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| 5250375554 | Interest Rate | The price, calculated as a percentage of the amount borrowed, charged by lenders to borrowers for the use of their savings for one year | 0 | |
| 5250414263 | Savings and ____ spending are always equivalent for the economy as a whole | Investment | 1 | |
| 5250431425 | Budget surplus | The difference between tax revenue and government spending when tax revenue exceeds government spending -Positive budget balance | 2 | |
| 5250433654 | Budget deficit | The difference between tax revenue and government spending when government spending exceeds tax revenue -Negative budget balance | 3 | |
| 5250450335 | Budget balance | The difference between tax revenue and government spending | 4 | |
| 5250467729 | National Savings | The sum of private savings and the budget balance, is the total amount of savings generated within the economy (Private savings= disposable income- consumption) | 5 | |
| 5250489208 | Capital inflow | The total inflow of foreign funds minus the total outflow of domestic funds to other countries -The net effect of international inflows and outflows of funds | 6 | |
| 5250515796 | Wealth | The value of a household's accumulated savings | 7 | |
| 5250519399 | Financial asset. What are the four types? | A paper claim that entitles the buyer to future income from the seller Types: -loans -stocks -bonds -loan-backed securities | 8 | |
| 5250539133 | Physical asset | A claim on a tangible object that gives the owner the right to dispose of the object as he or she wishes | 9 | |
| 5250543055 | Liability | A requirement to pay more in the future | 10 | |
| 5250560969 | What are the three tasks of a financial system? | -Reducing transaction costs -Reducing financial risk -Providing Liquidity | 11 | |
| 5250587673 | Transaction costs | The expenses of negotiating and executing a deal | 12 | |
| 5250589597 | Reducing financial risk | Uncertainty about future outcomes that involve financial losses and gains | 13 | |
| 5250593100 | Liquid asset | Can be quickly converted into cash without much loss of value Ex: stocks Illiquid: Business, car, home | 14 | |
| 5250656939 | Diversification | Investing in several different things so that the possible losses are independent events | 15 | |
| 5250691269 | Loan | A lending agreement between an individual lender and an individual borrower | 16 | |
| 5250694851 | Bond | An IOU issued by the buyer Owner= asset Issuer=liability | 17 | |
| 5250696704 | Stock | A share in the ownership of a company Owner= asset Company=Liability | 18 | |
| 5250698566 | Loan-backed security | Asset created by pooling individual loans and selling shares in that pool | 19 | |
| 5250719796 | Default | Occurs when a borrower fails to make payments as specified by the loan or bond contract | 20 | |
| 5250760269 | Bank deposit | A claim on a bank that obliges the bank to give the depositor his or her cash when demanded Depositor= asset Bank= liability | 21 | |
| 5309506596 | Store of value | A means of holding purchasing power over time | 22 | |
| 5309514012 | Unit of account | A measure used to set prices and make economic calcuations | 23 | |
| 5250885165 | What controls the money supply, and how? | The Federal Reserve controls the money supply by changing interest rates and the reserve ratio | 24 | |
| 5250892538 | Fractional-Reserve Banking | Banks accept deposits, make loans and investments, and hold reserves that are equivalent to a fraction of their deposit liabilities | 25 | |
| 5250901664 | Describe the relationship between the reserve ratio and the money supply | Inverse | 26 | |
| 5250904091 | What does the money multiplier equal? | 1/Reserve Ratio (1/rr) | 27 | |
| 5261745804 | What is the money supply set by? What does the money supply control? | The MS is set by the Federal Reserve (central bank). It controls the interest rates | 28 | |
| 5261755696 | Central bank | An institution that oversees and regulates the banking system and controls the monetary base | 29 | |
| 5261759284 | Federal Reserve: What is it? When was it created? How many districts? What does it consist of? | The central bank of the United States. It was created in 1913 in response to banking crises. It serves each of the 12 Federal Reserve districts. Consists of the Board of Governors in Washington D.C. | 30 | |
| 5261787019 | By 1933, banks had been separated into two categories. What are these categories? | Commercial: accepts deposits and is covered by deposit insurance Investment: trades in financial assets and is not covered by deposit insurance | 31 | |
| 5261791890 | Subprime lending | Caused the 2008 housing bubble due to securitization | 32 | |
