ECON 2500                        Name_____________

Exam #2                        November 21, 2000

1.      Chairman of Federal Reserve Board of Economics is ________________________.

2.      The Federal Reserve act was set up in  _________________________.

3.      The Full Employment Act was passed by Congress in ________________________.

Answer four (4) of the following six (6) questions:

1.      As appropriate define/explain/identify the terms:  regressive, proportional, and regressive tax.  How does the term "built-in stabilizer" relate to these terms?

2.      The term money is used in many ways.  How are the following terms used/defined:  medium of exchange, unit of account, store of value, near money, legal tender and fiat money?

3.      The XYZ National bank has reserves of $20,000 and demand deposits of $100,000.  The reserve requirement is 10%.  Assume households deposit $5000 in currency into the bank adding to its reserves.  What are the bank's actual and required reserves?  What action can the bank take and why would it do this?  Over time what could be expected to happen to the money supply?  Explain.

4.      What are the three basic tools of monetary policy?  How does each work?  Are they all relied upon equally?  Why? Why not?

5.      What is the Phillips Curve?  What data is used to illustrate it?  How might this information be used?

6.      What is meant by "full-employment budget"? How can it be used?  Why is it needed for this?