eco 114 5 HW questions

The M2 measure of the money supply equals

M1 plus savings account balances plus small-denomination time deposits plus noninstitutional money market fund shares

Which of the following characterizes the Fed's ability to prevent recessions?

The Fed is able to keep a recession shorter and milder than it would otherwise be

The statement, "My iPhone is worth $300" represents money's function as

a unit of account

The M1 measure of the money supply equals

currency plus checking account balances plus traveler's checks

The interest rate that banks charge other banks for overnight loans is the

federal funds rate.

Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be relatively ________ and real GDP to be relatively ________.

higher; higher

Suppose that households became mistrustful of the banking system and decide to decrease their checking accounts and increase their holdings of currency. Using the money demand and money supply model and assuming everything else is held constant, the equilibrium interest rate should

increase

Which of the following are goals of monetary policy?

price stability, economic growth, and high employment

Bank reserves include

vault cash and deposits with the Federal Reserve

The situation in which short-term interest rates are pushed to zero, leaving the central bank unable to lower them further is known as

a liquidity trap

An increase in the interest rate ________, and causes a movement down along the money demand curve.

Increases the opportunity cost of holding money

Which of the following is one of the most important benefits of money in an economy?

Money makes exchange easier, leading to more specialization and higher productivity

Open market operations refer to the buying and selling of ________ by the ________ to control the money supply.

Treasury securities; Federal Reserve

Contractionary monetary policy on the part of the Fed results in

a decrease in the money supply, an increase in interest rates, and a decrease in GDP

From an initial long-run macroeconomic equilibrium, if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than long-run aggregate supply, then the Federal Reserve would most likely

decrease interest rates

If a person takes $100 from his/her piggy bank at home and puts it in his/her savings account, then M1 will ________ and M2 will ________.

decrease; not change

If a person withdraws $500 from his/her savings account and puts it in his/her checking account, then M1 will ________ and M2 will ________.

increase; not change

If the Fed buys U.S. Treasury securities, then this

increases reserves, encourages banks to make more loans, and increases the money supply

A decrease in the discount rate ________ bank reserves and ________ the money supply if banks respond appropriately to the change in the rate.

increases; increases

A decrease in the reserve requirement ________ bank reserves and ________ the money supply.

increases; increases

f households choose to take some fraction of each check they deposit and hold it as currency, then the simple deposit multiplier ________ the real-world multiplier

is greater than

If the probability of losing your job remains ________, a recession would be a good time to purchase a home because the Fed usually ________ interestrates during this time

low; lowers

When a grocery store accepts your $5 bill in exchange for bread and milk, the $5 bill serves as a

medium of exchange

The Fed can increase the federal funds rate by

selling Treasury bills, which decreases bank reserves

The ________ the reserve ratio, the ________ the money multiplier.

smaller; larger

A farm worker gets paid today in money, but plans to spend the money next week. This illustrates which function of money?

store of value

The more excess reserves banks choose to keep

the smaller the deposit multiplier