Econ Multi

The functions of money are to serve as a: A.) Resource allocator, method for accounting, and means of income distribution B.) Unit of account, store of value, and medium of exchange C.) Determinant of consumption, investment, and gov spending D.) Factor of production, exchange, and aggregate supply

B

The interest rate that banks charge one another for the loan of excess reserves is the: A.) Prime interest rate B.) Federal funds rate C.) Discount rate D.) Term auction rate

B

The purchase and sale of government securities by the Fed is called: A.) Federal funds market B.) Open market operations C.) Money market transactions D.) Term auction facility

B

The reserve ratio is equal to: A.) A commerical bank's checkable deposit liabilities divided by its requierd reserves B.) A commercial bank's required reserves divided by its checkable deposit liabilities C.) A commercial bank's checkable deposit liabilities multiplied by its excess reseves D.) A commerical bank's excess reserves divided by its required reserves

B

When the federal reserve acts to tighten money and credit in the economy, it is trying to reduce: A.) The unemployment rate B.) The inflation rate C.) The target federal funds rate D.) The discount rate

B

A commercial bank has checkable deposit liabilities of $50,000 and a reserve ratio of 20%. What is the amount of required reserves? A.) $10,000 B.) $50,000 C.) $250,000 D.) $1 million

A

An increase in nominal GDP will: A.) Increase the transactions demand and total demand for money B.) Decrease the transactions demand and total demand for money C.) Increase the transactions demand for money but decrease the total demand for money D.) Decrease the transactions demand for money but increase the total demand for money

A

Assume that the stock of money is determined by the federal reserve and does not change when the interest rate changes. The situation means that the: A.) Supply of money curve is vertical B.) Supply of money curve is horizontal C.) Demand for money curve is directly related to the interest rate D.) Supply of money curve is inversely related to the interest rate

A

Cash held by a bank in its vault is a part of the bank's: A.) Reserves B.) Liabilities C.) Money Supply D.) Net Worth

A

What "backs" the money supply of the U.S.? A.) The U.S. gov's ability to keep the value of money relatively stable B.) The amount of gold the U.S. gov has on deposit at its banks C.) The fact that currency is issued by the federal reserve system D.) The fact that the intrinsic value of coins in circulation is greater than their face value

A

What function is money serving when you deposit money in a savings account? A.) Store of value B.) Unit of account C.) A checkable deposit D.) A medium of exchange

A

A newspaper headline reads: "Fed cuts federal funds rate for the fifth time this year." This headline indicates that the federal reserve is most likely trying to: A.) Reduce inflation in the economy B.) Raise interest rates C.) Ease monetary policy D.) Tighten monetary policy

C

Checkable deposits are included in: A.) M1 B.) M2 C.) Both M1 and M2 D.) Neither M1 or M2

C

If the Fed buys gov securities from commercial banks in the open market: A.) The Fed gives the securities to the commercial banks and increases the banks' reserves B.) The Fed give the securities to the commercial banks and decreases the banks' reserves C.) Commercial banks give the securities to the Fed, and the Fed increases the banks' reserves D.) Commercial banks give the securities to the Fed, and the Fed decreases the banks' reserves

C

One major advantage of money serving as a medium of exchange is that it allows society to: A.) Transfer purchasing power from the present to the future B.) Measure the relative worth of products C.) Escape the complications of barter D.) Use credit cards instead of currency

C

The basic requirement of money is that is be: A.) Backed by precious metals- gold or silver B.) Authorized as legal tender by the central government C.) Generally accepted as a medium of exchange D.) Some form of debt or credit

C

The fundamental objective of monetary policy is to assist the economy in achieving: A.) A rapid pace of economic growth B.) A money supply which is based on the gold standard C.) A full-employment, noninflationary level of total output D.) A balanced-budget consistent with full-employment

C

When a bank grants a loan to a customer who gets the funds and keeps it at home for a while, then the money supply will: A.) Not change b/c demand deposits did not go up B.) Not change b/c the money was not spent C.) Increase D.) Decrease

C

When the interest rate falls, the: A.) Asset demand for money decreases B.) Transactions demand for money increases C.) Total amount of money demanded increases D.) Total amount of money demanded decreases

C

Which is considered an advantage of monetary policy compared to fiscal policy? A.) The ability to reduce the budget deficit B.) It does not have any of the time lags of fiscal policy C.) Its protection from political pressure D.) Its cyclical asymetry

C

An asset's liquidity refers to its ability to be A.) Bought and stored B.) Increasing in value over time C.) Used and enjoyed D.) A means of payment

D

Other things equal, an expansion of commercial bank lending: A.) Change the composition, but not the size, of the money supply B.) Is desirable during a period of demand-pull inflation C.) Reduces the money supply D.) Increases the money supply

D

Suppose a commercial banking system has $240,000 of outstanding checkable deposits and actual reserves and $85,000. If the reserves ratio is 25%, the banking system can expand the supply of money by a maximum of: A.) $75,000 B.) $25,000 C.) $5,000 D.) $100,000

D

The federal open market committee (FOMC) of the federal reserve system is primarily for A.) Maintaining cash reserves that can be used to settle international transactions B.) Supervising banks to make sure that markets are open to all and remain competitive C.) Issuing currency and acting as the fiscal agent for the federal government D.) Setting the Fed's monetary policy and directing the purchase and sale of gov securities

D

The lending ability of commercial banks increases when the: A.) Reserves ratio is raised B.) Treasury collects tax revenues C.) Fed sells securities in the open market D.) Fed buys securities in the open market

D

When there is inflation in the economy, it implies that the A.) Price index is rising and the purchasing power of money is also rising B.) Price index is falling and the purchasing power of money is also falling C.) Price index is falling and the purchasing power of money is rising D.) Price index is rising and the purchasing power of money is falling

D