ECON 216 Test 3

Ahmet is receiving a 10% pay raise. If the rate of inflation is 12% then (A) Ahmet's purchasing power is falling. (B) Ahmet's purchasing power may be either rising or falling. (C) Ahmet's purchasing power is unaffected by either inflation or the pay raise because they are expressed in nominal, and not real, terms. (D) Ahmet's purchasing power is rising because inflation has no effect on purchasing power. (E) Too little information is given to make a judgment on the effects on Ahmet's purchasing power.

(A) Ahmet's purchasing power is falling.

Which statement is true? (A) Borrowers paying fixed interest payments benefit from inflation. (B) People on fixed incomes are rarely hurt by inflation. (C) Retirees living off of fixed interest payments benefit from inflation. (D) Inflation hurts all people to the same degree. (C) Workers on long-term contracts typically benefit from inflation.

(A) Borrowers paying fixed interest payments benefit from inflation.

In which of the following situations must national saving rise? (A) Both domestic investment and net capital outflow increase. (B) Domestic investment increases and net capital outflow decreases. (C) Domestic investment decreases and net capital outflow increases. (D) Both domestic investment and net capital outflow decrease.

(A) Both domestic investment and net capital outflow increase.

Which of the following is correct? (A) NCO = NX (B) NCO + I = NX (C) NX + NCO = Y (D) Y = NCO - I

(A) NCO = NX

Which best describes the incentives expected inflation provides to suppliers? (A) Sellers will withhold supply until prices rise. (B) Sellers will supply less in order to reduce potential taxes. (C) Sellers will wish to sell more now before prices rise. (D) Suppliers will want to produce more in order to forestall any price increases. (E) Sellers will try to reduce supply in order to increase the rate of inflation.

(A) Sellers will withhold supply until prices rise.

What is the correct chain of events associated with an increase in the discount rate? (A) The bank borrowing of excess reserves drops; fewer loans are extended; money supply drops. (B) The bank borrowing of excess reserves rises; fewer loans are extended; money supply rises. (C) The bank borrowing of excess reserves drops; more loans are extended; money supply drops. (D) The bank borrowing of excess reserves drops; fewer loans are extended; money supply rises. (E) The bank borrowing of excess reserves rises; more loans are extended; money supply rises.

(A) The bank borrowing of excess reserves drops; fewer loans are extended; money supply drops.

Which statement best describes inflation? (A) The general price level is increasing, but some product prices may be declining. (B) Inflation is caused by sellers' greed. (C) The price of every commodity in the economy is going up. (D) It always indicates a drop in the standard of living. (E) Inflation almost always eventually reverses itself as workers pressure firms to drop prices.

(A) The general price level is increasing, but some product prices may be declining.

Which best describes the reason the Bureau of Labor Statistics does not include those who are in the armed forces or institutionalized as unemployed? (A) They are not able to provide their labor to the civilian labor force even if they desired to do so. (B) It is difficult to estimate the number of people in those categories. (C) They choose these lifestyles to avoid working. (D) All of the above are reasons. (E) None of the above are reasons.

(A) They are not able to provide their labor to the civilian labor force even if they desired to do so.

The situation when a large number of depositors withdraw their funds from a bank at one time is called a(n) (A) bank run. (B) act of God. (C) money-impelled panic. (D) depositors' curse. (E) mass hysteric withdrawal.

(A) bank run.

A general decrease in prices is called (A) deflation. (B) deceleration. (C) inflation. (D) demonetization. price slowdown.

(A) deflation.

In the open economy macroeconomic model net capital outflow is equal to the quantity of (A) dollars supplied in the foreign exchange market. (B) dollars demand in the foreign exchange market. (C) funds supplied in the loanable funds market. (D) None of the above is correct.

(A) dollars supplied in the foreign exchange market.

Liquidity refers to the (A) ease of converting a given asset into a medium of exchange. (B) ability to hide a money asset. (C) ability of a money asset to retain its value. (D) ease of converting one currency for another currency. (E) ease of transporting money assets.

(A) ease of converting a given asset into a medium of exchange.

Frictional unemployment occurs when job openings (A) exist and people are willing to take them, but it takes some time to bring the two together. (B) do not exist, although people are willing to work, so it makes no sense to try to bring the two together. (C) exist and people are willing to take them, but bringing the two together is too expensive. (D) exist but people are not willing to take them, so it makes no sense to bring the two together. (E) None of the above is correct.

