Econ 101

Monetary stimulus requires about ________ for its full effect

12 to 18 months

the Federal Reserve Act establishing the Federal Reserve System was passed by Congress in..

1913

The discount rate is generally set ________ the fed funds rate

3/4 to 1 percentage point higher than

the current chairman of the Federal Reserve Board is...

Ben Bernanke

T/F The Federal Reserve has the power to issue money, but does not influence interest rates.

False

T/F The Federal Reserve is under the ultimate direction of the congress of the US because Congress can cut the budge of the Federal Reserve if the Federal Reserve Board of Governors does not follow the instructions of Congress

False

T/F The current chairman of the Federal Reserve is Alan Greenspan

False

T/F One of the goals of monetary policy is to make sure that the inflation rate and the overall rate of growth in the economy are the same.

False

The target federal funds rate is set by the...

Fed's Open Market Committee

The Fed's margin requirements control...

How much people can borrow when they buy stock

which of the following is a tool of the Federal Reserve System?

Performing open market operations in order to stimulate the economy during recessions and prevent inflation

if the Federal Reserve raises the federal funds rate, which one of the following will tend to happen as a result?

The demand curve for goods and services bought with a credit card will shift to the left

If the Federal Reserve increases the federal funds rate dramatically, which of the following would we expect to happen?

The price of cars would decrease

T/F Generally, if the inflation rate is too high, the Federal Reserve will want to raise the federal funds rate

True

T/F The Federal Reserve's most-used policy tool is open market operations, which control short-term interest rates

True

which of the following would be the result of increasing the money available for banks to lend?

a decrease in the federal funds rate

The Federal Reserve was founded by Congress in 1913 in response to...

a financial panic in 1907

When Fed Chairman Paul Volcker raised interest rates shortly after he became chairman in 1979, the effect was...

a pair of severe recession in 1980 and 1981-1982

Which of the following would shift the demand curve for cars to the right?

an increase in discount lending by the Fed to banks.

Which of the following would shift the supply curve for loans to the right, reducing short-term interest rates

an increase in the amount of money the Fed makes available to banks

people who have bought a house using an adjustable-rate mortgage are most likely to be hurt by...

an increase in the federal funds rates

Inflation targeting is a policy in which the Fed...

announces an inflation target and then runs monetary policy to hit that target

members of the Board of Governors of the Federal Reserve are...

appointed by the president of the US

which of the following is NOT one of the main goals of monetary policy?

balancing the federal budget

If the Federal Reserve raises the federal funds rate, which one of the following will NOT tend to happen as a result?

businesses will find it easier to obtain funds to expand

One potential problem with having private currencies- such as "Bank of Sam" dollars and "Bank of Fred" dollars- is that it will be difficult for individuals to...

compare Sam dollars to Fred dollars

in response to the financial crisis of 2007-2009, the Federal Reserve...

cut the fed funds rate from 5.25 percent to 2.0 percent

The Federal Reserve's response to the 2001 recession was to...

cut the federal fund rate over a three-year period

Alan Greenspan, who preceded Ben Bernanke as Fed chairman, was a proponent of

discretionary intervention

The Fed's response to the housing crisis of 2007 and 2008 was to...

encourage discount window borrowing.

T/F Lowering the federal funds rate will tend to reduce the overall price level in the economy

false

T/F When the Federal Reserve makes more money available for banks to lend, the demand curve for loans shifts to the right

false

When financial institutions borrow from the Federal Reserve, this is called...

going to the discount window.

Having government-issued money makes it easier for policy makers to...

guide and control the economy

If the inflation rate is rising, which one of the following would the Fed need to do to reduce the inflation rate?

increase the federal funds rate

reducing the fed funds rate can increase GDP in the short term because at lower interest rates....

individuals and businesses will want to borrow and spend more

if the Federal reserve reduces the federal funds rate...

inflation is more likely to appear

Money can be used to but goods and services, and is accepted in turn as payment. this is the __________ use of money...

medium of exchange

The Fed's control over interest rates, direct lending to financial institutions,and other policy tools is called

monetary policy

cutting the interest rate paid on reserves should make banks...

more willing to use their funds for lending

in the aftermath of the terrorist attacks of September 11, 2001 ______ banks failed because of the disruption to business on Wall Street

no

an element of trust is built into money because...

one must expect that it will still have value when the holder of money wants to spend it in the future

which one of the following is among the federal reserve's tools to control short-term interest rates?

open market operations

If the economy has been experiencing high inflation, as it was in the late 1970s, sharply reducing that inflation rate through monetary policy is likely to...

produce a recession in the short run

If a major crash of the financial system began, the Federal Reserve would...

provide money to banks in order to reassure investors and prevent banks from going bankrupt

which of the following is not one of the three purposes served by money?

providing a means for regulators to track economic activity

cutting the fed funds rate...

puts upward pressure on prices

to produce financial stability, the Federal Reserve would want to...

raise the money supply and cut interest rates during a recession to stimulate spending

which of the following is one of the main goals of monetary policy?

smoothing out the business cycle

money enables us to make comparison of value among goods and services. This is the ________ use of money....

standard of value

In the US and in virtually every other country, the printing of money is..

strictly a government monopoly

Alan Greenspan argued that a low, stable inflation rate was the best way to achieve....

strong economic growth

One of the advantages of monetary policy over fiscal policy is that...

the Fed can react more quickly than the legislature can.

Which of the following statements about monetary policy is true?

the Fed's policies tend to take effect more quickly and with less political influence than fiscal policy

when Paul Volcker became Federal Reserve chairman in 1979...

the rate of inflation was 12 percent, and he managed to reduce it, but doing so caused a recession

T/F The discount window allows the Fed to lend money to financial institutions that are running short of funds

true

T/F When the Federal Reserve acts as a lender of last resort, it is making sure that banks have the money they need to continue to operate.

true

Money serves as a medium of exchange..

use money to buy good and services, and accept it as a payment for the goods and services you sell