What are the 4 monetary policies?

Open-market Operations, RRR, Federal Funds Rate, Discount Rate

Neutral Monetary Policy, GGG, Discount Rate, Stocks

Which one is expansionary and which one is contractionary: buying and selling bonds?

Buying bonds is expansionary; selling bonds is contractionary.

Buying bonds has no effect; selling bonds is neutral.

Buying bonds is contractionary; selling bonds is expansionary.

Both buying and selling bonds are expansionary.

What is interest-sensitive spending?

Interest-sensitive spending is spending that is affected by changes in interest rates.

Spending that only occurs during economic recessions.

Spending that is unaffected by interest rates.

Spending that is solely based on consumer preferences.

What is the connection between interest rates and shifts in AD?

Interest rates affect aggregate demand by influencing interest-sensitive spending.

Interest rates have no impact on consumer confidence.

Higher interest rates always lead to increased investment.

Interest rates only affect the stock market, not aggregate demand.

What is the Federal Funds Rate?

The Federal Funds Rate is the interest rate for overnight loans between banks.

The Federal Funds Rate is the interest rate for long-term loans between banks.

The Federal Funds Rate is the rate at which the government lends money to banks.

The Federal Funds Rate is the interest rate for loans between banks and consumers.

What action is expansionary and what action is contractionary: RRR, Federal Funds Rate, Discount Rate?

Expansionary: Lower Contractionary: Raise

Raise RRR, Decrease Federal Funds Rate, Lower Discount Rate

Lower RRR, Increase Federal Funds Rate, Raise Discount Rate

Expansionary: Raise Contractionary: Lower

What are excess reserves?

Excess reserves are the funds that banks can loan out.

Excess reserves are the total deposits a bank holds.

Excess reserves are the minimum amount of cash a bank must keep.

Excess reserves are the loans given out by a bank to customers.

What is the Discount Rate?

The discount rate is the interest rate at which banks borrow from the FED

The discount rate is the rate at which a company pays its employees.

The discount rate is the fee charged for processing transactions.

The discount rate is the amount of tax applied to sales.

What are open-market operations?

Open-market operations are the buying and selling of government securities or bonds by a central bank.

The issuance of new currency by the government.

The regulation of interest rates by the central bank.

The collection of taxes by the government.

Assets are what the bank owns that has monetary value

Assets are only physical items like cash and property.

Assets are liabilities that decrease in value.

Assets are expenses incurred by a business.

What are Required Reserves?

Required reserves are the minimum funds banks must keep on hand

Required reserves are the extra funds banks keep for emergencies.

Required reserves are the funds banks can freely invest in the stock market.

Required reserves are the total amount of loans a bank can issue.

What are total reserves?

Total reserves are the sum of Requires Reserves(RR) and Excess Reserves(ER)

Total reserves are the total amount of a country's debt.

Total reserves are only the gold reserves of a country.

Total reserves include only domestic currency holdings.

Loans are borrowed funds that must be repaid with interest.

Loans are free money given by banks.

Loans are gifts that do not need to be repaid.

Loans are investments that generate profit without repayment.

What are Building and Fixtures?

Buildings and Fixtures are the value of the bank (building and stuff)

Buildings are only for commercial use; fixtures are movable items.

Buildings are only found in urban areas; fixtures are outdoor furniture.

Buildings are temporary structures; fixtures are decorative items.

What are liabilities?

Liabilities are what the bank owes (demand deposits and owner's equity)

Liabilities are profits generated from investments.

Liabilities are voluntary contributions to a business.

Liabilities are assets that provide future economic benefits.

What is owners equity?

Owner's equity is the value of bonds, buildings, and fixtures

Owner's equity is the total revenue generated by a business.

Owner's equity is the amount of cash a business has on hand.

Owner's equity is the total expenses incurred by a business.

What is the relationship between assets and liabilities on a bank statement?