(A) exist and people are willing to take them, but it takes some time to bring the two together.

Net capital outflow refers to the purchase of (A) foreign assets by domestic residents minus the purchase of domestic assets by foreign residents. (B) foreign assets by domestic residents minus the purchase of foreign goods and services by domestic residents. (C) domestic assets by foreign residents minus the purchase of domestic goods and services by foreign residents. (D) domestic assets by foreign residents minus the purchase of foreign assets by domestic residents.

(A) foreign assets by domestic residents minus the purchase of domestic assets by foreign residents.

An MP3 player in Singapore costs 200 Singaporean dollars. In the U.S. it costs 100 US dollars. Which of the following is correct? (A) if the nominal exchange rate is 2.0 Singaporean dollars per U.S. dollar, purchasing power parity holds. (B) if the nominal exchange rate is 1 Singaporean dollars per U.S. dollar, purchasing power parity holds. (C) if the nominal exchange rate is .50 Singaporean dollars per U.S. dollar, purchasing power parity holds. (D) purchasing power parity does not hold at any of the above exchange rates.

(A) if the nominal exchange rate is 2.0 Singaporean dollars per U.S. dollar, purchasing power parity holds.

If a country changes its corporate tax laws so that domestic firms build and manage more firms overseas, then this country will (A) increase foreign direct investment which increases net capital outflow. (B) increase foreign direct investment which decreases net capital outflow. (C) increase foreign portfolio investment which increases net capital outflow. (D) increase foreign portfolio investment which decreases net capital outflow.

(A) increase foreign direct investment which increases net capital outflow.

When the U.S. real interest rate falls, owning U.S. assets is (A) less attractive and so U.S. net capital outflow rises. (B) less attractive and so U.S. net capital outflow falls. (C) more attractive and so U.S. net capital outflow rises. (D) more attractive and so U.S. net capital outflow falls.

(A) less attractive and so U.S. net capital outflow rises.

The federal funds market is (A) the market where banks lend excess reserves to other banks. (B) where federal employees can get loans. (C) where the federal government gets loans for its operations. (D) where long-term interest rates are determined. (E) the market where banks lend money to the Federal Reserve System.

(A) the market where banks lend excess reserves to other banks.

Amy and Jeff are looking to buy a house. They just received an inheritance that would pay for the house. If the mortgage interest rate is 4% and the inflation rate is 7% then (A) they would be better off borrowing than paying the price in full. (B) at such an interest rate, they should wait to buy a house. (C) they should not borrow under any circumstances because borrowing is a poor financial practice. (D) they should keep their money in a savings account. (E) they should borrow from family, rather than the bank, to avoid affecting their credit rating.

(A) they would be better off borrowing than paying the price in full.

Which of the following is a simple way of stating the cause of inflation? (A) "Government is not the solution to the problem; government is the problem." (B) "Too much money is chasing too few goods." (C) "Inflation always is a local problem." (D) "Buyer and sellers cannot achieve equilibrium." (E) "Supply creates its own demand."

(B) "Too much money is chasing too few goods."

If the exchange rate is 5 units of Peruvian currency per dollar and a hotel room in Lima costs 300 units of Peruvian currency, how many dollars do you need to get a room? (A) 1,500, and your purchase will increase Peru's net exports. (B) 60 and your purchase will increase Peru's net exports. (C) 1,500 and your purchase will have no effect on Peru's net exports. (D) 60 and your purchase will have no effect on Peru's net exports.

(B) 60 and your purchase will increase Peru's net exports.

The country of Economia has a population of 100 men and 100 women. If the labor force consist of 70 men and 60 women, then the female labor force participation rate is (A) 50%. (B) 60%. (C) 55%. (D) 65%. (E) 70%.

(B) 60%.

Which best describes the incentives expected inflation provides to demanders? (A) Consumer groups will lobby Congress to see if the inflation can be stopped. (B) Demanders will wish to purchase more now before prices rise. (C) Demanders will buy less now and wait until prices stabilize before making more purchases. (D) Consumer groups will spontaneously protest the price increases by sponsoring boycotts. (E) Demanders will prefer to save money rather than spend it on items whose prices are rising.

(B) Demanders will wish to purchase more now before prices rise.

