Ch 15: Money, Banking, and Central Banking (PART 4: MONEY, STABILIZATION AND GROWTH)

Which of the following statements is true when considering central​ banks? A. The first central bank was the Bank of​ England, established by Parliament in 1694. B. The number of central banks in the world grew enormously after the Great Depression. C. Every nation in the world has a central bank that influences the​ world's economy. D. Central banks are a relatively new​ phenomena, appearing after the end of World War II.

B. The number of central banks in the world grew enormously after the Great Depression.

Liabilities refer to amounts​ owed, and assets refer to amounts owned. A. False B. True

B. True

The financial intermediary with liabilities of shares and checkable deposits and assets that include consumer debt and long term mortgage loans is a A. insurance company. B. credit union. C. money market mutual fund. D. commercial bank.

B. credit union.

Which of the following is a major reason why financial​ intermediaries, such as​ banks, exist? A. Banks create near monies. B. Banks exist to facilitate exchanges through barter. C. The existence of asymmetric information makes financial intermediaries more efficient in channelling money to its most efficient use. D. Financial intermediaries exist because they provide a medium of exchange for their customers.

C. The existence of asymmetric information makes financial intermediaries more efficient in channelling money to its most efficient use. Note: The bank has better information than what an individual possesses when dealing with loans to other firms. This reduces the risk to the household or individual.

The M2 measurement of the money supply includes all of M1 plus several other highly liquid assets. Which of the following is not one of those assets which is included in​ M2? A. money market mutual fund balances B. savings deposits C. credit card balances D. small-denomination time deposits

C. credit card balances

The Fed acts like a government agency when it A. acts as the​ government's fiscal agent. B. provides​ payment-clearing services. C. supplies the economy with fiduciary currency D. holds a depository​ institution's reserves.

C. supplies the economy with fiduciary currency

What is the basic structure of the Federal Reserve​ Bank? A. It is the combination of all private banks in the U.S. excluding Savings and Loans banks. B. There is one major bank with 25 branches. C. There is one major bank located in Washington D.C. with branch banks located in every major city. D. There are 12 district​ banks, a Board of Governors and a Federal Open Market Committee.

D. There are 12 district​ banks, a Board of Governors and a Federal Open Market Committee.

Obviously financial intermediaries need to collect money from a variety of sources so they can redirect it where it can be used efficiently. The primary source of funds for a financial intermediary are known as its A. capital controls. B. assets. C. income. D. liabilities.

D. liabilities. Note: Liabilities are the funds that financial intermediaries collect. They owe this money back to the households and businesses that place their money in the institution. OK

When money is used as a means of settling debts maturing in the​ future, it is serving as a A. medium of exchange. B. store of value. C. unit of accounting. D. standard of deferred payment.

D. standard of deferred payment.

Consider the following​ events: Insurance companies offer safe driver discounts to encourage insured individuals to drive safely. This is an attempt to _________.

limit moral hazard

Money is a highly _________ asset because it can be diposed of with low transaction costs and with relative certainty as to its value.

liquid

Pension funds tend to combine the retirement funds of many future retirees to _________.

lower management costs

Money is accepted in exchange for goods and services because people have confidence that it can later be exchanged for other goods and services. In​ addition, money has ________ value.

predictable

The opportunity cost of money holdings is A. the liquidity foregone from not holding some other asset. B. the alternative interest income foregone from not holding some other asset. C. the reduction in purchasing power brought on by deflation. D. All of the above.

B. the alternative interest income foregone from not holding some other asset.

Consider the following items. A​ $1,000 balance in a transactions deposit at a mutual savings bank. This item is counted in ________.

Both M1 and M2

When money is set aside to be used for future​ purchases, it is serving as a A. medium of exchange. B. standard of deferred payment. C. store of value. D. unit of accounting.

C. store of value.

A credit card is not considered money because A. it is not a unit of accounting. B. it simply defers rather than completes transactions that ultimately involve the use of money. C. it is not a store of value. D. All of the above.

D. All of the above. Note: The use of a credit card initiates a new loan and creates a new debt. It does not decrease​ one's debt. The card itself is not​ exchanged, therefore credit cards are not a medium of exchange.​ Finally, a credit card is a piece of plastic that facilitates the loan​ process, it is not an asset. It has no possibility of increasing in value.

