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Category > Economics Posted 07 May 2020 My Price 14.00

ECO 102 Macroeconomics Unit 3 Challenge 1,2 and 3 Sophia Course

ECO 102 Macroeconomics Unit 3 Challenge 1,2 and 3 Sophia Course

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Unit 3 Challenge 1

Challenge 1

When store owners quote prices in terms of dollars, money is acting as a __________.

· a.)

commodity

· b.)

medium of exchange

· c.)

store of value

· d.)

unit of account

The double coincidence of wants challenge is faced when we __________.

· a.)

use money as a medium of exchange

· b.)

establish gold as a commodity

· c.)

use gold as a unit of account

· d.)

attempt to barter to attain goods

When I use money to purchase a movie ticket, my dollars are acting as a __________.

· a.)

unit of account

· b.)

store of value

· c.)

bartering agreement

· d.)

medium of exchange

Which of the following choices is a reason why gold became a form of currency?

· a.)

It has little practical value.

· b.)

It is the most liquid form of money.

· c.)

It contributes to inflation.

· d.)

It is almost impossible to counterfeit.

As the use of gold as currency became more standardized, what happened to the gold trade?

· a.)

Americans lost faith in their currency and hoarded gold.

· b.)

Banks printed paper money to represent a specific amount of gold in the vault.

· c.)

Gold held little practical value other than as jewelry.

· d.)

The dollar's convertibility was suspended.

Which of the following describes what happened to the gold trade as the use of gold as currency became more standardized?

· a.)

People began to write checks instead of actually transferring gold.

· b.)

Certain commodities became accepted as forms of exchange.

· c.)

Banks figured out that they could print more money than gold that they had in their vaults.

· d.)

Traders faced a double coincidence of wants.

What is the central issue that causes bank runs and panics?

· a.)

Banks print more money than they have gold in their vaults

· b.)

Banks fail to pay interest to their depositors

· c.)

Banks withhold deposits from creditors

· d.)

Banks do not loan out enough funds to stimulate the economy

Which of the following can be described as when a bank holds a part of its gold and loans out the rest?

· a.)

Fiduciary money

· b.)

Deposit account

· c.)

Fiat currency

· d.)

Fractional reserve

Which of the following statements about fiat currency is true?

· a.)

Fiat currency has intrinsic value.

· b.)

Fiat currency is dependent on trust that it will be widely accepted.

· c.)

Fiat currency is not available in America today.

· d.)

Fiduciary currency has value based on the trust of the Federal Reserve.

Which answer below explains why some might have FAVORED the old banking system?

· a.)

Currency traders could make a lot of money by exchanging it between cities.

· b.)

All of the account holders at a bank could create a run by asking to withdraw their funds at the same time.

· c.)

The value of notes from unknown banks was unclear.

· d.)

Prices were uncertain in trading over long distances.

Some of the founding fathers were initially against a Central Bank because __________.

· a.)

the control of the English bank over the colonies

· b.)

the 'Continental' currency had already been issued

· c.)

different states wanted their own currency

· d.)

they couldn't agree which branch of government would control a Central Bank

Before a Central Bank was established in the United States, people known as __________ were able to buy and sell the monies from individual states.

· a.)

the Board of Governors

· b.)

federal funds traders

· c.)

equity salesmen

· d.)

currency traders

Which of the following statements regarding central banks is true?

· a.)

As the value of the currency becomes more certain, people rely more on commodity standards.

· b.)

A run could never happen at a central bank.

· c.)

Banks are not required to maintain cash on hand.

· d.)

A central bank is charged with the regulation of money supply and interest rates.

Which of the following statements regarding central banks is true?

· a.)

Central banks undermine international trade.

· b.)

Central banks require greater reliance on the gold standard.

· c.)

A central bank has the sole authority with respect to the money supply.

· d.)

A central bank controls the state and local bank locations and number of branches.

Which of the following describes a way that central banks strengthened the value of currency?

· a.)

Banks lent out more money than is kept in reserves.

· b.)

Over time, the banking system becomes less reliant on the gold standard.

· c.)

Traders made a living by exchanging currency between cities.

· d.)

People deposited paper money instead of gold in banks.

Which of the following statements about the Federal Reserve is true?

· a.)

The members of the Board of Governors of the Federal Reserve are appointed for terms of 14 years.

· b.)

The Federal Reserve Board of Governors are elected by the general public.

· c.)

The Federal Reserve prints more money to prevent runs on banks.

· d.)

The Federal Reserve is directly controlled by the government, as its members are all elected politicians.

How does the Federal Reserve prevent runs on banks?

· a.)

It doesn't; banks need to establish good reputations on their own

· b.)

By printing more money if necessary

· c.)

By acting as a lender of last resort to member banks

· d.)

By guaranteeing people's deposits

Which of the following statements is NOT true of the Federal Reserve?

· a.)

The Federal Reserve prints more money to prevent runs on banks.

· b.)

The Federal Reserve was created to sustain long term economic health.

· c.)

The Federal Reserve is independent from the federal government.

· d.)