| 5261800130 | What are the 4 functions of the Federal Reserve system? | -Provide financial services -Supervise and regulate banking institutions -Maintain the stability of the financial system -Conduct monetary policy | 33 | |
| 5261809055 | Reserve requirements | Rules set by the Federal Reserve that determine the minimum reserve ratio for a bank | 34 | |
| 5261816067 | Federal funds market | Allows banks that fall short of the reserve requirement to borrow funds from banks with excess reserves | 35 | |
| 5261827674 | Federal funds rate/ discount rate | The interest rate determined in the federal funds market | 36 | |
| 5261834609 | Open-market operations | A purchase or sale of government debt by the Fed. | 37 | |
| 5281678396 | Describe M1 and M2 | -M1 is the narrowest definition of money. It contains only currency in circulation (also known as cash), traveler's checks, and checkable bank deposits. -M2 starts with M1 and adds several other kinds of assets, often referred to as near-moneys- financial assets that aren't directly usable as a medium of exchange but can be readily converted into cash or checkable bank deposits. Ex: Savings accounts, time deposits, money market funds | 38 | |
| 5281670482 | Suppose you transfer $500 from your checkings account to your savings account. With this transaction, M1 _____ and M2 ______. | M1 decreases M2 does not change | 39 | |
| 5275113547 | What is the definition of money? What are some examples that could be defined as money? | Any asset that can easily be used to purchase goods and services. Money consists of cash itself, and any other assets that are highly liquid. Ex: Debit cards, checks, currency in circulation, checkable bank deposits, traveler's checks | 40 | |
| 5275139310 | The medium-of-exchange function means that money is used: | ---> to pay for goods and services Medium-of-exchange: an asset that individuals acquire from the purpose of trading for goods and services rather than for their own consumption. | 41 | |
| 5281865158 | What is the approximate present value of $1,000 realized 2 years from now if the interest rate is 4%? | $924.56 | 42 | |
| 5281933599 | If the interest rate is 2%, the amount received one year from now as a result of lending $100 today is | $102.00 | 43 | |
| 5281938729 | If the interest rate is 3%, the present value of $1 paid to you one year from now is: | $0.97 | 44 | |
| 5275162652 | Which of the following would be the initial effect of an individual making a $10,000 cash deposit in the bank? How would this affect the money supply? | The money supply would not be affected by the deposit. > The $10,000 is in circulation already before it is deposited. | 45 | |
| 5275253852 | First National Bank has $80 million in checkable deposits, $15 million in deposits with the Federal Reserve, $5 million cash in the bank vault and $5 million in government bonds. If the minimum reserve ratio is 20%, how much is the bank required to keep in reserves? | Required to keep $16 million Excess reserves available for the bank to lend: $4 million | 46 | |
| 5275256997 | suppose your grandma sends you 100 dollars for your birthday, and you deposit the 100 in your checking, reserve ration is 10%, based on this the banks reserve increased by _____ and money will grow by _____ | 90:900 | 47 | |
| 5275260293 | The Federal Reserve System is the _____ for the United States. | Central bank | 48 | |
| 5275264047 | How long is the term for each governor on the Federal Reserve Board? | 14 years | 49 | |
| 5275268260 | What is the Federal Reserve's most important function? | Maintain the stability of the financial system | 50 | |
| 5282192783 | Suppose the Federal Reserve were to engage in open-market operations by buying $100 million of U.S. treasury bills. Which of the following would be the end result of such an action? | The money supply would increase by $100 million >When the Fed buys U.S. Treasury bills from a commercial bank, it pays by crediting the bank's reserve account by an amount equal to the value of the Treasury bills. It will increase the monetary base by $100 million because it increases bank reserves by $100 million. It is more than $100 million due to the money multiplier. | 51 | |
| 5282284037 | (Don't have to know) When the Fed decreases bank's reserves through an open-market operation, what happens in regard to the monetary base, the amount of deposits, multiplier, and money supply? | The monetary base decreases, loans decrease, and the money supply decreases. | 52 | |
| 5282370087 | When a bank borrows from the Federal Reserve, it pays what in return? | Discount Rate > The interest rate the Fed charges on loans to banks through the discount window. | 53 | |
| 5282446467 | What are the 3 tools the Federal Reserve can use to change the money supply? | Reserve requirements, discount rates, and open market operations | 54 | |
