Macroeconomics Final Exam

New York bank.

The most important among the Federal Reserve district banks in conducting monetary policy is the San Francisco bank. Boston bank. New York bank. Chicago bank.

reciprocal of the reserve ratio.

The multiple by which the commercial banking system can expand the supply of money is equal to the reciprocal of the reserve ratio. reciprocal of the federal funds rate. ratio of actual reserves to required reserves. ratio of required reserves to actual reserves.

liability of the Federal Reserve System

The paper money or currency in the United States essentially represents a(n) liability of the Federal Reserve System. asset of the federal government. liability of commercial banks and savings institutions. liability of the U.S. Treasury.

open market operations.

The purchase and sale of government securities by the Fed is called open market operations. federal funds market. term auction facility. money market transactions.

real GDP

The purpose of expansionary monetary policy is to increase real GDP. the inflation rate. interest rates. the GDP gap.

a medium of exchange.

f you use $1,000 to purchase silver coins, which you plan to keep in a safe, you are using money as a medium of exchange. a unit of account. a store of value. bank reserves.

Board of Governors and the 12 Federal Reserve Banks

he Federal Reserve System consists of which of the following? U.S. Treasury Department and Bureau of Engraving and Printing Board of Governors and the 12 Federal Reserve Banks Federal Open Market Committee and Office of Thrift Supervision Federal Deposit Insurance Corporation and Controller of the Currency

foreign exchange market

A market in which the money of one nation is exchanged for the money of another nation is a _____. resource market foreign exchange market bond market stock market

debts of commercial banks and savings institutions.

Checkable deposits are assets of the federal government and government agencies. debts of commercial banks and savings institutions. debts of the federal government and government agencies. assets of commercial banks and savings institutions.

the money supply is decreased.

Contractionary monetary policy is when government spending is decreased. the money supply is decreased. exchange rates are increased. taxes are increased.

the major components of money supply M1

Currency and checkable deposits are of intrinsic value that determines the relative worth of money. redeemable for gold and silver from the Federal Reserve System. assets of the Federal Reserve Banks or of financial institutions. the major components of money supply M1.

indicate the Fed's plans for monetary policy

Financial markets pay close attention to changes in the federal funds rate because these changes directly affect a large volume of loans. indicate the Fed's plans for monetary policy. directly affect the interest payments on the national debt. indicate commercial bank lending policies.

double coincidence of wants.

Finding two parties who both have something the other party wishes to trade for is called a store of value. medium of exchange. double coincidence of wants. unit of account.

hold only a fraction of their deposits in their reserves.

Fractional reserve banking refers to a system where banks grant loans to their borrowing customers. accept a portion of their deposits in checkable accounts. hold only a fraction of their deposits in their reserves. deposit a fraction of their reserves at the central bank.

the balance of trade

Governments track the value of international transactions with _____. aggregate demand the balance of trade the circular flow model the federal deficit

commercial banks and thrift institutions.

Holding the money deposits of businesses and households and making loans to the public are the basic functions of district banks of the Federal Reserve System. the Federal Deposit Insurance Corporation and the Federal Savings and Loan Insurance Corporation. the Open Market Committee and the Board of Governors. commercial banks and thrift institutions.

not money.

In a monetary system, credit cards are not money. a store of value. a unit of account. a medium of exchange.

lowered the federal funds target rate.

In an effort to stabilize the banking sector and keep banks lending, from October 2008 to September 2009, the Fed declared a series of bank holidays to give banks a chance to recover from excessive withdrawals from customer accounts. raised the amount of interest paid on reserves held at Fed banks. raised reserve requirements. lowered the federal funds target rate.

legislative lag.

Monetary policy has no recognition lag. legislative lag. implementation lag. multiplier lag.

the central bank (the Fed).

Monetary policy is determined by Congress. the World Bank. the central bank (the Fed). the president and her economic advisors.

medium of exchange

Money eliminates the need for a coincidence of wants in trading primarily through its role as a medium of deferred payment. store of value. unit of account. medium of exchange.

delay purchases until you want the goods.

Money functions as a store of value if it allows you to delay purchases until you want the goods. measure the value of goods in a reliable way. make exchanges in a more efficient manner. increase your confidence in money.

a bank grants a loan to a customer

Money is "created" when someone lends money to a friend or a family member. people use money to pay for stuff they buy from one another. a depositor deposits money at the bank. a bank grants a loan to a customer.

easy comparison of the relative prices of goods and services.

Money serves as a basic yardstick for measuring economic value (a unit of account), allowing people to hold their wealth in a liquid form. goods and services to be exchanged with a double coincidence of wants. easy comparison of the relative prices of goods and services. governments to restrict the issuance of private monies.

the next day.

Reserves borrowed at the federal funds rate are usually repaid at the end of the month. the next day. in five years. in one year.

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

The Federal Open Market Committee (FOMC) sets policy on the sale and purchase of government bonds by the Fed. provides advice on banking stability to the Fed. follows the actions and operations of financial markets to keep them open and competitive. monitors regulatory banking laws for member banks.

checkable deposits and currency in circulation.

