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Econ 203 Exam 3 Texas A&M Edwardson || with Errorless Solutions 100%.
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  • Econ 203
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  • Econ 203

The Federal Reserve correct answers in charge of monetary policy in U.S., adjusts the money supply to help achieve its monetary policy goals Monetary correct answers increasing and decreasing amount of money in the economy Monetary Policy Goals correct answers e prices (low inflation) and max...

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  • August 16, 2024
  • 5
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

Subjects

  • the federal reserve

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  • Econ 203
  • Econ 203

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Econ 203 Exam 3 Texas A&M Edwardson || with Errorless
Solutions 100%.
The Federal Reserve correct answers in charge of monetary policy in U.S., adjusts the money
supply to help achieve its monetary policy goals

Monetary correct answers increasing and decreasing amount of money in the economy

Monetary Policy Goals correct answers 1.stable prices (low inflation) and maximum
employment
2. stable economic growth
3. stable financial system

The Fed's Monetary Policy Tools correct answers open market operations, interest rates on
reserves, required reserve ratio, discount rate

Fractional Reserve Banking correct answers a system in which banks must keep a fraction of
their deposits as reserves and can lend the rest

Money Supply correct answers the quantity of money available in the economy

Reserves correct answers deposits that banks have received but have not loaned out

Total Reserves= correct answers Required Reserves + Excess Reserves

Required Reserves= correct answers Deposits x Required Reserve Ratio

Change Money= correct answers change Reserves x 1/r

Discount Rate correct answers rate Fed charges when banks borrow

The Classical Theory of Inflation correct answers in the long run, inflation is determined solely
by changes in the amount of money in the economy

Long Run correct answers enough time has passed for market prices to be in equilibrium

The Value of Money correct answers a dollar is worth the amount of goods and services you can
buy with it

Effects of an Increase in the Money Supply correct answers creates excess supply of money,
people get rid of their money, making the value of money fall

Classical Dichotomy correct answers the idea that changes in REAL variables are caused by
changes in other REAL variables

, Real variable correct answers 3 slices of pizza

Nominal variable correct answers $6 of pizza

Do changes in nominal variables affect real variables? correct answers NO

Money Neutrality correct answers changes in the money supply (a nominal variable) have
neutral impact on real variables

The Velocity of Money correct answers the average number of times per year each dollar in the
money supply is spent

V (velocity of money)= correct answers P (price level) x Y (real GDP) / M (money supply)

P (price level) x Y (real GDP) correct answers Nominal GDP

M (money supply) x V (velocity of money)= correct answers P (price level) x Y (real GDP)

Quantity Theory of Money correct answers -velocity of money is constant (%change V=0)
-money neutrality (changes in money supply have no affect on real GDP)
- %change M = %change P

The Inflation Tax correct answers when the money supply increases, the value of money falls.
This decrease in value of money effectively a tax on holders of money

Imports correct answers goods and services produced abroad, but sold domestically

Exports correct answers goods and services produced domestically, but sold abroad

Net Exports (Nx)= correct answers Exports-Imports

What Determines a Country's Trade Balance correct answers 1. tastes for foreign and domestic
goods
2. foreign and domestic prices
3. exchange rates
4. foreign and domestic income
5. transaction costs
6. trade policy

Net Capital Flow (NCO) correct answers Domestic Purchase of Foreign Assets- Foreign
Purchase of Domestic Assets

NCO= correct answers DPFA-FPDA

Open Economy correct answers Y=C+I+G+NX

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