Monetary policy:
a. is the use of tax increases or cuts designed to change the amount of money available for spending
b. is the use of audits to make certain that banks follow bank policy
c. is the use of money and credit controls to influence macroeconom
c. is the use of money and credit controls to influence macroeconomic activity
The Board of Governors of the Fed:
a. consists of seven state governors who represent the views of individual states in monetary policy
b. consists of seven members appointed by the President of the United States, who together act as the key decision-maki
b. consists of seven members appointed by the President of the United States, who together act as the key decision-making entity for monetary policy
If the Federal Reserve wanted to stimulate the economy, it would most likely:
a. reduce the discount rate
b. decrease reserves in the banking system
c. increase reserves in the banking system
d. both A and C are true
d. both A and C are true
Fed purchases of bonds from the public, called open market operations:
a. tend to increase reserves in the system leading to reductions in interest rates
b. tend to reduce the money supply because the bonds are expensive to purchase
c. tend to reduce rese
a. tend to increase reserves in the system leading to reductions in interest rates
Which of the following functions does the Fed perform?
a. printing money
b. holding bank reserves
c. providing loans to other countries
d. all of the above are functions the Fed performs
b. holding bank reserves
Which of the following is a tool of monetary policy?
a. buying and selling government bonds
b. making loans to banks
c. setting reserve requirements
d. all of the above
d. all of the above
If the Fed is concerned about inflation, it should:
a. buy bonds or raise the discount rate
b. buy bonds or reduce the discount rate
c. sell bonds or raise the discount rate
d. sell bonds or reduce the discount rate
c. sell bonds or raise the discount rate
If unemployment is a problem, the Fed could ______ bonds and ______ the reserve requirement.
a. buy; increase
b. buy; decrease
c. sell; increase
d. sell; decrease
b. buy; decrease
If the Fed wants to stimulate aggregate demand it should _____ bonds to _____ the money supply.
a. buy; increase
b. sell; increase
c. buy; decrease
d. sell; decrease
a. buy; increase
When the Fed ______ bonds, the money supply _______.
a. buys; increases
b. buys; decreases
c. sells; increases
d. sells; is not affected
a. buys; increases
According to the Keynesian view of aggregate supply, an increase in the money supply will:
a. always cause inflation
b. cause inflation if the economy is at full employment
c. cause inflation only if aggregate supply is horizontal
d. never cause inflation
b. cause inflation if the economy is at full employment
All of the following are true about the basic money supply except:
a. it includes credit card balances
b. it includes currency held by the public
c. it includes money kept in transactions accounts
d. it is known as M1
a. it includes credit card balances
Excess reserves are:
a. bank reserves in excess of required reserves
b. legal reserves in excess of lending reserves
c. transactions deposits plus traveler's checks
d. total reserves plus deficient reserves
a. bank reserves in excess of required reserves
Expansionary monetary policy will:
a. reduce the lending capacity for banks
b. raise interest rates
c. encourage people to borrow more money
d. reduce the equilibrium price level
c. encourage people to borrow more money
Restrictive monetary policy will:
a. decrease the lending capacity for banks
b. reduce interest rates
c. cause a rightward shift of aggregate demand
d. raise the equilibrium price level
a. decrease the lending capacity for banks
The Board of Governors of the Federal Reserve System is the key decision maker for monetary policy.
True or False?
True
The basic money supply:
a. is controlled by Congress and the U.S. Treasury
b. includes savings accounts
c. includes currency and transaction accounts
d. includes money market mutual funds
c. includes currency and transaction accounts
The money multiplier:
a. is the number of deposit dollars the banking system can create from $1 of excess reserves
b. decreases as the required reserve ration decreases
c. is equal to excess reserves plus required reserves
d. is equal to the required rese
a. is the number of deposit dollars the banking system can create from $1 of excess reserves
Which of the following will cause an increase in aggregate demand?
a. restrictive fiscal policy
b. an increase in the reserve requirement
c. expansionary monetary policy
d. the sale of bonds by the Fed
c. expansionary monetary policy
When the Fed announces that it is raising the federal funds rate, this signals its intention to _______ bonds in the open market and _______ the money supply
a. buy; reduce
b. buy; increase
c. sell; reduce
d. sell; increase
c. sell; reduce