in each year is called a _________?

Back

Deficit