Macroeconomics
ECON 2301
Spring 2008
Marilyn Spencer, Ph.D.
Professor of Economics
Review of Chapters 14, 15 & 16
April 28, 2009
Third Exam: April 30
100 points possible
Miller’s Chapters 14, 15 & 16
 25 multiple choice questions, worth 4 points each
(100 points total)
• Will need to write an bubble in your name & ID#
• Will need to place answers on Scantron bubble sheet,
along with your name, ID#, course & section #’s
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 #: ______________________
Signature: ___________________________
Chapter 14 Learning Objectives:
1. Explain how federal government budget deficits occur
2. Define the public debt and understand alternative
measures of the public debt
3. Evaluate circumstances under which the public debt could
be a burden to future generations
4. Discuss why the federal budget deficit might be measured
incorrectly
5. Analyze the macroeconomic effects of government
budget deficits
6. Describe possible ways to reduce the government budget
14-4
deficit
Chapter 14 Exam Question Topics:
 Federal budget deficit, surplus or balanced budget
 Largest spending category of the federal budget
 How the federal government finances a budget deficit
 How a budget deficit can crowd out private spending
 Public debt:
•
gross v. net
•
burden to future generations: paying for it
 How to reduce the deficit
Chapter 15 Learning Objectives
1. Define the fundamental functions of money
2. Identify key properties that any goods that function as
money must possess
3. Explain official definitions of the quantity of money in
circulation
4. Understand why financial intermediaries such as banks
exist
5. Describe the basic structure of the Federal Reserve
System
6. Discuss the major functions of the Federal Reserve
15-6
Chapter 15 Exam Question Topics:
 Four major functions of money
 If something acts as money, what properties it must have
 Commodity money v. fiduciary money
 Importance and major role of financial intermediaries
 Federal Reserve System (Fed)
•
The major components
•
Its major responsibilities
Chapter 16 Learning Objectives
1. Describe how the Federal Reserve assesses reserve
requirements on banks and other depository institutions
2. Understand why the money supply is unaffected when
someone deposits in a depository institution funds
transferred from a transactions account at a another
depository institution
3. Explain why the money supply changes when someone
deposits in a depository institution funds transferred from
the Federal Reserve System
16-8
Ch. 16 Learning Objectives (cont'd)
4. Determine the maximum potential extent to which the
money supply will change following a Federal Reserve
purchase or sale of government securities
5. Discuss the ways in which the Federal Reserve conducts
monetary policy
6. Explain the essential features of federal deposit insurance
16-9
Chapter 16 Exam Question Topics:




Fractional reserve banking

The effect of a new deposit (or withdrawal) on a single bank

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

Most often used tool

Least often used tool
How/why the Fed conducts expansionary (or
contractionary) monetary policy
Federal Deposit Insurance
Good Luck!!!