Which of the functions of the Federal Reserve is appropriately matched with its correct​ institution? A. Collects and clears​ checks; The Board of Governors. B. Proposes the discount​ rate; Advisory Council. C. Establishes regulations in consumer​ finance; The Federal Open Market Committee. D. Holds reserve balances for depository​ institutions; The Federal Reserve Bank.

D. Holds reserve balances for depository​ institutions; The Federal Reserve Bank.

During the late​ 1970s, prices quoted in terms of the Israeli​ currency, the​ shekel, rose so fast that grocery stores listed their prices in terms of the U.S. dollar and provided customers with​ dollar-shekel conversion tables that they updated daily. Although people continued to buy goods and services and make loans using​ shekels, many Israeli citizens converted shekels to dollars to avoid a reduction in their wealth due to inflation.​ Thus, the U.S. dollar functioned as money in Israel during this period A. as a standard of deferred payment. B. as a credit card. C. as a medium of exchange. D. as a unit of accounting.

D. as a unit of accounting.

When sellers accept money as payment in market​ transactions, money is serving as a A. unit of accounting. B. store of value. C. standard of deferred payment. D. medium of exchange.

D. medium of exchange.

What is M2?

M1 plus (1) savings deposits at all depository institutions, (2) small-denomination time deposits, and (3) balances in retail money market mutual funds.

When we add savings​ deposits, small-denomination time​ deposits, and retail money market mutual fund balances to ________, we obtain the measure known as ________.

M1; M2

A​ $10,000 time deposit an elderly widow holds at her credit union. This item is counted in _________.

M2 only

A​ $50,000 money market deposit account balance. This item is counted in ________

M2 only

What is adverse selection?

The tendency for high-risk projects and clients to be over-represented among borrowers.

The money supply can be defined in a variety of​ ways, depending on whether we use the transactions approach or the liquidity approach. Using the ________ approach, the money supply consists of​ currency, transactions​ deposits, and​ traveler's checks. This is called ________.

transactions; M1

Consider the following data. Calculate M1. $________ billion. Calculate M2. $________ billion.

$1617 billion; $7036 billion Note: M1 = Currency + Traveler's checks outside of banks and thrifts + Transaction deposits M2 = M1 + + Savings and money market deposit accounts + Small denomination time deposits + non-institution money market mutual funds

Considering the following data​ (expressed in billions of U.S.​ dollars), calculate M1 and M2. M2 is $________ billion.

$2095 billion; $10690 billion

What is a central bank?

A banker's bank, usually an official institution that also serves as a bank for a nation's government treasury. Central banks normally regulate commercial banks.

What is a unit of accounting?

A measure by which prices are expressed; the common denominator of the price system; a central property of money.

What is the transaction approach?

A method of measuring the money supply by looking at money as a medium of exchange.

What is the liquidity approach?

A method of measuring the money supply by looking at money as a temporary store of value.

What is a standard of deferred payment?

A property of an item that makes it desirable for use as a means of settling debts maturing in the future; an essential property of money.

What is a fiduciary monetary system?

A system in which money is issued by the government and its value is based uniquely on the public's faith that the currency represents command over goods and services and will be accepted in payment for debts.

Which of the following assets is the least​ liquid? A. A house. B. Currency. C. A share of publicly traded stock. D. A​ three-month Treasury bill.

A. A house. Note: A house is the least liquid since it takes a longer time to convert into​ money, and there are larger transaction costs in selling a house compared to the other listed assets.

In the United​ States, the dollar volume of payments using checks exceeds the volume using debit cards. A. False B. True

A. False

Money is the least liquid asset. A. False B. True

A. False

Scott is seeking a loan from his bank for a home improvement project. He receives the loan and then decides to take a special vacation opportunity to Las Vegas and enter a gambling tournament. The​ bank, as a financial​ intermediary, is facing a problem of A. moral hazard. B. adverse selection. C. liabilities. D. symmetric information.

A. moral hazard. Note: This is a case of moral hazard since Scott used the money for a riskier proposition than he initially intended.

The value of the U.S. dollar is based on A. the​ public's faith that the dollar can be exchanged for goods and services. B. the U.S. supply of all precious metals. C. the value of all​ publicly-owned U.S. assets. D. the U.S. supply of gold.

A. the​ public's faith that the dollar can be exchanged for goods and services.

When money is used as a standard of value that allows people to compare the relative worth of various goods and​ services, it is serving as a A. unit of accounting. B. store of value. C. standard of deferred payment. D. medium of exchange.

