Econ credit quiz questions
Which body of the Federal Reserve System sets the majority of U.S. monetary policy?
The Federal Open Market Committee
Sometimes there can be benefits from inflation. One of them is that more labor might be demanded after a rise in the price level. For this to happen, the _______wage would be fixed and _______the competitive equilibrium level.
nominal; above
The Federal Reserve System is __________.
the central bank of the United States
If the price level increases, __________.
the money demand curve shifts to the right
Fiat money_______
Has no intrinsic value
Which of these predictions can be made using the growth rates associated with the quantity theory of money equation?
If the money supply grows at a faster rate than real GDP, there will be inflation
When we say that money serves as a unit of account, we mean that:
Prices of goods and services are quoted in terms of money.
The Board of Governors of the Federal Reserve has _________ members that are appointed for staggered _________ by the __________ and confirmed by the Senate.
Seven, 14-year terms, President
The value of the marginal product of labor is the ____________.
market value of a worker's additional output for a firm.
Credit cards are:
not part of the money supply.
The Fed conducts monetary policy primarily through:
open market operations.
One of the primary goals of the Federal Reserve is __________.
price level stability
The theory concerning the link between the money supply and the price level that assumes the velocity of money is constant is called the __________.
quantity theory of money
The history of hyperinflations includes __________.
recent events. Hyperinflations have occurred in recent times as well as the past
According to the quantity theory of money, the growth rate of money supply equals
the growth rate of nominal GDP
When the interest rate decreases, __________.
there is movement down a stationary money demand curve
Velocity is defined as:
V = (P x Q) / M
Suppose that velocity is 3 and the money supply is $500 million. According to the quantity theory of money, nominal output equals:
1.5 billion (MxV=PxQ)
How many Federal Reserve districts are there?
12
Which of the following factors does not cause a shift in the labor demand curve?
Changes in the wage rate.
Which of these statements about interest rates and inflation is true?
If there is zero inflation, the nominal interest rate is equal to the real interest rate.
The sum of all currency in the hands of the public plus demand deposits and other checkable deposits plus traveler's checks is the official definition of:
M1
What are the three functions that money serves in an economy?
Medium of exchange, store of value and unit of account
The actions the Federal Reserve takes to manage the money supply and interest rates in order to pursue economic objectives are called __________.
Monetary policy
According to the quantity theory of money, if the Fed engages in an open market purchase of bonds _______GDP will __________
Nominal; increase
Which of these facts is true about the creation of the Federal Reserve System (the Fed)?
The Fed was created in 1913.
Who is the chairperson of the Federal Open Market Committee (FOMC)?
The chairperson of the Board of Governors.
To increase the money supply, the FOMC directs the trading desk located at the Federal Reserve Bank of New York to:
buy U.S. Treasury securities from the public.
If the FOMC decides to increase the money supply, it orders the trading desk at the Federal Reserve Bank of New York to:
buy U.S. Treasury securities.
A sustained decrease in the average level of prices and wages in the economy is __________.
called deflation
If the Fed decreases the money supply and increases interest rates in order to reduce inflation, it is engaging in __________.
contractionary monetary policy
When interest rates on Treasury bills and other financial assets are low, the opportunity cost of holding money is __________ , so the quantity of money demanded will be __________.
low, high