The Federal Reserve prevents panics by allowing private banks to hold reserves at regional Federal Reserve banks.

Challenge 2

Select the answer below that has the three examples of money in order from most liquid to least liquid.

· a.)

Checking account balances, dollar bills, money market mutual funds

· b.)

Savings account balances, checking account balances, dollar bills

· c.)

Money market mutual funds, checking account balances, dollar bills

· d.)

Dollar bills, checking account balances, money market mutual funds

Which of the following statements regarding different types of money is true?

· a.)

Different types of money all have the same level of liquidity.

· b.)

Time deposits belong in the least liquid category of money.

· c.)

There are five main categories of money, based on liquidity.

· d.)

A checking account is a form of M0.

The M1 definition of money includes __________.

· a.)

demand deposits and time deposits

· b.)

physical currency only

· c.)

demand deposits only

· d.)

physical currency and demand deposits

If the reserve requirement of a bank is 50%, then the multiplier effect will be ________ and $100 in M1 will increase the money supply by ________.

· a.)

2; $200

· b.)

2; $50

· c.)

0.5; $50

· d.)

0.5; $200

If the reserve requirement of a bank is 25%, then the multiplier effect will be ________ and $200 in M1 will increase the money supply by ________.

· a.)

25; $50

· b.)

4; $800

· c.)

4; $50

· d.)

25; $800

If the reserve requirement of a bank is 20%, then the multiplier effect will be ________ and $50 in M1 will increase the money supply by ________.

· a.)

20; $250

· b.)

5; $250

· c.)

20; $1,000

· d.)

5; $1,000

Which statement is NOT true regarding the way that the Federal Reserve controls the money supply?

· a.)

If the Fed wants to reduce the money supply, it sells bonds and shreds the money it receives.

· b.)

The Fed gives bondholders cash in exchange for securities (bonds).

· c.)

Money that is printed by the Bureau of Printing and Engraving is turned over to the Fed.

· d.)

The U.S. Treasury sends the money it prints directly into circulation.

When the Fed sells bonds, the result is an increase in __________.

· a.)

interest rates

· b.)

money supply

· c.)

consumption (C)

· d.)

investment (I)

What is the result when the Federal Reserve buys Treasury bonds?

· a.)

More currency in the hands of the public

· b.)

Higher interest rates

· c.)

Less consumption (C)

· d.)

Fewer investments (I)

The federal funds rate is paid to __________.

· a.)

the Federal Open Market Committee for overseeing the Federal Funds rate

· b.)

banks who lend excess reserves to other member banks

· c.)

depositors whose funds are loaned out to member banks

· d.)

banks that need to borrow in order to meet the reserve requirement

Which of the following statements is true as it relates to banks and the federal funds market?

· a.)

The FOMC uses taxation to control our money supply.

· b.)

The federal funds market developed as banks lost customers.

· c.)

Banks with less than the reserve requirement need overnight loans to meet their obligations.

· d.)

The federal funds rate is charged on an annual basis.

Fed member banks enter the federal funds market in order to __________.

· a.)

increase the interest rate they can charge on loans

· b.)

boost profits

· c.)

meet reserve requirements

· d.)

increase their size and importance

Why would banks need to borrow directly from the Fed?

· a.)

To meet monthly deposit target goals

· b.)

To increase the interest rate they can charge to lenders

· c.)

To meet the reserve requirement

· d.)

To purchase Federal Treasury bonds on the open market

Which statement below is true about the discount rate?

· a.)

It involves banks loaning funds to one another so that they can meet their reserve level.

· b.)

It dictates the amount of money that banks should maintain in their vaults at all times.

· c.)

It is influenced by the multiplier effect.

· d.)

It is the rate that the Fed charges member banks for short term loans.

Which statement below is true about the discount rate?

· a.)

It is the same as the fed funds rate.

· b.)

This is the rate used when banks borrow directly from the Fed.

· c.)

It is the rate that banks charge other banks to loan money overnight.

· d.)

It is the interest rate that the federal government pays to the public via the sale of Treasury securities.

Which of the following statements regarding inflation is true?

· a.)

When the unemployment rate is under 5%, inflation is not a concern anymore.

· b.)

According to most economists, an annual inflation rate of 8% is normal and just fine.

· c.)

Decreasing the discount rate is one way to combat inflation.

· d.)

When inflation is extreme, it can destroy a country's currency.

Which of the following statements regarding goals of monetary policy is FALSE?

· a.)

The Fed might seek to reduce inflation by increasing the money supply.

· b.)

Extreme inflation has the potential to destroy a currency completely.

· c.)

Most economists say that a 2% annual inflation rate is normal.

· d.)

One of the Fed's main goals is to promote economic stability.

Which of the following statements is associated with deflation?

· a.)

In extreme cases, this can force people to revert back to a barter economy.

· b.)

Prices fall, but loan payments stay the same.

· c.)

It decreases the real value of debt.

· d.)

Prices increase so quickly that it hurts trade.

All of the following are examples of expansionary policy EXCEPT __________.