A. unit of accounting.

What are liabilities?

Amounts owed; the legal claims against a business or household by non-owners.

What are assets?

Amounts owned; all items to which a business or household holds legal claim.

What is a medium of exchange?

Any item that sellers will accept as payment.

What is money?

Any medium that is universally accepted in an economy both by sellers of goods and services as payment for those goods and services and by creditors as payment for debts.

Paul needs to decide between buying a new home gym for​ $1,800 or being able to go on a Florida vacation for​ $1,000 and still having enough left over to buy a new set of free weights for​ $800. Paul opts for the new set of free weights and the Florida vacation. Paul has used money in what ways in making his​ decision? A. Medium of exchange and a method to decrease deferred payments. B. Medium of exchange and a standard unit of account. C. Medium of exchange and a store of value. D. Store of value and a standard unit of account.

B. Medium of exchange and a standard unit of account. Note: Since Paul buys a new set of free weight and takes the Florida vacation he has used money as a medium of exchange. He exchanged $1800 for these items. He also used money to compare the new home gym set versus the vacation and the new set of free weights.

Which of the following events caused Congress to begin seriously looking at setting up the Federal Reserve​ system? A. The need to control inflation. B. Some severe banking crises at the end of the 19th century and early 20th century. C. World War I. D. The American​ people's loss of confidence in the​ nation's currency.

B. Some severe banking crises at the end of the 19th century and early 20th century.

Individuals purchasing new bonds issued by a corporation is an example of direct finance for the corporation. A. False B. True

B. True

Until​ 1946, residents of the island of Yap used large​ doughnut-shaped stones as financial assets. Although prices of goods and services were not quoted in terms of the​ stones, the stones were often used in exchange for particularly large​ purchases, such as payments for livestock. To make the​ transaction, several individuals would place a large stick through a​ stone's center and carry it to its new owner. A stone was difficult for any one person to​ steal, so an owner typically would lean it against the side of his or her home as a sign to others of accumulated purchasing power that would hold value for later use in exchange. Loans would often be repaid using the stones. These stones performed the following functions of money A. medium of​ exchange, unit of​ accounting, and store of value functions of money. B. unit of​ accounting, store of​ value, and standard of deferred payment functions of money. C. medium of​ exchange, store of​ value, and standard of deferred payment functions of money. D. medium of​ exchange, unit of​ accounting, and standard of deferred payment functions of money.

C. medium of​ exchange, store of​ value, and standard of deferred payment functions of money. Note: The stones were used as payments for particularly large​ purchases, such as transactions of livestock. Since sellers accepted the stones as​ payment, the stones fulfilled the medium of exchange function of money. The stones were put outside houses as a sign of accumulated purchasing power that would hold value over time thus fulfilling the store of value property of money. Since loans would often be repaid using the​ stones, they performed another essential property of​ money, namely the standard of deferred payment.

Money is defined by its​ functions, which are as a​ __________, __________,​ __________, and​ __________. A. medium of​ exchange; unit of​ discounting; store of​ value; and standard of deferred payment. B. medium of​ exchange; unit of​ accounting; multiplier of​ value; and standard of deferred payment. C. medium of​ exchange; unit of​ accounting; store of​ value; and standard of deferred payment. D. medium of​ exchange; unit of​ accounting; store of​ value; and standard of the barter system.

C. medium of​ exchange; unit of​ accounting; store of​ value; and standard of deferred payment.

Financial intermediaries A. is another term for the central banks in a country. B. include the Fed and banks but do not include savings and loans or stockbrokers. C. transfer funds from savers to investors. D. print money.

C. transfer funds from savers to investors. Note: They provide an incentive for savers to place money in their institutions so the institution can lend it out for those seeking to invest.

What are transactions deposits?

Checkable and debitable account balances in commercial banks and other types of financial institutions, such as credit unions and savings banks. Any accounts in financial institutions from which you can easily transmit debit-card and check payments without many restrictions.

Which of the following statements is true when considering national banking structures around the​ world? A. It is the case that in nearly all industrialized countries the largest 5 banks in a country generally hold over​ 75% of a​ country's assets. B. Due to free markets in the banking​ industry, banking fees vary marginally around the world. C. Most countries have only a few large banks. D. U.S. businesses only obtain approximately​ 30% of their funds from bank loans compared to​ 65% for European firms.