John is on his way to an appliance store to buy a refrigerator. He stops by the bank to withdraw money so that he can pay for it. Which function of money best applies to John's situation? (A) Unit of account (B) Medium of exchange (C) Standard of deferred payment (D) Store of value (E) Means of payment

(B) Medium of exchange

Jill is saving up for a car she plans to purchase next year. Which function of money best applies to Jill's situation? (A) Standard of deferred payment (B) Store of value (C) Medium of exchange (D) Unit of account (E) Means of paying taxes

(B) Store of value

The law of one price states that (A) a good must sell at the price fixed by law. (B) a good must sell at the same price at all locations. (C) a good cannot sell for a price greater than the legal price ceiling. (D) domestic producers of a good are guaranteed a subsidy by law.

(B) a good must sell at the same price at all locations.

In the open-economy macroeconomic model, if the supply of loanable funds increases, the interest rate (A) and the real exchange rate increase. (B) and the real exchange rate decrease. (C) increases and the real exchange rate decreases. (D) decreases and the real exchange rate increases.

(B) and the real exchange rate decrease.

If you go to the bank and notice that a dollar buys more Mexican pesos than it used to, then the dollar has (A) appreciated. Other things the same, the appreciation would make you less likely to travel to Mexico. (B) appreciated. Other things the same, the appreciation would make you more likely to travel to Mexico. (C) depreciated. Other things the same, the depreciation would make you less likely to travel to Mexico. (D) depreciated. Other things the same, the depreciation would make you more likely to travel to Mexico.

(B) appreciated. Other things the same, the appreciation would make you more likely to travel to Mexico.

If purchasing-power parity holds, a dollar will buy (A) more goods in foreign countries than in the United States. (B) as many goods in foreign countries as it does in the United States. (C) fewer goods in foreign countries than it does in the United States. (D) None of the above is implied by purchasing-power parity.

(B) as many goods in foreign countries as it does in the United States.

If a country has business opportunities that are relatively attractive to other countries, we would expect it to have (A) both positive net exports and positive net capital outflow. (B) both negative net exports and negative net capital outflow. (C) positive net exports and negative net capital outflow. (D) negative net exports and positive net capital outflow.

(B) both negative net exports and negative net capital outflow.

Workers who hold more than one job are (A) considered to be discouraged workers. (B) counted as employed only once. (C) considered to be underemployed. (D) considered to be overemployed. (E) counted twice in the employment statistics.

(B) counted as employed only once.

Mary is a long-distance truck driver who lost her job due to decreased demand for goods. An economist would say she is (A) structurally unemployed. (B) cyclically unemployed. (C) frictionally unemployed. (D) seasonally unemployed. (E) employed.

(B) cyclically unemployed.

The nominal exchange rate is the (A) nominal interest rate in one country divided by the nominal interest rate in the other country. (B) rate at which a person can trade the currency of one country for the currency of another. (C) price of a good in one country divided by the price of the same good in another. (D) the number of goods a person can trade for a similar good in another country.

(B) rate at which a person can trade the currency of one country for the currency of another.

Fiat money is money (A) because it has precious metals to back it up. (B) solely because of its usefulness and acceptability on exchange. (C) because it has intrinsic value as a commodity. (D) because it is declared so by tradition. (E) because it can be converted to other forms of money.

(B) solely because of its usefulness and acceptability on exchange.

Raising the discount rate (A) has an expansionary effect on the economy. (B) tends to decrease the money supply. (C) is a very strong policy tool. (D) is always done in concert with open market operations. (E) tends to increase the money supply.

(B) tends to decrease the money supply.

Suppose that more Chinese decide to vacation in the U.S. and that the Chinese purchase more U.S. Treasury bonds. Ignoring how payments are made for these purchases, (A) the first action by itself raises U.S. net exports, the second action by itself raises U.S. net capital outflow. (B) the first action by itself raises U.S. net exports, the second action by itself lowers U.S. net capital outflow. (C) the first action by itself lowers U.S. net exports, the second action by itself raises U.S. net capital outflow. (D) the first action by itself lowers U.S. net exports, the second action by itself lowers U.S. net capital outflow.

(B) the first action by itself raises U.S. net exports, the second action by itself lowers U.S. net capital outflow.

Net capital outflow measures (A) foreign assets held by domestic residents minus domestic assets held by foreign residents. (B) the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners. (C) the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic goods and services sold to foreigners. (D) None of the above is correct.

(B) the imbalance between the amount of foreign assets bought by domestic residents and the amount of domestic assets bought by foreigners.