· a.)

increasing the money supply

· b.)

selling Treasury bonds

· c.)

lowering the discount rate

· d.)

decreasing the reserve requirement

Which of the following is associated with contractionary monetary policy?

· a.)

Buying Federal Treasury bonds

· b.)

Increasing the reserve requirement

· c.)

Lowering the discount rate

· d.)

Increasing taxes

Expansionary policy is created in order to __________.

· a.)

encourage households and businesses to spend money

· b.)

reduce GDP

· c.)

counteract inflation

· d.)

slow down business investment in the economy

Challenge 3

Using the GDP model, which of the following often happens during a recession?

· a.)

Consumption (C) steadily increases.

· b.)

Net exports (X-M) will always increase.

· c.)

Government spending (G) will be greater than taxes (T).

· d.)

Consumption (C) will be less than savings (S).

Which of the following is NOT included in the expenditure approach for calculating GDP?

· a.)

Government purchases

· b.)

Business investments of capital

· c.)

Exports minus imports

· d.)

Consumer income

In the GDP model, investment (I) could be considered all of the following EXCEPT __________.

· a.)

the building of a new factory

· b.)

the increase in capital resources

· c.)

the purchase of a stock

· d.)

the purchase of a new restaurant

The Marginal Propensity to Consume (MPC) is __________.

· a.)

total expenditures minus savings in an economy

· b.)

the amount of savings that occurs as a result of a tax increase

· c.)

the amount of additional income spent in the economy

· d.)

the total expenditures in the economy

Which of the following statements about expansionary fiscal policy is true?

· a.)

It tends to increase the unemployment rate.

· b.)

It is used to curb inflation.

· c.)

It is when government expenditures exceeds tax revenues.

· d.)

It decreases the purchase of goods and services.

Which of the following is an example of expansionary policy?

· a.)

Decrease in taxes

· b.)

Decreasing the salaries of government workers

· c.)

Government cuts in spending

· d.)

Decrease in investment

The Phillips Curve shows the trade-off between __________.

· a.)

inflation and unemployment

· b.)

price level and GDP

· c.)

tax rates and government revenue

· d.)

labor and leisure

Using the GDP model, taxes initiated to finance government spending are subtracted from __________.

· a.)

investment

· b.)

consumption

· c.)

consumption and investment and net exports

· d.)

consumption and investment

Contractionary fiscal policy is enacted in order to __________.

· a.)

lower the interest rate

· b.)

decrease unemployment

· c.)

fight inflation

· d.)

encourage borrowing

Which of the following is true concerning government bonds?

· a.)

The yield increases when market price falls.

· b.)

The yield is always equal to the interest rate at the time of maturity.

· c.)

They are always paid off at maturity.

· d.)

The yield falls with the market price.

Government securities that are issued for a time period between one and 10 years are known as __________.

· a.)

notes

· b.)

bills

· c.)

commodity money

· d.)

bonds

U.S. debt in the form of bills, notes and bonds are sold by the __________.

· a.)

Federal Open Market Committee

· b.)

U.S. Treasury

· c.)

Federal Reserve Member Banks

· d.)

Congressional Budget Committee

How does treasury debt held by foreigners decrease economic growth?

· a.)

Interest payments to foreigners comes from U.S. tax revenues.

· b.)

Foreign nations do not charge interest on loans.

· c.)

Net exports decline as a result of foreign held debt.

· d.)

Foreigners pay capital gains tax on U.S. held securities to the U.S. government.

When the government finances debt, interest must be paid to __________.

· a.)

member banks with excess deposits

· b.)

stockholders

· c.)

bondholders

· d.)

fund transfer payments

Economic growth is measured by the __________.

· a.)

growth in the skilled labor force

· b.)

changes in the unemployment rate over time

· c.)

percent increase in nominal GDP over time

· d.)

GDP, adjusted for inflation over time

Deficit spending increases the interest rate because __________.

· a.)

the demand for loans decreases

· b.)

the Fed decreases the money supply

· c.)

the demand for loans increases

· d.)

the Fed increases the money supply

In order to offset interest rate increases as a result of government borrowing, the Federal Reserve would __________.

· a.)

lower the reserve requirement

· b.)

sell bonds to the public

· c.)

decrease the money supply

· d.)

increase the Fed Funds rate

Higher interest rates will __________.

· a.)

decrease the consumption in the economy

· b.)

increase investment in the stock market

· c.)

decrease the cost of borrowing money

· d.)

slow down government spending

Large budget deficits __________.

· a.)

occur when tax revenues are greater than government spending

· b.)

help alleviate the national debt

· c.)

reduce the value of domestic currency

· d.)

Decrease the interest rate

Large budget deficits can have a ______ effect on economic growth because they can cause interest rates to _______.

· a.)

positive; fall

· b.)

positive; rise

· c.)

negative; fall

· d.)

negative; rise

When the demand for a country's currency falls, the currency will __________.

· a.)

have inflationary results at home

· b.)

depreciate

· c.)

appreciate

· d.)

be more valuable to foreigners

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Status NEW Posted 07 May 2020 04:05 AM My Price 14.00

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