ECO

Refer to the given list of assets. 1. Large-denominated ($100,000 and over) time deposits 2. Noncheckable savings deposits 3. Currency (coins and paper money) in circulation 4. Small-denominated (under $100,000) time deposits 5. Stock certificates 6. Checkable deposits 7. Money market deposit accounts 8. Money market mutual fund balances held by individuals 9. Money market mutual fund balances held by businesses 10. Currency held in bank vaults The M2 definition of money includes

2, 3, 4, 6, 7, 8

Which of the following best describes the cause-effect chain of an expansionary monetary policy?

An increase in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP.

The market for immediately available reserve balances at the Federal Reserve is known as the

Federal funds market

Money is "created" when

People receive loans from their banks

The major problem facing the economy is high unemployment and weak economic growth. The inflation rate is low and stable. Therefore, the Federal Reserve decides to pursue a policy to increase the rate of economic growth. Which policy changes by the

buying government securities, doing repos, and lowering the discount rate

A commercial bank can expand its excess reserves by

demanding and receiving payment on an overdue loan. buying bonds from the public.

Which of the following is correct? When the Federal Reserve buys government securities from the public, the money supply

expands and commercial bank reserves increase.

A bank that has assets of $85 billion and a net worth of $10 billion must have

liabilities of 75 billion

Joe deposits $200 in currency into his checking account at a bank. This deposit is treated as

no change in money supply

The purpose of a restrictive monetary policy is to

raise interest rates and restrict the availability of bank credit.

If the price index rises from 100 to 120, the purchasing power value of the dollar

Will fall by one sixth

If you are estimating your total expenses for school next semester, you are using money primarily as

a unit of account

The Federal Reserve System performs the following functions except

providing banking services to the general public

The Federal Reserve can increase aggregate demand by

reducing the discount rate.

The blurring of the lines separating the subsets of the financial industry started in the

1990's

During the Financial Crisis of 2007-2008, the Federal Reserve

Served as lender of last resort to both solvent and insolvent firms

Which of the following best describes what occurs when monetary authorities sell government securities?

There is a decrease in the size of commercial banks' excess reserves, the money supply decreases, and interest rates rise, thereby causing a decrease in investment spending and real GDP.

The seven members of the Board of Governors of the Federal Reserve System are

appointed by the president with the confirmation of the senate

Disequilibrium in the money market is mainly corrected via a change in

bond prices

If the Fed wants to discourage commercial bank lending, it will

increase the interest paid on excess reserves held at the Fed

Three functions of money are

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

The acronym FOMC describes

The Federal Open Market Committee

The problem of cyclical asymmetry refers to the idea that

a restrictive monetary policy can force a contraction of the money supply, but an expansionary monetary policy may not achieve an increase in the money supply.

Collateralized Default Swaps

insured holders of loan backed securities in case the underlying loans were not repaid