Macroeconomics Exam #4

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When was the Federal Reserve System established?

1913

The M1 money supply is composed of:

Checkable deposits and currency

Which is the most important function of the Federal Reserve System?

Controlling the money supply

The largest component of the money supply (M1) is:

Currency

Checkable deposits are:

Debts of commercial banks and savings institutions

Coins and paper money are:

Debts of the Federal government and government agencies

When the Federal Reserve acts to ease money and credit in the economy, then the aggregate:

Demand curve will shift to the right

Which one of the following is to be a tool of monetary?

Discount rate

One major advantage of the medium of exchange function of money is that it allows society to:

Escape the complications of barter

What is the main body assisting the Board of Governors of the Federal Reserve System in determining monetary policy?

Federal Open Market Committee

The conduct of monetary policy in the United States is the main responsibility of the:

Federal Reserve

Paper money in the United States comes in the form of:

Federal Reserve Notes

The use of monetary policy to address a problem of recession or inflation is:

Hindered by a lag in the time it takes for the policy to have an effect

The asset demand for money and the rate of interest are:

Inversely related

Who is the current Chairman of the Federal Reserve Board of Governors?

Janet Yellen

The Federal Reserve Banks are owned by the:

Member banks

The tendency for financial investors and financial services firms to take on greater risks because they assume they are at least partially insured against loss.

Moral Hazard

Bond prices and interest rates are:

Negatively related

The most important of the Federal Reserve district banks is the:

New York bank

The use of a credit card is most similar to:

Obtaining a short-term loan from a financial institution

The most frequently used monetary device for achieving price stability is:

Open-market operations

The most frequently used tool of monetary policy is:

Open-market operations

Which one of the following is a tool of monetary policy for altering the reserves of commercial banks?

Open-market operations

Which one of the following is a tool of monetary policy?

Open-market operations

Which one of the following is a tool of monetary policy for altering the reserves of commercial banks?

Reserve ratio

Which one of the following is a tool of monetary policy?

Reserve ratio

The economy is experiencing inflation and the Federal Reserve decides to pursue a restrictive money policy. Which actions by the Fed would be most consistent with this policy?

Selling government securities

The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for:

Setting the Fed's monetary policy and directing the purchase and sale of government securities

What "backs" the money supply?

The U.S. government's ability to keep the value of money relatively stable

When a consumer wants to compare the price of one product with another, money is primarily functioning as a:

Unit of Account

How many members can serve on the Board of Governors of the Federal Reserve System?

7

What function is money serving when you buy a ticket to a movie?

A Medium of exchange

What function is money serving when you take it on a trip and keep it in your wallet or purse in case you need it?

A Store of Value

The fundamental objective of monetary policy is to assist the economy in achieving:

A full-employment, noninflationary level of total output

One major advantage of credit cards used for transactions is that they:

Allow consumers coordinate timing and payment for purchases

In the consolidated balance sheet of the Federal Reserve Banks, loans to commercial banks are:

An asset of the Federal Reserve Banks and a liability for commercial banks

Members of the Federal Reserve Board of Governors are:

Appointed by the President to staggered 14-year terms

If Federal Reserve officials attempt to pull the economy out of a recession when the price level is relatively stable, the policies they would most likely use would be to:

Buy government securities and decrease the discount rate

Refer to the table. The size of the M1 money supply is: Checkable deposits- $597 Small time deposits- $818 Currency- $639 Money-market mutual (business)- $1,045 Savings deposit (include money-market)-$ 2,866 Money-market mutual (individuals)- $979 (Amounts in Billions)

$1,236 Billion

Refer to the table. The size of the M2 money supply is: Checkable deposits- $597 Small time deposits- $818 Currency- $639 Money-market mutual (business)- $1,045 Savings deposit (include money-market)-$ 2,866 Money-market mutual (individuals)- $979 (Amounts in Billions)

$5,899 Billion

A contraction of the money supply:

increases the interest rate and decreases aggregate demand.

Which statement is true? A. The Federal funds rate will be higher than the prime interest rate B.The prime interest rate will be higher than the Federal funds rate C.The Federal funds rate and the prime interest rate will be the same D.The prime interest rate will be the same as the discount rate

The prime interest rate will be higher than the Federal funds rate

When the interest rate falls, the:

Total amount of money demanded increases

A consumer holds money to meet spending needs. This would be an example of the:

Transactions demand for money

This congressional legislation allocated billions of dollars to the U. S. Treasury to make emergency loans in an effort to "save" critical financial and other U. S. firms during the Financial Crisis of 2007-2008.

Troubled Asset Relief Program (TARP)


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