ECON 111- Money and Monetary Policy

To reduce the money supply in the economy, the Fed would A) increase the FFR and carry out open market sales. B) carry out open market purchases and/or raise the reserve ratio. C) carry out open market sales and/or lower the FFR. D) carry out open market purchases and/or lower the FFR. E) None of the answers is correct.

A) increase the FFR and carry out open market sales.

Money is best defined as: A) anything that has a high nominal value. B) anything that is a widely accepted as means of payment. C) only the amount we spend in a given period. D) the total amount of fixed assets we own. E) None of the answers is correct.

B) anything that is a widely accepted as means of payment.

Which of the following is most liquid? A) a mortgage loan B) checkable deposits in a bank C) a new truck D) a diamond E) None of the answers is correct.

B) checkable deposits in a bank

Suppose you deposit $1,000 in your checking account. If the reserve ratio is 10%, how much of your deposit can the bank loan? A) $0. B) $100. C) $900. D) $1,000. E) None of the answers is correct.

C) $900.

Bank notes are issued by A) the leading financial institutions of the U.S. B) investment houses and banks. C) the Federal Reserve only. D) private banks and the Federal Reserve. E) None of the answers is correct.

C) the Federal Reserve only.

If the required reserve ratio is 4%, the money multiplier is A) 4. B) 16. C) 20. D) 25. E) None of the answers is correct.

D) 25.

To increase the money supply in the economy, the Fed would A) increase the FFR and/or lower the reserve ratio. B) carry out open market purchases and/or raise the reserve ratio. C) carry out open market sales and/or lower the FFR. D) carry out open market purchases and/or lower the FFR. E) None of the answers is correct.

D) carry out open market purchases and/or lower the FFR.

_________________ is considered as money. a. Your Visa card b. Your personal checks c. Dollar bills in your wallet d. All of the above. e. None of the above.

d. All of the above.

The Federal Reserve can influence the economy by shifting A) the AD curve. B) the SRAS curve. C) the Solow growth curve. D) All of the answers are correct. E) None of the answers is correct.

A) the AD curve.

M2 refers to: A) currency. B) currency plus total reserves held at the Fed. C) currency plus checkable deposits. D) currency, checkable deposits, savings deposits, money market mutual funds, and small-time deposits. E) None of the answers is correct.

D) currency, checkable deposits, savings deposits, money market mutual funds, and small-time deposits.

Which of the following is not a function of the Federal Reserve? A) serving as the lender of last resort B) regulating the U.S. financial system C) regulating the U.S. money supply D) providing loans to small businesses E) None of the answers is correct.

D) providing loans to small businesses

When you put your spare change into your child's piggy bank, money is serving as a a. store of value. b. unit of account and store of value. c. medium of exchange and unit of account. d. medium of exchange. e . unit of account.

a. store of value.

The Federal Reserve System is divided into how many districts? a. 7 b. 12 c. 50 d. 2 e. 6

b. 12

To economists, money a. means the same thing as income. b. functions as a medium of exchange. c. means the same thing as wealth. d. All of the above. e. None of the above.

b. functions as a medium of exchange.

Which of the following is correct? A decline in the federal funds rate is expected to a. decrease spending. b. increase spending. c. decrease the AD curve. d. All of the above. e. None of the above.

b. increase spending.

Suppose transactions are conducted in pesos, and prices are quoted in dollars. The primary function(s) of the peso in this case is (are) a. medium of exchange and unit of account. b. unit of account. c. medium of exchange. d. unit of account and store of value. e.store of value.

c. medium of exchange.

The "Fed" is the nickname for a. Congress. b. the presidency. c. the Federal Reserve System. d. the federal government. e.theUnited States Treasury.

c. the Federal Reserve System.

Which of the following is correct? a. In a barter economy, there exists no token or commodity that is used as the medium of exchange. b. Fiat money has no intrinsic value, which means that its value is not based on a commodity, such as a precious metal. c. Commodity money (for example, gold or silver coins) can be debased by lowering the metallic content of coins. d. All of the above. e. None of the above.

d. All of the above.

Which of the following is correct? a. The functions of a central bank are very different than those of a commercial bank (or any other type of a financial intermediary). b. The American central bank is called the Fed (the Federal Reserve System). c. Central banks define and implement monetary policy. d. All of the above. e. None of the above.

d. All of the above.

Which of the following would decrease the aggregate demand curve? a. The Fed sells bonds to the public. b. The Fed increases the federal funds rate. c. The Fed increases the reserve requirement. d. All of the above. e. None of the above.

d. All of the above.

The voting members of the Federal Open Market Committee (FOMC) consists of a. all 7 members of the Board of Governors and 12 presidents of district banks. b. all 7 members of the Board of Governors and 4 Presidents of district banks on a rotating basis and the President of the New York Fed. c. The president of New York district bank is a non-rotating member of the FOMC. d. Both (b) and (c) are correct. e. Both (a) and (c) are correct.

d. Both (b) and (c) are correct.

Which of the following is responsible for conducting the monetary policy in the U.S.? a. the President. b. Congress. c. Secretary of the Treasury. d. The Federal Open Market Committee. e. The Board of Governors of the Federal Reserve.

d. The Federal Open Market Committee.

To insulate the Federal Reserve System from political pressure, the members of the Board of Governors a. are elected by the public. b. have life-time tenure. c. are supervised by the House Banking Committee. d. are appointed by the President of the U.S. for 14-year terms, subject to Congressional approval. e. None of the above.

d. are appointed by the President of the U.S. for 14-year terms, subject to Congressional approval.

The federal funds rate is the interest rate a. the Fed pays on reserves. b. the Fed charges on loans to financial intermediaries. c. commercial banks pay on deposits. d. people pay on loans provided by commercial banks. e. None of the above.

e. None of the above.

M1 consists of a. paper money only. b. currency plus checking deposits only. c. currency plus checking deposits plus traveler s checks plus savings deposits only. d. currency only. e.currency plus checking deposits plus travelers checks only.

e.currency plus checking deposits plus travelers checks only.