Although there are more unemployed white workers than African-American workers, unemployment is a much larger problem for African-Americans because (A) African-Americans workers earn lower salaries than white workers. (B) the unemployment rates among African-Americans are higher than for whites. (C) African-American workers tend to be younger than white workers. (D) All of the above are correct. (E) None of the above are correct

(B) the unemployment rates among African-Americans are higher than for whites.

When economists say that the unemployment rate will probably never be zero, they mean that (A) policymakers do not have the tools to adequately deal with unemployment. (B) there will always be some frictional and structural unemployment. (C) some unemployed persons do not interview well. (D) business managers have an interest in having an "army of the unemployed" to keep wages low. (E) the capitalist system is incapable of providing jobs for everyone.

(B) there will always be some frictional and structural unemployment.

First National Bank gave James a $20,000 loan to purchase a car. The money was deposited by the seller in an account at Second National Bank. When the check clears, (A) $20,000 of Second National Bank's funds is transferred to the Federal Reserve System. (B) since checks are cleared electronically, no "real" funds are transferred between banks. (C) $20,000 of First National Bank's excess reserves is transferred to Second National Bank. (D) since the check is cleared via the Federal Reserve System, the $20,000 ends up being owned by the Fed. (E) the check is split 50/50, with $10,000 going to each bank.

(C) $20,000 of First National Bank's excess reserves is transferred to Second National Bank.

If the reserve requirements are 0.10, what is the value of the simple money multiplier? (A) 100 (B) 90 (C) 10 (D) 1 (E) The simple money multiplier cannot be computed from the information given.

(C) 10

There are 15 million people living in Marketstan of which 9 million are working and 1 million are actively looking for work. What is the size of Marketstan's labor force? (A) 16 million (B) 24 million (C) 10 million (D) 5 million (E) 25 million

(C) 10 million

A roll of duct tape costs 3 Canadian dollars in Canada and 2 U.S. dollars in the U.S. The nominal exchange rate is 1.25 Canadian dollars per U.S. dollar. (A) A profit could be made by buying duct tape in Canada and selling it in the U.S. This would tend to drive up the price of U.S. duct tape. (B) A profit could be made by buying duct tape in Canada and selling it in the U.S. This would tend to drive up the price of Canadian duct tape. (C) A profit could be made by buying duct tape in the U.S. and selling it in Canada. This would tend to drive up the price of U.S. duct tape. (D) A profit could be made by buying duct tape in the U.S. and selling it in Canada. This would tend to drive up the price of Canadian duct tape.

(C) A profit could be made by buying duct tape in the U.S. and selling it in Canada. This would tend to drive up the price of U.S. duct tape.

What is a common government response to structural unemployment? (A) Create job banks (B) Change the structure of the financial industry to be more fundamentally sound (C) Retrain displaced workers (D) Diversify the economy (E) Stimulate total demand

(C) Retrain displaced workers

An example of an underemployed worker is (A) a surgeon asked to assist in an operation she never performed before. (B) an illegal alien who gets paid cash to avoid paying taxes. (C) a Ph.D. in Economics who drives a truck for a living. (D) an auto mechanic who gets under a car to change the oil. (E) None of the above

(C) a Ph.D. in Economics who drives a truck for a living.

When economists talk about full employment, they are referring to a situation where (A) frictional unemployment has been eliminated. (B) no one is looking for work. (C) cyclical unemployment has been eliminated. (D) structural unemployment has been eliminated. (E) the unemployment rate is zero

(C) cyclical unemployment has been eliminated.

All saving in the U.S. economy shows up as (A) investment in the U.S. economy. (B) U.S. net capital outflow. (C) either investment in the U.S. economy or U.S. net capital outflow. (D) None of the above is correct.

(C) either investment in the U.S. economy or U.S. net capital outflow.

A U.S. citizen buys bonds issued by an automobile manufacturer in Japan. Her expenditures are U.S. (A) foreign direct investment that increase U.S. net capital outflow. (B) foreign direct investment that decrease U.S. net capital outflow. (C) foreign portfolio investment that increase U.S. net capital outflow. (D) foreign portfolio investment that decrease U.S. net capital outflow.

(C) foreign portfolio investment that increase U.S. net capital outflow.

The main advantage of the use of money over barter is that (A) an exchange contract is more easily enforced in court if money is involved. (B) the use of money issued by the government increases confidence in the trade. (C) it removes the problem of the double coincidence of wants. (D) some buyers can get bargains if the value of money changes. (E) None of the above is an advantage of the use of money.