Assets are what the bank owes; liabilities are what the bank owns.

What is an equation of RRR?

RRR = (RR/Demand Deposits) * 100

RRR = Market Return - Risk-Free Rate

RRR = Risk-Free Rate * Beta + Market Return

RRR = Beta + Risk-Free Rate + Market Return

What is the Monetary Base(M0) made of?

The Monetary Base (M0) is made of currency in circulation and bank reserves

Only digital currency held by banks

Government bonds and securities

What is the Money Supply(M1) made of?

M1 is made of M0 and demand deposits

Physical currency, bonds, and savings accounts

Only physical currency and stocks

Demand deposits and real estate

What is the Broad Money(M2) made of?

Broad Money (M2) is made of M1 and CDs.

Broad Money (M2) includes only physical coins and notes.

Broad Money (M2) consists solely of government bonds.

Broad Money (M2) is made up of real estate investments.

What is the Money Multiplier's definition?

The Money Multiplier is the amount of money that banks create for each dollar of excess reserves. The do this through loans.

The Money Multiplier is the interest rate set by the central bank.

The Money Multiplier is the total amount of cash in circulation.

The Money Multiplier is the total value of government bonds in the economy.

When they ask for the "change in MS" what formula do you usually use?

Change in MS = Money Multiplier x ER

Change in MS = Change in Money Supply x Change in Reserves

Change in MS = Money Supply - Change in Reserves

Change in MS = Change in Reserves - Money Multiplier

When they ask for maximum MS, what equation do you use?

MS = Money multiplier x Initial Deposit

What does the "P x Y" equal in the equation for exchange formula?

Total number of goods exchanged

Total weight of goods exchanged

Price level changes _____ with money supply?

Price level changes decrease with money supply.

What is a consequence of PL moving proportionally with MS?

Price levels remain constant regardless of MS.

Inflation is unrelated to money supply changes.

What are the qualifications for having Ample Reserves?

RRR = 0%, Reserves are abundant, Change in MS doesn't impact i%

Excessive inventory without sales.

Minimal cash flow with high expenses.

High levels of debt compared to assets.

What are axis', curves, and equilibrium points on the Reserve Market Model?

Axis' are Qr (horizontal) and PR (vertical), Curves are Sr and Dr, and equilibrium points are Q1 and PR1

Axes show only the demand; curves are fixed lines; equilibrium points are never reached.

Axes indicate only the interest rate; curves are only for inflation; equilibrium points are random.

Axes represent only the total reserves; curves are irrelevant; equilibrium points are always at zero.

What are Sr and Dr, respectively?

Supply of Reserves and Demand of Reserves

Supply of Radishes and Demand of Radishes

What is Policy Rate(PR)?

The Policy Rate (PR) is the interest rate set by a central bank to influence economic activity.

The Policy Rate is the minimum wage set by the government.

The Policy Rate is the tax rate imposed on businesses.

The Policy Rate is the exchange rate between currencies.

What are the two monetary policies that affect the Reserve Market Model?

Interest on Reserves (IOR) and Discount Rate

Interest rate ceilings and reserve requirements

Taxation and government spending

Currency devaluation and fiscal policy

AP Macro - Unit 4

Quiz

•

Social Studies

•

9th - 12th Grade

•

Practice Problem

•

Easy

ELYANA NAJARIAN-GARB

Used 9+ times

FREE Resource

International Monetary Fund

Commercial banks

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AP Macro - Unit 4

54 questions

What are the axis', curves, and equilibrium points on the Loanable Funds graph?

What is Slf and Dlf, respectively?

What are the axis', curves, and equilibrium points on the Money Market graph?

Who supplies loanable funds?

Who demands loanable funds?

What does the Money Supply and Money Demand directly affect?

Who controls monetary policy?

What are the 4 monetary policies?

Which one is expansionary and which one is contractionary: buying and selling bonds?

What market do open-market operations and RRR primarily affect?

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