D. U.S. businesses only obtain approximately​ 30% of their funds from bank loans compared to​ 65% for European firms.

During the​ 1945-1946 Hungarian​ hyperinflation, when the rate of inflation reached 41.9 quadrillion percent per​ month, the Hungarian government discovered that the real value of its tax receipts was falling dramatically. To keep real tax revenues more​ stable, it created a good called a​ "tax pengö", in which all bank deposits were denominated for purposes of taxation. ​Nevertheless, payments for goods and services were made only in terms of the regular Hungarian​ currency, whose value tended to fall rapidly even though the value of a tax​ pengö remained stable. Prices were also quoted only in terms of the regular currency.​ Lenders, however, began denominating loan payments in terms of tax​ pengös. The tax​ pengö functioned as money in Hungary in 1945 and 1946 A. as a unit of accounting. B. as a medium of exchange. C. as a barter exchange. D. as a standard of deferred payment

D. as a standard of deferred payment

Due to the​ Gramm-Leach-Bliley Act of 1999 A. the US government forbid US commercial banks to own stock of any other business domestic or foreign. B. allowed European central banks to unite into the European Union Bank. C. the US government forbid US commercial banks to own stock of foreign banks and businesses. D. the US government allowed commercial banks to own stock and sell insurance policies.

D. the US government allowed commercial banks to own stock and sell insurance policies.

________ intermediaries, including depository institutions such as commercial banks and savings​ institutions, insurance​ companies, mutual​ funds, and pension​ funds, transfer funds from ultimate lenders​ (savers) to ultimate borrowers.

Financial

What are depository institutions?

Financial institutions that accept deposits from savers and lend funds from those deposits out at interest.

What are thrift institutions?

Financial institutions that receive most of their funds from the savings of the public. They include savings banks, savings and loan associations, and credit unions.

What are traveler's checks?

Financial instruments obtained from a bank or a nonbanking organization and signed during purchase that can be used in payment upon a second signature by the purchaser.

What is asymmetric information?

Information possessed by one party n a financial transaction but not by the other party.

What are financial intermediaries?

Institutions that transfer funds between ultimate lenders (savers) and ultimate borrowers.

A​ $100,000 certificate of deposit issued by a New York bank. This item is counted in _________.

Neither M1 nor M2 Note: ​Small-denomination time deposits are counted in M2. But to​ qualify, the time deposits have to be less than​ $100,000. So in this​ case, the certificate of deposit is not included in either M1 or M2. OK

What is the Fed?

The Federal Reserve system; the central bank of the United States.

What is a store of value?

The ability to hold value over time; a necessary property of money.

What is money supply?

The amount of money in circulation.

What is liquidity?

The degree to which an asset can be acquired or disposed of without much danger of any intervening loss in nominal value and with small transaction costs. Money is the most liquid asset.

What is a barter?

The direct exchange of goods and services for other goods and services without the use of money.

What is M1?

The money supply, measured as the total value of currency plus transactions deposits plus traveler's checks not issued by banks.

What is moral hazard?

The possibility that a borrower might engage in riskier behavior after a loan has been obtained.

What is financial intermediation?

The pricess by which financial institutions accept savings from businesses, households, and governments and lend the savings to other businesses, households, and governments.

_________ deposits are any deposits in financial institutions from which the deposit owner can transfer funds using a debit card or checks.

Transactions

The U.S. currency is ________ of the Federal Reserve System.

a liability Note: A liability is an obligation to be paid back at a future date. Federal Reserve banks issue paper currency in the form of Federal Reserve notes. Individuals and households hold this currency as money.​ Thus, it is the obligation of the Federal Reserve System to compensate the holders of these notes for the market value of these notes. In other​ words, U.S. currency will always be the liability of the central bank of the​ U.S., the Federal Reserve system.