(C) it removes the problem of the double coincidence of wants.

The idea that inflation is caused by too much money chasing too few goods means that (A) there is a surplus of money supplied relative to the quantity of money demanded. (B) unemployment is too high. (C) quantity supplied is less than quantity demanded. (D) quantity supplied exceeds quantity demanded. (E) the economy is beset by surpluses.

(C) quantity supplied is less than quantity demanded.

The discouraged worker effect causes (A) the official unemployment statistics to overstate the true degree of unemployment during a downturn. (B) other workers to lose faith in their managers. (C) the official unemployment statistics to understate the true degree of unemployment during a downturn. (D) All of the above are correct. (E) None of the above is correct

(C) the official unemployment statistics to understate the true degree of unemployment during a downturn.

A discouraged worker is a worker who has (A) entered the labor force rather than stay at home. (B) not been able to complete training. (C) withdrawn from the labor force rather than keep searching for a job. (D) withdrawn from the labor force in the hope of finding a better job. (E) entered the labor force rather than go to school.

(C) withdrawn from the labor force rather than keep searching for a job.

Suppose the Fed decides to raise reserve requirements. What will happen to the simple money multiplier? (A) Its effect on the multiplier cannot be predicted with the information given. (B) It may increase, depending on how much money is in deposits. (C) It may decrease, depending on how much money is in deposits. (D) It will decrease. (E) It will increase.

(D) It will decrease.

Janet is receiving a 15% pay raise. If the rate of inflation is 12% then (A) it is impossible to tell what is happening to Janet's purchasing power without further information. (B) Janet's purchasing power is unaffected by either inflation or the pay raise because they are expressed in nominal, and not real, terms. (C) Janet's purchasing power is falling. (D) Janet's purchasing power is rising. (E) Janet's purchasing power is rising because inflation has no effect on purchasing power.

(D) Janet's purchasing power is rising.

Which is the chain of events associated with an expansionary monetary policy? (A) The Fed buys securities in the open market; excess reserves increase; the money supply drops. (B) The Fed buys securities in the open market; excess reserves decrease; the money supply rises. (C) The Fed sells securities in the open market; excess reserves increase; the money supply rises. (D) The Fed buys securities in the open market; excess reserves increase; the money supply rises. (E) The Fed sells securities in the open market; excess reserves decrease; the money supply drops.

(D) The Fed buys securities in the open market; excess reserves increase; the money supply rises.

Bob, a Greek citizen, opens a restaurant in Chicago. His expenditures (A) increase U.S. net capital outflow and have no affect on Greek net capital outflow. (B) increase U.S. net capital outflow and increase Greek net capital outflow. (C) increase U.S. net capital outflow, but decrease Greek net capital outflow. (D) decrease U.S. net capital outflow, but increase Greek net capital outflow.

(D) decrease U.S. net capital outflow, but increase Greek net capital outflow.

The basic model of the labor market suggests that (A) in a world with no barriers to movement, people migrate to high-wage areas, thereby raising wages in the high-wage areas. (B) the United States should have unlimited immigration. (C) immigration creates a greater demand for labor. (D) in a world with no barriers to movement, people migrate to high-wage areas, thereby reducing wages in the high-wage areas. (E) the United States should close its borders to immigration.

(D) in a world with no barriers to movement, people migrate to high-wage areas, thereby reducing wages in the high-wage areas.

When a depository institution makes a loan, (A) the composition of the money supply changes as currency drops and checkable accounts rise. (B) M1 rises but M2 declines. (C) there is no change in the overall money supply. (D) it creates money. (E) the money supply temporarily drops until the loan is repaid.

(D) it creates money.

Inflation tends to redistribute income from (A) workers to retirees. (B) demanders to supplies. (C) suppliers to demanders. (D) lenders to borrowers. (E) borrowers to lenders.

(D) lenders to borrowers.

A country has a trade deficit. Its (A) net capital outflow must be positive, and saving is larger than investment. (B) net capital outflow must be positive and saving is smaller than investment. (C) net capital outflow must be negative and saving is larger than investment. (D) net capital outflow must be negative and saving is smaller than investment.

(D) net capital outflow must be negative and saving is smaller than investment.

