08 Jun Question 1. An open market __________ by the Fed increases the money supply, which leads to __________ interest rates and increase
Question
1. An open market __________ by the Fed increases the money supply, which leads to __________
interest rates and increased GDP. A. purchase; increased
B. purchase; decreased
C. sale; increased
D. sale; decreased
2. o increase the money supply using the reserve requirements, what would the Fed typically do?
A. increase the reserve requirement for banks
B. reduce the reserve requirement for banks
C. make each bank set its own reserve levels
D. let each bank get more currency from the Treasury
3. An open market __________ by the Fed decreases the money supply, which leads to __________
interest rates and a fall in investment spending. A. sale; increased
B. sale; decreased
C. purchase; increased
D. purchase; decreased
4. What impact does the Fed’s raising the interest rate have on the money supply and on the
price level? A. An increase in interest rates raises the money supply and eventually reduces prices.
B. An increase in interest rates reduces the money demand which will slow the growth in prices.
C. An increase in interest rates lowers the money supply and raises the money demand, which
will neutralize price increases.
D. An increase in interest rates will increase investment spending and GDP, which will lower
prices.
6.The group responsible for deciding on monetary policy is the __________. A. Federal Open Market Committee B. Board of Governors only
C. Federal Advisory Council
D. group of 12 Federal Reserve Bank presidents only
7. A bank may make loans until its __________.
A. required reserves are exhausted
B. excess reserves are exhausted
C. total assets are exhausted
D. total liabilities are exhausted
8. The Federal Reserve influences the level of interest rates in the short run by changing the
__________. A. demand for money through open market operations
B. demand for money through changes in reserve requirements
C. supply of money through open market operations
D. supply of money through changes in stock market operations
The Federal Reserve System was created by the __________. A. U.S. Treasury
B. President
C. Congress
D. Supreme Court
The Fed can change the money supply by buying or selling long-term Treasury bonds. Purchasing
long-term securities is commonly called __________. A. open market operations
B. discount operations
C. federal funds speculation
D. quantitative easin
bank’s reserves __________. A. are the sum of its excess and required reserves
B. can be held as cash in its vault
C. can be held as deposits with the Federal Reserve
D. all of the above
When money is used to express the value of goods and services, it is functioning as a __________. A. medium of exchange
B. store of value
C. unit of account
D. store of purchasing powe
By law, banks are required to __________. A. hold 100 percent of customer deposits as reserves
B. hold a fraction of their reserves at the Federal Reserve bank
C. hold a fraction of demand deposits as reserves
D. lend out no more than the amount of their required reserves
Money guarantees that there is a(n. __________, because it will always be accepted in exchange
for a desired service or good. A. double coincidence of wants
B. open market
C. fiat
D. human interaction
Equilibrium in the money market occurs when __________. A. the quantity of money demanded equals the quantity of money supplied
B. the quantity of money demanded is less than the quantity of money supplied
C. the quantity of money demanded is more than the quantity of money supplied
D. the interest rate equals the money supply One of the essential functions that a bank performs is __________. A. purchasing government bonds
B. creating deposits by lending required reserves
C. transferring money from savers to lenders
D. owning assets like real estate
An increase in the reserve requirement __________. A. increases the money supply, which leads to increased interest rates and a decrease in GDP
B. increases the money supply, which leads to decreased interest rates and a decrease in GDP
C. decreases the money supply, which leads to increased interest rates and a decrease in GDP
D. decreases the money supply, which leads to decreased interest rates and a decrease in GDP
While some tokens, such as a metro fair card or plane ticket, are only acceptable forms of
payment in a specific arena, money is __________, meaning it can be used to purchase anything. A. a government note
B. generally accepted
C. purchase specific
D. a representation of currency
M1 __________. A. is the sum of currency plus traveler’s checks
B. is the narrowest definition of the money supply
C. includes small time deposits
D. includes credit cards
Consider how the value of the U.S. dollar affects the worldwide increase in commodity prices to
answer the following two question(s.. Starting in the summer of 2010, there was a rise in prices of
commodities such as oil and food worldwide. Some economists suggested that monetary policy in
the United States was the cause of the worldwide commodity boom. According to this scenario,
some economists noticed that the U.S. dollar __________ largely because monetary policy in the
United States had driven interest rates __________. A. depreciated; down B. depreciated; up
C. appreciated; down
D. appreciated; up
Consider how the value of the U.S. dollar affects the worldwide increase in commodity prices to
answer the following two question(s.. Starting in the summer of 2010, there was a rise in prices of
commodities such as oil and food worldwide. Some economists suggested that monetary policy in
the United States was the cause of the worldwide commodity boom. Some economists noticed
that the change in the value of the U.S. dollar was largely due to the change in interest rates, and
the change in interest rates occurred because of the Fed’s use of __________ to further stimulate
the economy. A. open market sales
B. quantitative easing
C. discount operations
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