The M1 money supply is composed of checkable deposits and currency in circulation. all coins and paper money held by the general public and the banks. bank deposits of households and business firms. bank deposits and mutual funds.

M1, savings deposits, small time deposits, and money market mutual funds.

The M2 measure of money consists of the sum of Currency, checking and savings deposits, and small time deposits. M1, checking and savings deposits, and currency. M1, savings deposits, small time deposits, and money market mutual funds. Savings deposits, small time deposits, and money market mutual funds.

barter

The direct trade of goods and services for other goods and services is called barter. financial intermediation. diversification. using a medium of exchange.

inelastic with respect to the interest rate.

The money supply curve is elastic with respect to the interest rate. inelastic with respect to the interest rate. drawn as an upward sloping line. drawn as a downward sloping line.

downward-sloping.

The demand curve for federal funds is vertical. downward-sloping. horizontal. upward-sloping.

rate at which the Federal Reserve Banks lend to commercial banks

The discount rate is the interest rate at which the central banks lend to the U.S. Treasury. yield on long-term government bonds. rate at which commercial banks lend to the public. rate at which the Federal Reserve Banks lend to commercial banks.

rate at which the Federal Reserve Banks lend to commercial banks.

The discount rate is the interest rate at which the central banks lend to the U.S. Treasury. yield on long-term government bonds. rate at which commercial banks lend to the public. rate at which the Federal Reserve Banks lend to commercial banks.

foreign exchange markets

The equilibrium exchange rate between two currencies is determined by the supply and demand in the stock exchange markets money markets traded goods markets foreign exchange markets

supply-of-money curve and the total-demand-for-money curve

The equilibrium rate of interest in the market for money is determined by the intersection of the investment-demand curve and the total-demand-for-money curve. supply-of-money curve and the transactions-demand-for-money curve. supply-of-money curve and the total-demand-for-money curve. supply-of-money curve and the asset-demand-for-money curve.

B)rate at which two currencies can be traded for each other

The exchange rate is the _____. A)price of the average domestic good or service relative to the price of the average foreign good or service, when prices are expressed in terms of a common currency B)rate at which two currencies can be traded for each other C)market on which currencies of various nations are traded for one another D)quantity of foreign currency assets held by a government for the purpose of purchasing the domestic currency in the foreign exchange market

banks; other banks

The federal funds rate is the interest rate that _______ charge(s) _______. banks; their best corporate customers banks; other banks the Fed; commercial banks banks; on federal student loans

unit of account, a store of value, and a medium of exchange.

The functions of money are to serve as a unit of account, a store of value, and a medium of exchange. factor of production, exchange, and aggregate supply. determinant of consumption, investment, and government spending. resource allocator, a method for accounting, and a means of income distribution.

full-employment, noninflationary level of total output.

The fundamental objective of monetary policy is to assist the economy in achieving a money supply, which is based on the gold standard. rapid pace of economic growth. balanced budget consistent with full employment. full-employment, noninflationary level of total output.

discount rate

The interest rate at which the Federal Reserve Banks lend to commercial banks is called the discount rate. federal funds rate. short-term rate. prime rate.

prime rate.

The interest rate that banks use as a reference point for interest rates on a wide range of loans to businesses and individuals is the term auction rate. discount rate. prime rate. real interest rate.

the discount rate

The interest rate that the Fed charges on loans made directly to banks the discount rate. the prime rate. the federal funds rate. interest on reserves.

current, financial, capital

The three accounts used to measure the balance of trade are the ___ account, the ___ account and the ___ account. current, capital, reserve financial, reserve, current current, reserve, financial current, financial, capital

serving as a medium of exchange, unit of account, and store of value.

The three functions of money are implementing monetary policy, fiscal policy, and structural policy. spending for consumption, investment, and government purchases. measuring balance of payments, exchange rates, and interest rates. serving as a medium of exchange, unit of account, and store of value.

effectiveness

The time between when a policy is enacted and when it affects the economy is the _____ lag. legislative multiplier effectiveness recognition

federal funds rate.

Traditionally, the Fed often communicated its intentions to restrict or expand monetary policy by announcing a change in its target for the prime rate. discount rate. federal funds rate. consumer price index.

appreciated

When the exchange rate between dollars and pounds moves from $2 = 1 pound to $1 = 1 pound, we say that the dollar has _____. inflated appreciated depreciated deflated

Federal Open Market Committee

Which group is responsible for the policy decision of changing the money supply? Office of Management and Budget Federal Advisory Council Thrift Advisory Council Federal Open Market Committee

open-market operations

Which of the following is a tool of monetary policy often used by the Fed for altering the reserves of commercial banks? open-market operations issuing currency check collection reserve requirement

savings deposits

Which of the following items are included in money supply M2 but not M1? checkable deposits savings deposits coins Federal Reserve notes

the reserve requirement

Which of the monetary policy tools can alter both the level of excess reserves and the money multiplier? the reserve requirement the federal funds rate the discount rate open-market operations

The 12 Federal Reserve Banks

Which part of the Federal Reserve System holds reserves of the member banks? The Federal Open Market Committee The 12 Federal Reserve Banks The Board of Governors The Federal Advisory Committee