Macroeconomics ECON 2301 Spring 2011 Marilyn Spencer, Ph.D. Professor of Economics Chapters 15 & 16 Review

3rd Exam: 100 points possible Miller’s Chapters 15 & 16 ii Wednesday, April 27  Section 003 – 20 (Setion 004 – 25) multiple choice questions, worth 5 (4) points each (100 points total) + 3 extra credit questions  You may select among resources you’ll use, as with previous exams.  I’ll provide the Scantron sheets.

Test Resources Used Please check any applicable box concerning "fees" for test resources you plan to use DURING the exam:  3x5 card with notes, 5 test points  textbook and notebook, 15 test points  information from others, 100 test points  Will NOT use additional resources* * Two (2) points will be added to your score if you choose to NOT use any of these test resources. Name (please print):____________________ ID #:______________________ (some portion of ID#) Signature: ___________________________

 Four major functions of money  For something to act as money, the properties it must have  Commodity money v. fiduciary money  Importance and major role of financial intermediaries  Federal Reserve System (Fed)  Major components  Major responsibilities  Reserves: legal, required & excess reserves  Federal Deposit Insurance Corporation  Asymmetric information, adverse selection & moral hazard in the context of financial intermediaries Chapter 15 Exam Question Topics:

 Fractional reserve banking  The effect of a new deposit (or withdrawal) on a single bank’s ability to make loans  The effect of a new deposit from outside the banking system on the amount of money in the banking system  Formula for the maximum money (deposit expansion) multiplier – and how to use that formula  Three tools of monetary policy & how/why the Fed conducts expansionary (or contractionary) monetary policy  Federal Funds Market/Federal Funds Rate  Fed as “lender of last resort”  Relationship between bond price & bond yield (% interest Chapter 16 Exam Question Topics:

Assignment for our next regular class: Be ready to review for the final exam!!! If you plan to take the final exam, you must me to tell me by noon: ÜSection 003 (10 a.m. class): Thurs., May 5 ÜSection 004 (5:30 p.m. class): Monday, May 9