econ final

The beta for an asset considered to be risk-free

equals zero.

If, in the market for money, the quantity of money demanded exceeds the money supply, the interest rate will

rise, causing households and businesses to hold less money.

The Federal Reserve System changes the money supply by

providing forward guidance about how it intends to conduct monetary policy.

According to the Taylor rule, if there is no unemployment gap and

if inflation rises to 4 percent, the Fed should raise its targeted interest rate to 7 percent.

Which of the following is included as part of the M1 money supply?

$200,000 balance in the checking account of Main Street Trading Corp.

If an investment is equally likely to return 10 percent per year or 15 percent a year, then its average expected rate of return is

12.5 percent

The largest mutual fund, as of October 2021, held approximately _________billion in assets under management.

411

Which one of the following is true about the U.S. Federal Reserve System?

There are 12 Federal Reserve districts each with one central bank.

Which of the following is not a result of policy actions taken by the Fed since the financial crisis of 2007-2009?

a very volatile federal funds rate

The goal of the Federal Reserve when buying and selling government securities in open-market operations is to

affect economic activity.

M1 is composed of

currency in circulation, checkable deposits, and savings deposits

Before the financial crisis of 2007-2009, if the Fed bought U.S. securities in the open market, it

increased the reserves of the banking system, increasing the amount of reserves for overnight loans in the federal funds market, lowering the federal funds rate.

In terms of the mechanics of quantitative easing,

it works the same as open-market operations.

The Fed's response to the zero lower bound problem was quantitative easing (QE), where the Fed buys large amounts of long-term bonds in order to

lower longer-term interest rates.

When the Fed undertakes "reverse repo" transactions with nonbank financial firms, it is trying to influence the behavior of the

nonbanks that operate in the money market.

Prior to the 2007-2009 financial crisis, the most frequently employed monetary policy tool was

open market operations

The Federal Open Market Committee (FOMC) of the Federal Reserve System is primarily for

setting the Fed's monetary policy and directing the purchase and sale of government securities.

There is an asset demand for money primarily because of which function of money?

store of value

The primary risk that bondholders face is that

the bond issuer will default.

As expansionary monetary policy tools, quantitative easing (QE) and traditional open-market purchases differ in all of the following, except

the desired goal of shifting aggregate demand.

The amount of money people want to hold for use as a medium of exchange is the

transactions demand for money.