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In class Quiz 3s Last Semester A car is listed at 6 500 The function of money is Unit of Account Fiat Money has Little to no intrinsic value and is authorized by the central bank or gov t body The interest rate that banks charge each other for overnight loans is called the Federal Funds Rate How many years does the Board of Governors serve in the U S Federal Reserve System 14 Years Feds want to BOTH increase the money supply AND raise the money multiplier Feds 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 farther Major shortcoming of a barter system is Requirement of a double coincidence of wants Think of a fantasy football trade both sides must benefit All of the following are powers of the Federal Reserve System except Obligation to mint U S coins Housing Market Bubble is when the housing prices fell Consumption spending as many households found it to borrow against the value of their homes Declined Harder A bank will consider a house loan to Squilly a and a checking account to Tyrell a Asset Liability To increase the money supply the Fed s can Conduct 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 RGDP 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 Billion Real GDP 50 Billion Price Level 5 Velocity 10 Find Nominal GDP and Money Supply Find Money Supply first before NGDP Highest Poverty Rate Single Female Headed Households Gini Coefficient A A B This semester Pennies in Squilly s bank are counted in what Both M1 and M2 12 000 tax refund check is counted in what Both M1 and M2 Example of legal tender 50 bills The interest rate that banks charge each other for overnight loans is called the Federal Funds Rate Squilly transfers 8 600 from his savings to checking account Checking increases by 8 600 M2 stays the same Simple deposit multiplier 1 RR What essential factor enables commercial banks to create money Excess reserves The Earliest type of exchange involved Barter Squilly 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 money Who are always the coting members of FOMC meetings New York Fed President and Board of Governors Which 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 question Combined 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 doing 1 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 elderly Supply Demand chart shows demand shift right increase Explain using discretionary fiscal policy Decrease 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 RGDP This 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 55 000 Answer 200 000 105 000 50 000 95 000 55 000

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Mizzou ECONOM 1015 - In-class Quiz #3s

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