Two years ago, Brenda quit her job to take care of her children. She has not looked for a job since then. According to official U.S. statistics, Brenda is (A) mostly unemployed. (B) unemployed. (C) in the labor force but without a job. (D) not in the labor force. (E) mostly employed.

(D) not in the labor force.

If there is a trade deficit, then (A) saving is greater than domestic investment and Y > C + I + G. (B) saving is greater than domestic investment and Y < C + I + G. (C) saving is less than domestic investment and Y > C +I + G. (D) saving is less than domestic investment and Y < C + I + G.

(D) saving is less than domestic investment and Y < C + I + G.

Required reserves are (A) independent of the amount of deposits at a bank. (B) required only for banks specified in the Federal Reserve Act and optional for all other banks. (C) the amount of reserves that must be held as vault cash. (D) the amount of reserves that must be held in readily available form.

(D) the amount of reserves that must be held in readily available form.

In order for monetary policy to work properly, the Fed needs the cooperation of (A) Congress. (B) the Fed district banks. (C) the President of the United States. (D) the banks and the public. (E) the state governors.

(D) the banks and the public.

If real interest rates are negative, then one may reasonably conclude that (A) lenders did not understand the difference between real and nominal interest. (B) lenders have already protected themselves against the effects of inflation. (C) government instituted price controls. (D) the economy experienced unexpected inflation. (E) borrowers had superior negotiating abilities.

(D) the economy experienced unexpected inflation.

In the open-economy macroeconomic model, the demand for loanable funds comes from (A) domestic investment. (B) net exports. (C) net capital outflow. (D) the sum of net capital outflow and domestic investment.

(D) the sum of net capital outflow and domestic investment.

Dana buys a $150 vase with a credit card. As a result of this purchase, (A) M2 decreased by $150. (B) M2 increased by $150. (C) M1 increased by $150. (D) there is no change in the money supply. (E) M1 decreased by $150.

(D) there is no change in the money supply.

Other things the same, if the Canadian real interest rate were to increase, Canadian net capital outflow (A) and net capital outflow of other countries would rise. (B) and net capital outflow of other countries would fall. (C) would rise, while net capital outflow of other countries would fall. (D) would fall, while net capital outflow of other countries would rise.

(D) would fall, while net capital outflow of other countries would rise.

he population of Workovia is estimated to be 100 million people, of which 5 million are under 16 years of age and another 5 million are institutionalized. The civilian labor force consists of 80 million, of which 60 million currently have a job. The unemployment rate is (A) 10% (B) 15% (C) 5% (D) 20% (E) 25%

(E) 25%

In the following, who would be best off with unexpected inflation? (A) A government employee getting salary increases every other year (B) A couple paying off a variable-rate mortgage (C) A retiree living off of fixed interest from a bank account (D) A union worker whose contract specifies wage increases for the next five years (E) A student paying of a fixed-interest student loan

(E) A student paying of a fixed-interest student loan

The primary instrument the government uses to measure unemployment is the (A) Unemployed Population Survey. (B) the Survey of Businesses. (C) Census. (D) Current Business Survey. (E) Current Population Survey.

(E) Current Population Survey.

Jeff is seasonally unemployed. Which occupation is he most likely in? (A) Train conductor (B) Computer programmer (C) Police officer (D) Engineer (E) Farmer

(E) Farmer

If the Fed wants to pursue an expansionary policy, it can (A) buy securities, lower the discount rate, or raise reserve requirements. (B) buy securities, raise the discount rate, or raise reserve requirements. (C) sell securities, lower the discount rate, or lower reserve requirements. (D) sell securities, raise the discount rate, or raise reserve requirements. (E) buy securities, lower the discount rate, or lower reserve requirements.

(E) buy securities, lower the discount rate, or lower reserve requirements.

Joseph deposited a $100 in his checking account. This ________ currency by $100, ________ checkable deposits by $100, and ________. (A) increases; increases, increases M1 by $100. (B) decreases; increases; increases M1 by $100. (C) decreases; decreases; decreases M1 by $100. (D) decreases; increases; decreases M1 by $100. (E) decreases; increases; M1 is unchanged

(E) decreases; increases; M1 is unchanged

The Federal Open Market Committee (A) is a temporary committee that meets in times of financial emergencies. (B) is the part of the Fed that gathers information through open interaction with the financial markets. (C) is, by law, required to have meetings open to the public. (D) runs the Federal Reserve System. (E) sets the direction of U.S. monetary policy.

(E) sets the direction of U.S. monetary policy.