macro ch 11
which body of the Federal Reserve System sets the majority of US monetary policy?
Federal Open Market Committee
sum of all currency in the hands of the public plus demand deposits and other checkable deposits plus traveler's checks is the official definition of
M1
when interest rates on Treasury bills and other financial assets are low, the opportunity cost of holding money is ________, so the quantity of money demanded will be _________
low; high
what are the three functions that money serves in an economy?
medium of exchange, unit of account, store of value
the actions the Fed takes to manage the money supply and interest rates in order to pursue economic objectives are called
monetary policy
when the interest rate decreases
there is a movement down a stationary money demand curve
the theory concerning the link between the money supply and the price level that assumes the velocity of money is constant is called the
quantity theory of money
the history of hyperinflation includes
recent events; hyperinflations have occurred in recent times as well as the past
the Board of Governors of the Fed has _______ members that are appointed for staggered ________ by the _________ and confirmed by the Senate
seven; 14-year terms, president
which of these facts is true about the creation of the Fed?
the Fed was created in 1913
the FED is
the central bank of the US
who is the chairperson of the FOMC?
the chairperson of the Board of Governors
according to the quantity theory of money, the growth rate of money supply equals
the growth rate of nominal GDP
if the price level increases
the money demand curve shifts to the right
suppose that velocity is 3 and the money supply is $500 million; according to the quantity theory of money, nominal output equals
$1.5 billion
how many Federal Reserve districts are there?
12
velocity is defined as
V=(PxQ)/M
to increase the money supply, the FOMC directs the trading desk located at the Fed of NY to
buy US Treasury securities from the public
if the FOMC decides to increase the money supply, it orders the trading desk at the Fed of NY to
buy the US Treasury securities
a sustained in the average level of prices and wages in the economy is
called deflation
if the Fed decreases the money supply and increases interest rates in order to reduce inflation, it is engaging in
contractionary monetary policy
fiat money
has no intrinsic value
which predictions can be made using the growth rates associated with the quantity theory of money equation?
if the money supply grows at a faster rate than real GDP, there will be inflation
which statement about interest rates and inflation is true?
if there is zero inflation, the nominal interest rate is equal to the real interest rate
sometimes there can be benefits from inflation; one of them is that more labor might be demanded after a rise in the price level; for this is happen, the ________ wage would be fixes and ________ the competitive equilibrium level.
nominal; above
according to the quantity theory of money, if the Fed engages in an open market purchase of bonds ______ GDP will__________.
nominal; increase
credit cards are
not part of the money supply
the Fed conducts monetary policy primarily through
open market operations
one of the primary goals of the Fed is
price level stability
when we say that money serves as a unit of account, we mean that
prices of goods and services are quotes in terms of money
