ap macro collegeboard review

the commercial bank’s ability to create money depends on which of the following

a fractional reserve banking system

commercial banks can create money by

lending excess reserves to customers

Suppose that all banks keep only the minimum reserves required by law and that there are no currency drains. The legal reserve requirement is 10 percent. If Maggie deposits the $100 bill she received as a graduation gift from her grandmother into her checking account, the maximum increase in the total money supply will b

900

Which of the following is a determinant of the amount of money the commercial banking system can create?

the reserve requirement

Assume that Linda deposits in her checking account the $1,000 cash she was keeping at home for an emergency. If the required reserve ratio is 0.20, what is the maximum change in the money supply from her deposit?

4,000

Suppose the required reserve ratio is 20 percent and a single bank with no excess reserves receives a $100 deposit from a new customer. The bank now has excess reserves equal to

$80

Assume that the reserve requirement is 15 percent and that a bank receives a new checking deposit of $200. Which of the following will most likely occur in the bank's balance sheet?

liabilities; increase by $200 required reserves; increase by $30

If a commercial bank has no excess reserves and the reserve requirement is 10 percent, what is the value of new loans this single bank can issue if a new customer deposits $10,000 ?

9,000

current us currency is..

fiat money with no instrinic value

liquidty refers to

the ease with which an asset is converted to the medium of exchange

which of the following is not included in m1

credit cards

on a bank’s t account

reserves are assets, deposits are liabilites

when the fed conducts open market purchases

it buys treasury securities, which increases the money supply.

which of the following is adverse selection?

a high-risk person being more likely to apply for insurance

according to the efficent markets hypothesis, better than expected news about a corpotoin will

raise prick of the stock

crowding out occurs when

government borrowing to finance its spending decreases private sector investment

Assume a country’s banking system has limited reserves. If the central bank buys government bonds from individuals on the open market and banks do not loan out any excess reserves created by the open market purchase, which of the following will happen?

the money supply will increase

Assuming a banking system with limited reserves, which of the following actions by the central bank reduces the ability of the banking system to create money?

increasing the reserve requirement

An increase in government spending will affect the demand for money and nominal interest rates in which of the following ways?

demand for money; increase nominal interest rates; increase

which of the following is considered the most liquid asset

currency

Pat deposits a portion of her wages into a personal savings account every week. The saved money can be considered to be primarily a

store of value

money supply in the united states EXCEPT

gold bullion

On the island of Mabera, the local money is called “favoli.” The price of every good in Mabera is expressed as the number of favolis needed to buy the good. The use of favolis to express the price of goods describes which function of money?

unit of account

which of the following shifts the money demand curve to the right

an increase in the price level

expansionary monetary policy can affect the economy through which

decreasing the adminestered rates lowers nominal interest rates which increase investement

Assume a country’s banking system has limited reserves. Which event would have caused the shift of the money supply curve from S₁ to S₂ in the money market shown above?

gov bonds

if the fed reserve lowers its administered interest rates which of the following would most likely occur

businesses will purchase more factories & equipment

Which of the following government policies can reduce the rate of inflation in the short run?

increasing administered interest rates

The table shows the maximum quantity of cars or motorcycles that can be produced by two countries, X and Y, using equal amounts of resources.

country y has the comparative advantage in producing cars

comparative advantage implies that

two countries should benefit from trade unless both have equal opportunity costs in every good

On the basis of the diagram above showing an economy's production possibilities curve for two goods, which of the following statements must be true?

I II III

Brazil and Peru produce both coffee and wheat using labor as the only input. The table below shows the labor hours required to produce a unit of coffee and a unit of wheat in each country.

 

peru has comparative advantage in producing coffee

example of factor of production

capital, entrepreneurship, labor, land

The main benefit of free trade between two countries is that

each country can consume beyond its constraints of resources and productivity

he table below shows the cost of the same representative basket of goods in the base year 2012 and in 2013, and the average weekly nominal wage rate in 2012 and 2013.

the cp in year 2013 is 120

The consumer price index (CPI) measures the

prices of a specific group of goods and services purchased by consumers

Suppose that a typical consumer buys the following quantities of three commodities in 1993 and 1994.

Which of the following can be concluded about the consumer price index (CPI) for this individual from 1993 to 1994 ?

increase by 25

Which of the following is true according to the circular flow model?

Households are demanders in the product markets and suppliers in the factor markets

cording to the business cycle represented in the diagram above, the actual rate of unemployment equals the natural rate of unemployment when the economy is

potential line

The table below shows a country’s macroeconomic data in 2013.

220 billion GDP=C+I+G+(X−M)

In 2007, the nominal gross domestic product (GDP) was $50 billion and the GDP deflator was 200. Thus real GDP was

25