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CLEP Macroeconomics: Money And Banking

Subjects : clep, economics
  • Answer 42 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. T/F. The transactions demand for money is dependent on the interest rate.

2. Occurs when the Fed switches the deposits between its own accounts and the accounts of the commercial banks

3. Currency + demand deposits

4. Open market operations effect the money supply and _______ _____

5. M2+ + non-personal term deposits + foreign currency deposits

6. Changing the money supply to assist the economy to achieve a full employment - noninflationary level of output

7. The ratio of a bank's cash assets to its deposit liabilities

8. The rate at which the Fed will loan money to commercial banks

9. (1) medium of exchange; (2) store of value; (3) unit of account

10. Decreases money supply

11. Increase interest rates to decrease the money supply

12. The purchase or sale of government securities

13. The rate the Federal Reserve charges banks to borrow money

14. Stems from the fact that money is a store of value and people hold their financial assets in many forms

15. Movement along money demand curve

16. If the Federal reserve lowers the reserve requirement - the interest rate will ________

17. Each group is less liquid than the one before

18. The amount that a bank must keep in its reserve in order to meet cash demands

19. The money that a bank has in reserve which exceeds the reserve requirement

20. Who determines quantity of money supplied?

21. M1 + personal savings deposits + non-personal notice deposits (from chartered banks)

22. Quantity of money demanded and interest rate are ________ related

23. Increases money supply

24. Four categories of money

25. When the Fed purchases securities it ________ the banks' reserves

26. Lender of last resort - supervisor of member banks - provider of check-clearing services - and controller of money supply

27. Decrease interest rates to increase the money supply

28. What determines how much cash people will want to hold?

29. Equilibrium force in quantity of money demanded and quantity of money supplied

30. Expansionary monetary policy is used during a period of _________

31. Shift of money demanded curve

32. Shows how interest rates affect investment expenditure - and ultimately real GDP - prices and unemployment

33. Contractionary monetary policy is used during a period of _________

34. The Federal Reserve policies that are aimed at changing the size of the money supply and interest rates to affect the national economy

35. Informal discussions that occur between the commercial banks and the Fed about monetary and other policies

36. The multiple by which the banking system can expand the money supply for each dollar of excess reserves

37. How banks create money

38. M2 + deposits held by other financial institutions (trust companies - credit unions)

39. Households using money to pay bills - purchase materials - etc.

40. The amount received by a lender and paid by a borrower expressed as a percentage of the amount of a loan

41. Entity responsible for managing the money supply in accordance with the needs of the economy

42. 1/reserve requirement