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ECO 202 Final Exam – Questions And Detailed Answers
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ECO 202 Final Exam – Questions And Detailed Answers
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ECO 202 Final Exam – Questions And Detailed AnswersWhen you walk into a store, you see the price tags marking "$.99", "$100", or
"$14.99". You don't see the price tags with "1 bitcoin", "3 bitcoins", or "100
bitcoins", etc. This illustrates that bitcoins cannot fulfill the Right Ans - unit
of account function
Last year, bitcoins were traded at $1000 a piece. The year before, they were
traded at $20 a piece. Next year, it may be traded at $100,000 a piece. This
illustrates that bitcoins cannot fulfill the Right Ans - store of value function
very well
You own some bitcoins. But you cannot go to One Stop at Miami and pay your
tuition with your bitcoins. This illustrates that bitcoins cannot fulfill the
Right Ans - medium of exchange function
M1 and M2 are called Money Stock Measures because Right Ans - they
measure the amount of money at a specific point in time
According to the footnotes for Table 1, currency stored in commercial banks'
vaults Right Ans - is not a part of money supply
You find a 20 dollar bill in your winter jacket when you clean up your closet.
You then spend the money at Kroger for some groceries. As a result, Right
Ans - currency in circulation stays unchanged because the $20 is already out
in circulation and counted
When a bank receives a new deposit of $5,000 from the public, what might be
the minimum change in money supply? Right Ans - $0
Bank runs might spread to other banks and cause Right Ans - even
financially healthy banks to go under
The Glass-Steagall Act of 1933 Right Ans - created federal deposit
insurance as an important measure for the prevention of bank runs
, Financial intermediaries involved in shadow banking typically Right Ans -
borrow money short term and lend or invest long term
In 2008, when the U.S. financial system collapsed, it led to Right Ans - a
severe cycle of deleveraging and a credit crunch for the economy as a whole
Who is a permanent voting member of the FOMC but not part of the Fed's
Board of Governors? Right Ans - President of New York Fed
"The Fed also eliminated banks' reserve requirement—the percent of deposits
that banks must hold as reserves to meet cash demand—though this is largely
irrelevant because banks currently hold far more than the required reserves."
Which of the following roles of the Fed is NOT illustrated by the quote?
Right Ans - lender of last resort
the first response from the Fed was to cut the Federal Funds Rate to zero. This
is most relevant to the Fed's role as Right Ans - monetary policymaker
the Fed has taken a significant step in lending directly to major non-financial
corporations and the goal is to "allow companies access to credit so that they
are better able to maintain business operations and capacity during the period
of dislocations related to the pandemic". This is most relevant to the Fed's role
as Right Ans - lender of last resort
Monetary base cannot be determined unless Right Ans - we also know the
amount of currency in circulation
Suppose the Fed increases the required reserve ratio from 10% to 100%. As a
result, Right Ans - it is impossible to have bank failures caused by bank
runs
The AD curve shows the relationship between Right Ans - the aggregate
price level and the quantity of aggregate output demanded
Suppose a lower aggregate price level increases the purchasing power of
assets in an economy which causes consumers to spend more. This is known
as Right Ans - the wealth effect and it represents a movement along a fixed
AD curve
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