ch. 14 & 15 HW

The group that sets the Federal Reserve System's policy on buying and selling government securities (bills, notes, and bonds) is the

Federal Open Market Committee (FOMC).

The discount rate is the rate of interest at which

Federal Reserve Banks lend to banks.

Paper money (currency) in the United States is issued by the

Federal Reserve System.

Which of the following is considered an advantage of monetary policy compared to fiscal policy?

It is relatively isolated from political pressure.

Assuming no other changes, if checkable deposits decrease by $40 billion and balances in money market mutual funds increase by $40 billion, the

M1 money supply will decline and the M2 money supply will remain unchanged.

Which of the following statements best describes the 12 Federal Reserve Banks?

They are privately owned and publicly controlled central banks whose basic goal is to control the money supply and interest rates in promoting the general economic welfare.

If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as

a medium of exchange.

The interest rate that the Fed uses as the policy rate is called the

federal funds rate.

If the economy is operating in the relatively steep (upper) portion of its aggregate supply curve, a reduction in the money supply will

increase the interest rate and reduce the price level, assuming it is flexible downward.

In a reverse repo transaction,

the Fed is the borrower and the nonbank firm is the lender.

Each member of the Board of Governors of the Federal Reserve System is selected by

the U.S. president and confirmed by the Senate.

Which of the following is least likely to be a problem for monetary policy?

the administrative lag

Which of the following will happen when the Federal Reserve lowers the interest rate paid on reserve balances?

Banks will choose to lend into the money market instead of lending to the Fed.

A decrease in the money supply

increases the interest rate and decreases aggregate demand.

Which of the following is not part of the M2 money supply?

large-denominated time deposits

Purchasing groceries using a debit card best exemplifies money serving as a

medium of exchange.

The Federal Open Market Committee (FOMC) includes

members of the Board of Governors and 5 of the 12 presidents of the Federal Reserve Banks, of which the president of the New York Fed has a permanent voting seat.

Actions or communications by a central bank intended to help it achieve its macroeconomic policy objectives defines

monetary policy.

Monetary policy is thought to be

more effective in controlling inflation than in moving the economy out of a recession.

If the inflation rate was on target at 2 percent and the unemployment rate was 3.4 percent, the Fed would likely adopt a(n)

neutral monetary policy.

Coins held in commercial bank vaults are

not part of the nation's money supply.

The three main tools of monetary policy are

open-market operations, forward guidance, and changing the administered interest rates.

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

price-level stability, full employment, and economic growth.

The Federal Reserve System performs the following functions except

providing banking services to the general public.

The Federal Reserve System changes the money supply by

providing forward guidance about how it intends to conduct monetary policy.

Which of the following Fed actions will decrease the money supply?

raising the overnight reverse repo rate

The Federal Reserve can increase aggregate demand by

reducing the three administered interest rates.

If the inflation rate was 8 percent and the unemployment rate was 3.2 percent, the Fed would likely adopt a(n)

restrictive monetary policy.

Which of the following is a tool of monetary policy?

telling the public how they (the Fed) intends to manage monetary policy

Quantitative easing refers to

the Fed buying longer-term bonds to reduce longer-term interest rates.

Open-market operations refer to

the purchases and sales of U.S. government securities by the Fed.

The functions of money are to serve as a

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

The money supply is backed

by the government's ability to control the supply of money and therefore to keep its value relatively stable.

The purpose of an expansionary monetary policy is to shift the

aggregate demand curve rightward.

Members of the Federal Reserve Board of Governors are

appointed by the president to staggered 14-year terms.

One of the strengths of monetary policy relative to fiscal policy is that monetary policy

can be implemented more quickly.

The Federal Deposit Insurance Corporation (FDIC) insures deposits in

commercial banks and thrifts.

The Board of Governors of the Federal Reserve System

coordinates policies for the 12 Federal Reserve Banks.

Why do most economists assume that policymakers will not give equal weight to meeting the inflation rate target and the full-employment target?

cyclical unemployment represents permanently foregone output that cannot be recovered

If the Fed wants to encourage bank lending, it will

decrease the IORB.