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STUDY GUIDE CH 11-13 Test

Enter the letter for the matching Answer
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1.
Fractional reserve banking originated
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2.
Suppose Congress increases income taxes. This is an example of
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3.
When money is used to buy a computer, it is functioning as a
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4.
When a bank makes a loan to one of its customers, to the bank the loan is classified as
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5.
When a check is written on an account at Bank A and deposited in Bank B, the reserve account of __________ will rise and reserves of the entire banking system will __________
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6.
An example of contractionary fiscal policy is
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7.
Suppose the economy is at a position below the physical production possibilities frontier but above the institutional production possibilities frontier. In response to this situation, Keynesian economists would propose that government enact __________ f
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8.
Historically, which of the following goods have evolved into money?
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9.
If the Fed purchases government securities from commercial banks, the reserves of the banking system will immediately
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10.
A curve showing the relationship between tax rates and tax revenues is called a __________ curve.
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11.
If, based on the Laffer curve, an economist recommends that the government reduce the average tax rate in order to increase tax revenues, she is implicitly assuming that the economy is currently operating at a poin
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12.
If peanuts were widely accepted for purposes of exchange, then
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13.
Bank A has checkable deposits of $10 million and reserves of $1 million. The required reserve ratio is 9 percent. The bank has excess reserves of
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14.
Money is defined by economists as
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15.
Suppose the government increases spending on public education by $700 million and individual spending on private education drops by $700 million. This is an example of
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16.
Required reserves are the amount of
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17.
Refer to Exhibit 11-2. At point A, if we cut tax rates slightly, tax revenues
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18.
Refer to Exhibit 11-1. The economy is currently at point 1. Suppose the federal government increases purchases and there is complete crowding out. As a result, the aggregate demand (AD) curve in the exhibi
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19.
Assuming no cash leakages and no excess reserves held by banks, a required reserve ratio of 0 percent would mean that the simple deposit multiplier is
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20.
Federal Reserve = $40 billion, vault cash = $2 billion, required reserve ratio = 0.10, & total checkable deposits = $400 billion. It follows that reserves equal _______ billion (total) reserves equal ______ billion and excess reserves equal______ billion.
A.
contractionary; inflationary; decreasing
B.
any good that is widely accepted in exchange and for the repayment of debts.
C.
when goldsmiths realized they could issue warehouse receipts beyond gold on deposits.
D.
$100,000.
E.
an asset
F.
decrease
G.
Laffer
H.
a and c
I.
complete crowding out.
J.
medium of exchange.
K.
increase by the amount of the purchase.
L.
on the downward-sloping portion of the Laffer curve.
M.
contractionary fiscal policy.
N.
maintains its present position at AD
O.
reserves a bank must hold against its deposits as mandated by the Federal Reserve
P.
$40; $42; $2
Q.
a decrease in government purchases, or an increase in taxes, or both.
R.
all of the above
S.
Bank B; remain constant
T.
infinity
Type the Answer that corresponds to the displayed Question.
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21.
Bank A has deposits of $200,000 and reserves of $24,000. If the required reserve ratio is 11 percent, the bank has excess reserves of
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22.
Bank A holds $1 million in required reserves and the required reserve ratio is 9 percent. It follows that Bank A holds checkable deposit liabilities that total approximately
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23.
Which of the following is true?
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24.
Keynesians believe
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25.
When the Fed purchases securities from a bank, it __________ reserves and ____________ the money supply
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26.
The United States is divided into __________ Federal Reserve districts, each with a district bank.
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27.
The AD curve shifts to the right with a __________ in government purchases (G) or a __________ in taxes.
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28.
When commercial banks borrow from other commercial banks, the immediate impact is that reserves in the banking system
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29.
If the Fed purchases government securities from a commercial bank, which of the following will happen?
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30.
Compared to barter, money __________ transaction costs, making transactions __________ time- consuming

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