Are you smarter than a Fed Chairman?. What are the 2 main components of M1? Cash Checking Accounts...

Are you smarter than a

Fed Chairman?

What are the 2 main components of M1?

CashChecking Accounts(Demand Deposits)

You deposit a $100 bill into your checking account.

What immediate effect would this have on the Money Supply?

No effect

You deposit $10,000 in a checking account when the Reserve Requirement is 20%. How much must your bank place in reserves?

$2,000

TIME Magazine said I was . . . . What?

The most powerful nerd on the planet!

The Reserve Requirement is 10%.What is the money multiplier?

10

The Reserve Requirement is 20%.You deposit $10,000 in your bank checking account. By how much might the money supply increase?

$40,000

The supply of money increases while demand remains unchanged.

What would happen to interest rates?

Fall (decrease)

True or False:Since my high school did not offer Calculus, I learned it on my own.

True

The Fed lowers the Reserve Requirement.

What would this do to the Money Supply?

Increase

The economy is in a recession.Should the Fed implement a

contractionary policy or expansionary policy?

Expansionary

The Fed wants to implement a contractionary policy.

Should it increase or decrease interest rates?

Increase

What did I score on the SAT?

(back in the days when it only had 2 sections, not 3)

1590out of 1600

Banks that borrow from the Fed pay what rate of interest?

Discount Rate

Who is in charge of Open Market Operations?

FOMCFederal Open Market Committee

If the FOMC wants to increase the Money Supply, what would it do?

Buy government securities

Where did I earn my Ph.D?

M.I.T.

It’s no Stanford, but it was the best I could do.

If the FOMC sells government securities, what would happen to the

federal funds rate?

Increase

The money people save that is available to be borrowed is known as

the _______ _________ market.

Loanable Funds

If the government increases its borrowing, what would probably

happen to the level of interest rates?

Increase

At which university was I chairman of the

Economics Department?

Princeton

If people’s savings decline, what would probably happen to the level of

interest rates?

Increase

What would a decrease in interest rates do to the overall level of investment in the economy?

Make it increase

What would an increase in investment do to the economic growth rate

of the economy?

Make it increase