Econ chapter 14

Which one of the following is true about the U.S. Federal Reserve System?

There are 12 regional Federal Reserve Banks.

Currency in circulation is part of

both M1 and M2

If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as

medium of exchange

The Federal Reserve Banks are owned by the

member banks

The central authority of the U.S. banking system is the

Board of Governors of the Federal Reserve.

Assuming no other changes, if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion, the

M1 money supply will decline and the M2 money supply will remain unchanged.

Money market deposit accounts are included in

M2 only

When economists say that money serves as a unit of account, they mean that it is

a monetary unit for measuring and comparing the relative values of goods.

If you are estimating your total expenses for school next semester, you are using money primarily as

a unit of account

Michelle transfers $4,000 from her savings account to her checking account. What effect is this change likely to have on M1 and M2?

M1 increases and M2 stays the same

The Federal Reserve System was created in

1913

As it relates to Federal Reserve activities, the acronym FOMC describes the

Federal Open Market Committee

The group that sets the Federal Reserve System's policy on buying and selling government securities (bills, notes, and bonds) is the

FOMC

Which of the following statements best describes the 12 Federal Reserve Banks?

They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare.

Which of the following is not true about the Federal Reserve Banks?

They compete with commercial banks in their basic functions.

The money supply is backed

by the government's ability to control the supply of money and therefore to keep its value relatively stable.

In the United States, the money supply (M1) includes

coins, paper currency, and checkable deposits.

To keep high inflation from eroding the value of money, monetary authorities in the United States

control the supply of money in the economy

The basic requirement for an item to function as money is that it be

generally accepted as a medium of exchange

An important routine function of the Federal Reserve Bank is to

provide facilities by which commercial banks and thrift institutions may collect checks.

The Federal Open Market Committee (FOMC).

sets policy on the sale and purchase of government bonds by the Fed.

The Federal Open Market Committee (FOMC) is made up of

the seven members of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Bank presidents on a rotating basis.

In defining money as M1, economists exclude time deposits because

they are not directly or immediately a medium of exchange.

To say that the Federal Reserve Banks are quasi-public banks means that

they are privately owned but managed in the public interest.

Checkable deposits are classified as money because

they can be readily used in purchasing goods and paying debts.