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Exam 31. Almost all money in the world today is ____ moneya. commodityb. fiatc. industriald. contractural 2. Prior to the 1900s, most countries in the world used ______ as their money.a. only goldb. only silverc. both silver and goldd. either silver or gold, but not both 3. Which of the following is not one of the functions of money?a. medium of exchangeb. store of valuec. moderator of wealthd. unit of account 4. An economic system without money is a(n) _____________ system. 5. (True/False) An increase in the money supply should lower interest rates. 6. (True/False) An increase in the money supply should lower inflation. 7. The central bank increases the money supply by __________ bonds. 8. The Fed is divided into 12 districts which are supposed to:a. simplify the Fed’s accountingb. each contain 1/12 of the population, creating a monetary “congress”c. represent the unique economic interests of different parts of the countryd. all members of congress to appoint those who run their local economy 9. There are supposed to be ______ members of the Fed Board of Governors, who are supposed toserve for ______ years. 10. Most of the money in the world is:a. cash printed by the governmentb. created by banks when they make loansc. created through printing bondsd. created by banks taking deposits 11. The entity intended to be the central bank for the world is the:a. ECBb. IMFc. World Bankd. Wynn Resorts 12. When the entity in #11 makes a loan to a country, it requires a(n) _____ program in exchangea. re-invigorationb. austerityc. spending 13. Banks borrow from each other overnight. In the US, they are charged the ______ rate, in the restof the world, they are charged the ______.a. discount, LIBORb. Federal Funds, LIBORc. LIBOR, LIBORd. Federal Funds, discount 14. A currency board issues money:a. backed partly by metals such as gold or silverb. backed by the money of other countries such as the U.S. or Japanc. backed by assets such as stocks from U.S. or Japanese stock marketsd. without backing of any kind ____ 15.____ The changes made to U.S. currency have been made to:a. lengthen the time the money is used in circulationb. prevent counterfeitingc. lower the costs of printingd. b and c 16. __________________ and __________________ are the two major components of M1. 17. Gresham’s Law states that:a. supply creates its own demandb. bad money drives good money out of circulationc. good money drives bad money out of circulationd. gold and silver will drive all other currencies out of circulation ____ 18.____ In a fractional reserve banking system, banks must keep a percentage of their ________:a. actual reservesb. depositsc. loansd. total liabilities 19. The required reserve ratio used most often today is ______________________ percent. 20. The formula for the money multiplier is: _____________________________ 21. (True/False) All banks must have a Federal charter, and a charter from each state in which theyoperate. 22. (True/False) Credit unions and thrifts do not need a charter, and do not have deposit insurance.Ninth National BankCash: $5,000Securities: $4,000Deposits: $20,000Required Reserve Ratio = 10% 23. The 9th National Bank as listed above has $______________________________ in loans. 24. The required reserves of the 9th National Bank are $ _____________________________ 25. The actual reserves of the 9th National Bank are $ _____________________________ 26. The excess reserves of the 9th National Bank are $ _____________________________ 27. A deposit of $2,000 in cash could create a maximum of $__________________________ in deposits(including the original $2,000). 28. Draw the T account for the Ninth National Bank. 29. Redo the T account assuming a new customer comes to the bank with $500 in cash to deposit. 30. (true/false) Based on the intent of law, banks should never be leveraged more than about eight to 1,yet some were as high as 30 and 40 to 1 in 2007. 31. The _________ Act separated banking and stock brokers. It has since been repealed. 32. (True/False) Prior to 2000, banks in the US could only operate in one state. 33. (True/False) Congress in 1999 passed a law which prohibited the government from creating rulesthat regulated mortgage backed securities. 34. What are the functions of a central bank? 35. Why is the Fed supposed to be independent from Congress and the President and how do we keepit independent? 36. The neo-classical theory of economic growth states that:a. savings creates capital which drives growthb. consumption creates capital which drives growthc. natural resources create investment, which stimulates capital, and growthd. income creates capital which drives growth 37. The highest income countries per person are also the countries with the highest:a. savings per personb. consumption per personc. capital per persond. consumption to investment per person 38. The modern theory of growth states that growth comes from:a. ideas and innovationsb. investment in capitalc. natural resourcesd. controlling trade 39. According the United Nations, what is the biggest obstacle to economic development for poornations in the world today?a. too much debtb. treatment of womenc. child labord. poor transportation systems 40. Human capital is the economist’s word for:a. the portion of the labor force that uses capital in its workb. the education, training and skills of workersc. the portion of the labor force that performs unskilled tasksd. production when people are substituted for capital, as in low income countries 41. (True/False) The United States has both a high savings rate and a high rate of innovation, which iswhy it grows so fast. 42. (True/False) While all countries with lots of natural resources have good economic growth, lack ofresources does not prevent economic growth. 43. (True/False) The phrase “maximum sustainable growth” means that creating economic growth willautomatically create stable prices and full employment. 44. ______________________________________________ policy means the use of the government’staxing and spending powers to influence the economy. 45. The Classical economic philosophy of “hands off” is expressed by the French phrase:______________________________________________________________________________ 46. In the current economic crisis, a Classical economist would have done what with the failing banksand insurance companies?a. let them go bankrupt, regardless of effect on anything elseb. let them go bankrupt, with the Fed protecting other financial institutions affected by itc. forced another financial institution to buy them, with help from the Fedd. exactly what the Fed did, buy billions in their stock to increase their reserves 47. (True/False) Data tell us that changing taxes has the strongest effect on the economy when timesare good, and less effect as times go bad. 48. (True/False) All economists agree the government can effect the economy in a positive way. 49. (True/False) The USA has traditionally used industrial policy, other countries have not. 50. When lowering interest rates does not affect the economy, economists say that we are in a(n)_____________________________________________________________________________ 51. It is called ______________________________________________________________________ whenthe government’s borrowing to pay for something like the stimulus package makes interest ratesgo up, and lessens private borrowing. 52. How would you end a demand recession? Explain. 53. If a recession is caused by a supply shock, how would you end it? Explain. 54. The idea that there is a tradeoff between inflation and unemployment in the short run is:a. Gresham’s Lawb. The Phillips Curvec. Keynes’ Conundrumd. The Laffer Curve

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