Chapter 25

By raising the discount rate, the Fed encourages banks to make....loans to households and firms, which will...checking account deposits and the money supply.

D. fewer;decrease

Which of the following is included in M2?

D. All of the above are included in M2

In the definition of money supply, where do credit cards belong?

D. Credit cards are not included in the definition of money supply

Velocity is defined as:

D. V=(PXY)/M

To increase the money supply, the FOMC directs the trading desk, located at the Federal Reserve Bank of New York, to

A. buy U.S. Treasury securities from the public

Which of the following is not a factor that helped lead to the financial panic of 2008?

A. deposit insurance for all commercial banks

The Fed conducts monetary policy primarily through

A. open market operations

Which of the following is an asset to a bank?

A. reserves

If prisoners of war use cigarettes as money, then cigarettes are

D. commodity money

The Fed uses three monetary policy tools. Which of the following is not one of those tools?

D. federal funds rate setting

Which of the following statements is correct about currency in the United States?

B. More than 80 percent of all goods and services are purchased with checking account balances rather than with currency

Which of the following statements is true?

B. Today, people are not allowed to write checks against their savings account balances

Money serves as a standard of deferred payment when

B. repayment of debts is made using money units

A double coincidence of wants refers to

B. the fact that for a barter trade to take place between two people; each person must want what the other one has

The theory concerning the link between the money supply and the price level that assumes the velocity of money is constants is called

B. the quantity theory of money

Warren Buffet hods money and wealth. He also earns an annual income. Which of the following is largest?

C. His wealth

The key role that banks play in the economy is to

C. accept deposits and make loans

The actions the Federal Reserve takes to manage the money supply and interest rates to pursue economic objectives is called

C. monetary policy

Assets that are generally accepted in exchange for goods and services or for payment of debts are specifically called

C. money

Money serves as a unit of account when

C. prices of goods and services are stated in the monetary unit

By making exchange easier, money allows for

C. specialization and higher productivity