1. Almost all the money in the world today is _____ money
  2. Money whose value comes from the substance from which it is made
    Commodity money
  3. Prior to 1900's what did most countries use as their money?
    Gold and silver.
  4. Functions of money
    Medium of exchangeUnit of accountStore of value
  5. An economic system without money is called?
    Barter system
  6. An increase in the money supply should lower interest rates. T/F
  7. An increase in the money supply should lower inflation T/F?
  8. The central bank increase the money supply by _______ bonds
  9. The central bank decreased the money supply by _______ bonds
  10. The fed is divided into how many districts?
  11. Why is the fed divided into 12 districts?
    To represent the unique economic interests of different parts of the country.
  12. How many members of the fed board of governors?
  13. How many years do the board of governors serve for?
    14 years
  14. How is money created?
    When banks make loans.
  15. ECB
    European Central Bank
  16. The entity intended to be the central bank for the world is the
  17. IMF
    International Monetary Fund
  18. The policies used by governments to reduce budget deficits during adverse economic conditions. These policies may include spending cuts, tax increases, or a mixture of the two.
  19. Banks borrow from each other overnight. In the US, they are charged the _____ rate, and in the rest of the world they are charged the ______
    Federal Funds, LIBOR
  20. LIBOR
    London InterBank Offered Rate
  21. A currency board issues money:
    Backed by the money of other countries such as the U.S. Or Japan
  22. The changes made to the U.S. Currency have been made to:
    Prevent counterfeiting
  23. The interest rate the fed charges when banks borrow is called:
    Discount rate
  24. The two major components of M1:
    Checking account and currency(cash)
  25. Gresham's Law
    Bad money drives good money out of circulation
  26. What is fractional reserve banking?.
    It's where banks must keep a percentage of their deposits
  27. The required reserve ratio used often today is
  28. The formula for the multiplier is
    1/reserve rate or 1/reserve requirement
  29. What charter must banks have?
    Federal OR state charter
  30. Credit unions and thrifts do not need a charter, and do not have deposit insurance
  31. What are the components of M2?
    Time deposits and savings accounts
  32. What is intent of law?
    Banks should never be leveraged more than about 8 to 1
  33. Some banks were leveraged as high as 30 and 40 to 1 in 2007
  34. The _______ act separated banking and stock brokers. It has since been repealed
    Glas Steagal
  35. Prior to 2000 banks in the US could only operate in one state.
  36. What law was passed in 1908?
    Betting on stock market
  37. Congress in 1999 passed a law which prohibited the government from creating rules that regulated mortgage backed securities.
  38. What were the names of the congressmen that passed the law in 1999 to regulate mortgage backed securities?
  39. Why is the Fed supposed to be independent from Congress and the president and how do we keep it independent?
    Because the economy is not political and thus the long terms of the governors make it independent
  40. The neoclassical theory of economic growth states that
    Savings create capital which drives growth
  41. The highest income countries per person also the countries with the highest
    Capital per person
  42. The modern theory of growth states that growth comes from
    Ideas and innovations
  43. According to the United Nations what are the biggest obstacles to economic development for poor nations in the world today
    Treatment of women
  44. Human capital is economist's word for
    The education,training and skills of workers
  45. They United States has a high savings rate and a high rate of innovation which is why grow so fast
  46. When all countries with lots of natural resources have a good economic growth, lack of resources does not prevent economic growth
  47. The phrase "maximum sustainable growth" means that creating economic growth will automatically create stable prices and full employment
  48. The phrase "maximum sustainable growth" means that creating economic growth will automatically create stable prices and full employment means
    leaving inflation low
  49. Using the government's taxing and spending powers to influence the economy
    Fiscal Policy
  50. Changing the amount of money and interest rates
    Monetary policy
  51. Targeting a specific industry
    Industrial policy
  52. The classical economic philosophy of "hands off" is expressed by the French phrase
    Laissez Faire
  53. In the current economic crisis, a Classical economist would have done what with the failing banks and insurance companies?
    let them go bankrupt, regardless of effect on anything else
  54. Data tells us that changing taxes has the strongest effect on the economy when times are good, and less effect when times go bad
  55. All economists agree the government can effect the economy in a positive way
  56. The USA has traditionally used industrial policy, other countries have not
  57. When lowering interest rates does not affect the economy, economists say that we are in a
    liquidity trap
  58. It is called ________- when the government's borrowing to pay for something like the stimulus package makes interest rates go up, and lessen private borrowing
    crowding out
  59. How would you end a demand recession?
    Lower interest rate and increase money supply
  60. How would you end a supply recession?
    Turn it into a demand recession and solve it
  61. If a recession is caused by a supply shock, how would you end it?
    By doing nothing. There's nothing you can do about supply shocks
  62. The idea that there is a trade off between inflation and unemployment in the short run isĀ 
    The Phillips Curve
  63. What do you need to grow
    Quality education system and freedom to create
  64. What is the government's job?
    Maintain full employment, stable prices and economic policy
  65. four times a yer the government has to tell us what they are doing to create jobs
  66. Fighting inflation is number one goal
    Maximum sustainability growth
  67. Clinton's system
  68. Demand recession
    Real GDP down, inflation down
  69. Supply recession
    Real GDP down, inflation up
Card Set
Dr Robinson's class