Macroeconomics Exam #4
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)
