Monetary Policy

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The Federal Open Market Committee consists of the seven members of the ________, the president of the Federal Reserve Bank of New York, and ________.

Federal Reserve's Board of Governors; four presidents from the other 11 Federal Reserve banks

Which of the following is not a consequence of hyperinflation?

Money's function as a medium of exchange is enhanced.

The purchase of Treasury securities by the Federal Reserve will, in general,

increase the quantity of reserves held by banks.

A decrease in the reserve requirement ________ bank reserves and ________ the money supply.

increases; increases

Which of the following is not a function of the Federal Reserve System, or the "Fed"?

insuring deposits in the banking system

Which of the following information about fiat money is false? Fiat money

is backed by gold.

People hold money as opposed to financial assets because money

is perfectly liquid.

The money demand curve has a

negative slope because an increase in the interest rate decreases the quantity of money demanded.

Bank panics have largely disappeared in the United States because

of deposit insurance.

If the central bank can act as a lender of last resort during a banking panic, banks can

satisfy customer withdrawal needs and eventually restore the public's faith in the banking system.

A decrease in real GDP can

shift money demand to the left and decrease the interest rate.

Which of the following is a function that money serves?

store of value unit of account medium of exchange All of the above are correct.****

The Federal Reserve can directly affect its monetary policy ________, which then affect its monetary policy ________.

targets; goals

A monetary policy target is a variable that

the Fed can affect directly.

Hyperinflation can be caused by

the government selling bonds to the central bank.

According to the quantity theory of money, the inflation rate equals

the growth rate of the money supply minus the growth rate of real output.

Using the quantity equation, if the velocity of money grows at 5 percent, the money supply grows at 10 percent, and real GDP grows at 4 percent, then the inflation rate will be

11 percent.

According to the quantity theory of money, if the money supply grows at 20 percent and real GDP grows at 5 percent, then the inflation rate will be

15 percent.

To increase the money supply, the Federal Reserve could

conduct an open market purchase of Treasury securities.

An increase in the money supply will

decrease the interest rate.

Open market operations refer to the purchase or sale of ________ to control the money supply.

U.S. Treasury securities by the Federal Reserve

Changes in the federal funds rate usually result in

changes in both short-term and long-term interest rates with more of an effect on short-term interest rates.

Which of the following is not a consequence of the Fed changing the reserve requirement?

Changes in the ratio are easily incorporated into banks' routine management.

Suppose there is a bank panic. Which of the following would not be a consequence of this bank panic?

Required reserves would increase.

Open market operations refer to the buying and selling of ________ by the ________ to control the money supply.

Treasury securities; Federal Reserve

A major source of inefficiency in barter economies is that they require

a double coincidence of wants in exchange.

The statement, "My iPhone is worth $300" represents money's function as

a unit of account.


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