econ final
The beta for an asset considered to be risk-free
equals zero.
If, in the market for money, the quantity of money demanded exceeds the money supply, the interest rate will
rise, causing households and businesses to hold less money.
The Federal Reserve System changes the money supply by
providing forward guidance about how it intends to conduct monetary policy.
According to the Taylor rule, if there is no unemployment gap and
if inflation rises to 4 percent, the Fed should raise its targeted interest rate to 7 percent.
Which of the following is included as part of the M1 money supply?
$200,000 balance in the checking account of Main Street Trading Corp.
If an investment is equally likely to return 10 percent per year or 15 percent a year, then its average expected rate of return is
12.5 percent
The largest mutual fund, as of October 2021, held approximately _________billion in assets under management.
411
Which one of the following is true about the U.S. Federal Reserve System?
There are 12 Federal Reserve districts each with one central bank.
Which of the following is not a result of policy actions taken by the Fed since the financial crisis of 2007-2009?
a very volatile federal funds rate
The goal of the Federal Reserve when buying and selling government securities in open-market operations is to
affect economic activity.
M1 is composed of
currency in circulation, checkable deposits, and savings deposits
Before the financial crisis of 2007-2009, if the Fed bought U.S. securities in the open market, it
increased the reserves of the banking system, increasing the amount of reserves for overnight loans in the federal funds market, lowering the federal funds rate.
In terms of the mechanics of quantitative easing,
it works the same as open-market operations.
The Fed's response to the zero lower bound problem was quantitative easing (QE), where the Fed buys large amounts of long-term bonds in order to
lower longer-term interest rates.
When the Fed undertakes "reverse repo" transactions with nonbank financial firms, it is trying to influence the behavior of the
nonbanks that operate in the money market.
Prior to the 2007-2009 financial crisis, the most frequently employed monetary policy tool was
open market operations
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.
There is an asset demand for money primarily because of which function of money?
store of value
The primary risk that bondholders face is that
the bond issuer will default.
As expansionary monetary policy tools, quantitative easing (QE) and traditional open-market purchases differ in all of the following, except
the desired goal of shifting aggregate demand.
The amount of money people want to hold for use as a medium of exchange is the
transactions demand for money.