| 5282455672 | How would the Fed increase and decrease the money supply using reserve requirements? | The Fed. would decrease the reserve requirement to increase the money supply, and increase the reserve requirement to decrease the money supply. | 55 | |
| 5282465018 | How would the Fed increase and decrease the money supply using discount rates? | The Fed. would decrease the discount rate to increase the money supply, and increase the discount rate to decrease the money supply | 56 | |
| 5282482830 | How would the Fed increase and decrease the money supply using open market operations? | The Fed would buy bonds to increase the money supply, and sell bonds to decrease the money supply | 57 | |
| 5282396592 | If a checking account has an interest rate of 1% and a government Treasury bill has an interest rate of 3%, the opportunity cost of holding cash in your wallet is: | 3% | 58 | |
| 5282399845 | The demand for money is negatively related to _______ and positively related to ________ | the interest rate; the real GDP (Quantity of money) | 59 | |
| 5282403549 | An increase in the demand for money would result from a(n) __________ in the price level | increase | 60 | |
| 5282562755 | The graph below shows the market for loanable funds in equilibrium. Name a scenario that might produce a new equilibrium interest rate of 8% and a new equilibrium quantity of loanable funds of $150. | Businesses become more optimistic about the return on investment spending |  | 61 |
| 5282630680 | The Chair of the Federal Reserve testifies before Congress that he/she expects the health of the economy to significantly improve in coming months. | Demand will increase | 62 | |
| 5282645152 | Households fear an imminent recession and begin to cut back on discretionary purchases. | Demand will decrease | 63 | |
| 5282645153 | The Federal government announces another annual budget surplus. | Demand decreases (or supply increases) | 64 | |
| 5282650241 | The flow of foreign financial capital into American financial markets begins to decrease. | Supply decreases | 65 | |
| 5282653404 | Congress uses expansionary fiscal policy but does not change the tax rates. | supply decreases | 66 | |
| 5282757714 | Crowding Out | When a government deficit drives up the interest rate and leads to reduced investment spending and consumption | 67 | |
| 5309271304 | Money is anything that: A. serves as a medium of exchange for goods and services. B. can be converted into silver with relatively little loss in value. C. can be converted into gold with relatively little loss in value. D. that is traded in the stock market. E. serves as a financial asset. | A. | 68 | |
| 5309299852 | Which of the following assets is an example of money? A. a $20 bill in your pocket B. a valuable work of art C. a baseball signed by a famous player D. shares of stock in a profitable company E. a bond issued by the government. | A. | 69 | |
| 5309342463 | Suppose you transfer $500 from your savings account to your checking account. With this transaction, M1 _____ and M2_____. A. increased; decreased B. increased; stayed the same C. decreased; decreased D. stayed the same; decreased E. increased; increased | B. | 70 | |
| 5309372150 | Which of the following is an asset that most people would consider money? A. your house B. your shares of stock in a company C. your checking account balance D. your car E. your retirement savings. | C. | 71 | |
| 5309378990 | Commodity-backed money is: A. a medium of exchange with no intrinsic value. B. equivalent to commodity money. C. a medium of exchange which has alternative economic uses. D. gold and silver coins used for exchange. E. equivalent to fiat money. | A. | 72 | |
| 5310233858 | 9. A decrease in the demand for money would result from: A. an increase in income. B. a decrease in real GDP. C. an increase in the price level. D. an increase in nominal GDP. E. an increase in the supply of money. | B. | 73 | |
| 5310627980 | If a checking account has an interest rate of 1% and a government Treasury bill has an interest rate of 2%, the opportunity cost of holding the checking account as money is: A. zero. B. 0.02%. C. 1%. D. 2%. E. 3%. | C. | 74 | |
| 5310662234 | Suppose that the economy enters a recession and real GDP falls. All else equal, we would expect: A. the money demand curve to shift inward. B. the money demand curve to shift outward. C. a downward movement along a fixed money demand curve. D. an upward movement along a fixed money demand curve. E. no impact on the money demand curve. | A. | 75 | |
| 5309666878 | Consider the information for First National Bank. If the minimum reserve ratio is 20%, how much is the bank required to keep in reserves? A. $20 million B. $16 million C. $25 million D. $10 million E. $40 million | B. | 76 |