An individual who was recently approved for a loan to start a new business decides to use some of the funds to take a Hawaiian vacation. This situation poses _________.

a moral hazard problem

A loan applicant does not mention that a legal judgment in his divorce case will require him to make alimony payments to his​ ex-wife. This situation poses _________.

an adverse selection problem

A​ $50 traveler's check. This item is counted in _________

both M1 and M2

Jill makes a ​$118 purchase at​ Macy's using a debit card issued by Bank of America.​ Macy's deposit account is with Citibank. How does this transaction affect the assets and liabilities of Citibank and Bank of​ America? Why does the transaction not change the total quantity of deposits in the banking system​ and, consequently, the money​ supply? The ​$118 transfer out of​ Jill's Bank of America deposit account causes Bank of​ America's liabilities to _________ by $118, which requires the bank's assets to _______ by the same amount. Simultaneously, the transfer into Macy's deposit account with Citibank causes Citibank's liabilities and assets to _________ by $118. Total deposits change by $________, so total deposits and the money supply _________.

decline; fall; rise; 0; are unaffected Note: The ​$118 transfer out of​ Jill's Bank of America deposit account causes Bank of​ America's liabilities to decline by ​$118​, which requires the​ bank's assets to fall by the same amount. ​Simultaneously, the transfer into​ Macy's deposit account with Citibank causes​ Citibank's liabilities and assets to rise by ​$118. Total deposits change by $118−$118=$0​, so total deposits and the money supply are unaffected.

Modern nations have ________ monetary systems—national currencies are not convertible into a fixed quantity of gold or silver.

fiduciary

Savings banks review loan applications to determine which of the potential borrowers carry high risk of default. This is an attempt to _________.

limit adverse selection Note: Savings banks are financial intermediaries that transfer funds between borrowers and lenders. Lenders​ (banks) and borrowers have asymmetric information. Because of asymmetric​ information, the borrowers know whether they are high risk or not but banks do not have that information. Because of such asymmetric​ information, banks screen potential borrowers to estimate the default risk associated with each of them.​ Thus, the banks try to limit potential defaults on their loans. In other​ words, they try to limit the adverse selection before making the loan.

The Fed acts like a private banking institution when it A. supplies the economy with fiduciary currency. B. holds Depository institution's reserves C. regulates the money supply. D. acts as the​ "lender of last​ resort."

B. holds Depository institution's reserves

The possibility that a borrower might engage in riskier behavior after a loan has been obtained is known as A. adverse selection. B. moral hazard. C. asymmetric information. D. financial intermediation.

B. moral hazard.

Consider each of the following events in the financial​ markets: A manager of a savings and loan association responds to reports of a likely increase in federal deposit insurance coverage. She directs loan officers to extend mortgage loans to less creditworthy borrowers. This situation poses _________.

a moral hazard problem Note: When a manager of a savings and loan association decides to extend loans to less creditworthy borrowers after learning that there will be a likely increase in federal deposit insurance​ coverage, she is engaging in risky​ behavior, after knowing that federal deposit insurance will cover the risk. This is a clear case of moral​ hazard, where individuals engage in risky behavior after entering into a contractual agreement. Moral hazard occurs because of asymmetric information after a transaction has occurred. Moral hazard in this case arises because the manager of the insured savings and loan association has incentive to assume more risk than she otherwise​ would, and the FDIC cannot observe her action.

Financial intermediaries specialize in tackling problems of _________ information. They address the ________ problem by carefully reviewing the​ credit-worthiness of loan​ applicants, and they deal with the _________ problem by monitoring borrowers after they receive loans. Many financial intermediaries also take advantage of cost reductions arising from the centralized management of funds pooled from the savings of many individuals.

asymmetric; adverse selection; moral hazard

How might limited acceptability of old masters paintings in​ exchange, and difficulties in predicting their values from year to​ year, help to explain their low liquidity relative to the most liquid​ asset, money? How might these characteristics affect the likelihood that these assets could function as forms of​ money? Assets that people ________ exchange are typically among their more liquid assets. Most people ________ willing to accept old masters paintings in exchange, so their liquidity is relatively _________ and their usefulness as a medium of exchange is ________. Difficulties in predicting the value of old masters paintings would make them uncertain stores of purchasing power and thereby also ________ their liquidity and usefulness as forms of money.

regularly; are not; low; limited; reduce

Which of the following assets is the most​ liquid? A. A U.S. savings bond. B. 50 shares of Microsoft stock. C. A​ traveler's check. D. An automobile.

C. A​ traveler's check. Note: A​ traveler's check is considered money. Money is the most liquid form of any asset.

Which of the following is not a duty of the a central​ bank? A. Provide financial services for private banks. B. Conduct monetary policy for its respective government. C. Guarantee the savings of its citizens. D. Performing banking functions for its respective government.

