In-class Quiz #3sLast SemesterA car is listed at $6,500. The function of money is…Unit of AccountFiat Money has:Little to no intrinsic value and is authorized by the central bank or gov’t bodyThe interest rate that banks charge each other for overnight loans is called the:Federal Funds RateHow many years does the Board of Governors serve in the U.S. Federal Reserve System?14 YearsFeds want to BOTH increase the money supply AND raise the money multiplierFeds buy bonds and lowers the reserve requirement*Buying bonds throws money back into the economy and increases M*Lowering the reserve makes money stretch and go fartherMajor shortcoming of a barter system is:Requirement of a double coincidence of wants*Think of a fantasy football trade; both sides must benefitAll of the following are powers of the Federal Reserve System except:Obligation to mint U.S. coinsHousing Market Bubble is when the housing prices fell. Consumption spending ___ as many householdsfound it ___ to borrow against the value of their homesDeclined; HarderA bank will consider a house loan to Squilly a ____ and a checking account to Tyrell a ____Asset; LiabilityTo increase the money supply, the Fed’s canConduct an Open Market purchase of 30 billion Treasury Bills (Throwing money back into The economy)Formulas that will be used:M x V = NGDP M x V = P x Y*M=Money, V=Velocity, P=Price Level, Y=RGDPReal GDP= 50 Billion Price Level= 5Velocity= 10Find Nominal GDP and Money Supply.-Find Money Supply first before NGDP-M x V = P x Y ……… M x 10 = 5 x 50 Billion ……… 50x5/10= $25 Billion-M x V = NGDP……… $25 Billion x 10 = $250 BillionHighest Poverty Rate:Single, Female Headed HouseholdsGini Coefficient:A/A+BThis semesterPennies in Squilly’s bank are counted in what?Both M1 and M2$12,000 tax refund check is counted in what?Both M1 and M2Example of legal tender:$50 billsThe interest rate that banks charge each other for overnight loans is called the:Federal Funds RateSquilly transfers $8,600 from his savings to checking account:Checking increases by $8,600; M2 stays the sameSimple deposit multiplier:1/RRWhat essential factor enables commercial banks to create money?Excess reservesThe Earliest type of exchange involved:BarterSquilly transfers $2,500 from his checking account to a money market mutual fund:M1 decreases, M2 stays the same (Money market mutual fund is under M2)Which of the following is INCORRECT? (Most of the ?’s on the final are like this)Currency in a bank, credit cards, debit cards, and electronic checks are money*75% this specific question will be on the final *Credit cards are not moneyWho are always the coting members of FOMC meetings?New York Fed President and Board of GovernorsWhich of the following are NOT characteristics of a “good” medium of exchange?It should have increasing purchasing power*Again, this one is most likely a final questionCombined effect of raising money supply and raising the money multiplier:Fed buys bonds and lowers the reserve requirement*Lowering the reserve requirement example is from 10% to 5%. Test this by doing1/.1=10 and 1/.05=20. (Simple money multiplier is 1/RR)According to lecture, which group of people has recently had the highest poverty rate?Female-headed households, no spouse present*Don’t fall prey to this racist question: Other options include blacks and elderlySupply & Demand chart shows demand shift right(increase). Explain using discretionary fiscal policyDecrease in tax rate for citizens who are making $400,000 per year*Increase in Demand increases RGDP (Increase in money) (More purchases bc ppl stuntin)*”Fiscal” means the Gov’t intervenes by decreasing tax rate, which means more money in pocket. Remember, Fiscal is gov’t. (Monetary are the Federal Reserve Bank aka Feds)The Federal Reserve wants to increase money supply (M) by 5,000,000. The RR is 10%They fucking PURCHASE $500,000 in bonds*They purchase/buy to throw money back in the economy*It’s only $500,000 because the banks can flip 500,000 to 5,000,000 because the RR is 10%.The equation is: x/.1=5,000,000. The bank takes the money (in this case $500,000) and flips it like crazy until its 5,000,000. They flip it by charging interest on loans Note: When you see a T-account, the total Deposits are a liability. However, the same amount in deposits becomes assets, in the form of reserves and loans. I CANNOT STRESS ENOUGH that MxV=NGDP and MxV=PxY.M is money supply, V is velocity, P is price level, and Y is RGDPThis is 100% a final question:T-account reads Assets=$90,000 in reserves and $90,000 in loans. Liabilities=$180,000 in deposits.The RR is 25%The question reads like this:Suppose that Kyle walks in and deposits $20,000 in cash into his checking account. The bank takes action and uses $5,000 towards new loans. The bank now has ________ in deposits, ________ in reserves, _______ in required reserves, _______ in loans, and _______ in excess reserves.Deposit is $20,000, so add the deposit to the $180,000 already in deposits. =$200,000.Total reserved is not the full $20,000 because the bank uses $5,000 for loans. Add $15,000 to $90,000 already in total reserves =$105,000.Required reserves is 25%. Take the new total deposit ($200,000) x .25 =$50,000.The original in loans is $90,000; simply add the new $5,000 to this. =$95,000.Excess reserves is total reserved minus the RR; Take the new Total reserves ($105,000) minus the new required reserves ($50,000). =$55,000Answer: $200,000; $105,000; $50,000; $95,000;