ECO 201 Exam 2 Review

The shift in the graph could be caused by

• an increase in consumer wealth.
• expectations of a recession.
• a government surplus.
• the balanced budget multiplier.

The shift in the graph could be caused by

• the economy contracting.
• a decline in population.
• a new technology revolutionizes business.
• the government eliminates default risk.

If investors expect the economy is headed for expansion the ______ of loanable funds will _______.

• demand; decrease
• demand; increase
• supply; decrease
• supply; increase

The crowding out effect can only occur if the

• government deficit spends.
• government runs a surplus.
• personal savings rate increases.
• economy begins to boom.

The smallest fraction of bank deposits a bank is required to hold

• reserve ratio

• capital requirement

• deposit insurance

• deposit assurance

• mortgage insurance

The money multiplier =

• 1 + rr

• 1 – rr

• 1 (rr)

• 1 / rr

• 1^rr

What are the 3 functions of money?

• Measure of Gold

• Store of Value

• Medium of Exchange

• Store of Bank Notes

• Measure of Value

Which of the following is considered to be money?

• Google Stock

• Bonds

• Credit Cards

• CHECKING ACCOUNT DEPOSITS

• Real Estate

If you transfer $1,000 from your savings account to your checking account:

• M1 decreases by $1,000, and M2 increases by $1,000.

• M1 increases by $1,000, and M2 decreases by $1,000.

• M1 and M2 don't change.

• M1 increases by $1,000, but M2 doesn't change.

• M2 decreases by $1,000, but M1 doesn’t change.

To increase money supply the FED should

• increase the required reserve ratio

• increase the discount rate

• Sell bonds to banks

• Buy bonds from banks