C. Guarantee the savings of its citizens.

$20 billion in money market deposit accounts is counted in. A. M1 only. B. both M1 and M2. C. M2 only. D. neither M1 nor M2.

C. M2 only.

Which of the following statements is true when considering​ liquidity? A. Stocks have no transaction fees. B. Physical assets are the most liquid type of assets. C. The most liquid assets typically earn no or little interest. D. Bonds have a guaranteed redemption value so there is no chance of a financial loss from their purchase.

C. The most liquid assets typically earn no or little interest. Note: The cost of holding cash or currency is the loss of earned interest. The most liquid​ asset, money or​ currency, typically earns no or little interest.

Money may serve as a​ "standard of​ value" that allows for comparison of the relative worth of various goods and services. What function of money does this​ describe? A. Standard of deferred payment. B. Medium of exchange. C. Unit of accounting. D.Store of value.

C. Unit of accounting. Note: Money allows one to compare relative prices of goods and services. Since prices are denominated in a single currency one can easily obtain the relative prices of the goods.

Explain the difference between direct and indirect finance. The difference is that A. direct finance is the process through which ultimate borrowers channel funds to ultimate lenders through financial​ intermediaries, while indirect finance does not include financial intermediaries. B. direct finance is the process through which ultimate lenders channel funds to ultimate borrowers through financial​ intermediaries, while indirect finance does not include financial intermediaries. C. indirect finance is the process through which ultimate lenders channel funds to ultimate borrowers through financial​ intermediaries, while direct finance does not include financial intermediaries. D. indirect finance is the process through which ultimate borrowers channel funds to ultimate lenders through financial​ intermediaries, while direct finance does not include financial intermediaries.

C. indirect finance is the process through which ultimate lenders channel funds to ultimate borrowers through financial​ intermediaries, while direct finance does not include financial intermediaries.

If you live in​ Atlanta, Georgia, and you purchase a computer in Los​ Angeles, California, while there on​ vacation, which of the following paths would your check take before it finally​ clears? A. The check goes into the computer​ store's bank and is then sent to your bank directly. B. The check goes from the computer​ store's bank to the Federal Reserve bank in San​ Francisco, then to the Federal Reserve bank in​ Atlanta, and then to your bank. C. The check goes from the computer​ store's bank right to the Atlanta Federal Reserve and then back to your bank. D. The check goes from the computer​ store's bank to the Federal Reserve bank in San​ Francisco, and then directly to your bank.

B. The check goes from the computer​ store's bank to the Federal Reserve bank in San​ Francisco, then to the Federal Reserve bank in​ Atlanta, and then to your bank.

The M1 measurement of the money supply includes all of the following components except A. ​traveler's checks. B. savings deposits. C. currency. D. transactions deposits.

B. savings deposits.

The Federal Reserve System is divided into 12​ districts, each served by one of the Federal Reserve district​ banks, located in the following​ cities: Boston,​ MA; New​ York, N.Y.;​ Philadelphia, PA;​ Washington, D.C.;​ Richmond, VA;​ Atlanta, GA; St.​ Louis, MO;​ Dallas, TX;​ Cleveland, OH;​ Chicago, IL;​ Minneapolis, MN; Kansas​ City, MO; and San​ Francisco, CA.​ Today, the U.S. population is centered just west of the Mississippi River— that​ is, about half of the population is either to the west or the east of a line running roughly just west of this river. The current locations of Fed districts and banks are structured this way because A. the original Fed districts were designed in​ 1913, but have been redesigned many times since then. B. the Fed districts were designed in 1913 to best serve the population at that​ time; these have remained the same. C. the Fed districts were redesigned in 1965 to best serve the population at that​ time; these have remained the same. D. the Fed districts have been redesigned only once in 1973 to best serve the population at that time.

B. the Fed districts were designed in 1913 to best serve the population at that​ time; these have remained the same.

What is the key policy making group within the Federal Reserve​ System, who are its members and what is its key​ function? If the focus of monetary policy-making was on discount rates or the interest rate paid on bank​ reserves, would this change the key policy-making​ group? The ________ the key policy-making group within the Federal Reserve System. Composed of the seven members of the ________ and five _________, it is responsible for _________. If monetary policy-making were to focus on using discount rates or the interest rate paid on bank reserves, the ________ would become the key policy-making group

Federal Open Market Committee is; Board of Governors; Federal Reserve bank presidents; buying and selling U.S. government securities; Board of Governors.