ECON Test #3
If GDP is $16 trillion and the money supply is $4 trillion, then the velocity of money is a. 0.25. b. 12. c. 4. d. 20.
c
During a credit crunch, the excess reserve ratio will a. increase. b. remain unchanged. c. decrease. d. become negative.
a
If Claire were to sell a US Treasury security to the Federal Reserve in the secondary market, receiving a check from the Fed as payment, and then cash the check at her bank and hold onto the cash, then a. the monetary base will increase but bank reserves will stay the same. b. both the monetary base and bank reserves will increase. c. the monetary base will decrease but bank reserves will stay the same. d. both the monetary base and bank reserves will decrease.
a
The channel through which the Federal Reserve impacts the monetary base is a. bank reserves. b. interest rates. c. bank deposits. d. bank regulations.
a
When a bank repays a loan at the discount window to the Federal Reserve, it will __________ the monetary base by __________ bank reserves. a. decrease; decreasing b. increase; decreasing c. decrease; increasing d. increase; increasing
a
When a negative shock to the economy is intensified by worsening financial market conditions, it is referred to as a(n) a. financial accelerator. b. financial disaster. c. economic accelerator. d. shock accelerator.
a
When the Federal Reserve buys US Treasury securities on the open market, it is attempting to a. lower interest rates. b. raise interest rates. c. reduce inflation. d. slow economic growth.
a
When the link between M1, M2, and inflation broke down in the 1980s, many economists argued that the best policy approach was to have an explicit inflation target. The biggest problem with an explicit inflation target is a. that it requires perfect foresight on the part of the Federal Reserve because of the lagged impact of monetary policy instruments. b. determining what that target should be. c. that it puts too much emphasis on stable prices over other possible goals for monetary policy. d. determining which measure of inflation to use.
a
When a central bank wants to pursue a contractionary monetary policy, it should a. pump excess reserves into the banking system. b. decrease the required reserve ratio. c. increase the required reserve ratio. d. decrease the currency ratio.
c
When borrowers are hesitant to borrow to finance purchases because of pessimism about the future and banks are hesitant to lend because of a fear that borrowers will default on their loans, the economy is said to be experiencing a(n) __________ trap. a. stagflationary b. inflationary c. liquidity d. interest rate
c
When the excess reserve ratio decreases, the impact of changes in the monetary base on the money supply is a. reversed. b. unchanged. c. strengthened. d. weakened.
c
Alistair tells a friend that he likes to deposit his entire paycheck into his checking account just in case prices fall. This is an example of the __________ demand for money. a. inflationary b. transactions c. speculative d. precautionary
d
An advantage of inflation rate targeting is a. inflation rates are easy to measure and forecast. b. there is almost no lag in inflation rate data. c. it allows the Federal Reserve an optimal amount of flexibility in conducting monetary policy. d. it reduces inflationary expectations.
d
When the currency ratio increases, the impact of changes in the monetary base on the money supply is a. reversed. b. unchanged. c. strengthened. d. weakened.
d
When the economy is caught in a liquidity trap, expansionary monetary policy will a. result in inflation. b. result in a significant contraction in economic activity. c. result in a significant expansion of economic activity. d. have little impact on the economy.
d
In the Taylor Rule formulation for setting a federal funds target rate, a negative output gap means that the a. output in the economy is below the economy's potential output. b. output in the economy is above the economy's potential output. c. economy is operating at its full employment level. d. economy is operating above its full employment level.
a
In the early days of the Fed, the discount rate, the rate at which the regional Federal Reserve banks would lend to commercial banks, was determined by the a. regional Federal Reserve banks. b. board of governors. c. Secretary of the Treasury. d. Federal Reserve bank of New York.
a
Monetary policy has the best chance of influencing the level of __________ unemployment. a. cyclical b. frictional c. structural d. seasonal
a
Some economists would argue that financial market stability should be an important goal for the Federal Reserve. This could be achieved by making sure that a. interest rates are stable, exchange rates are stable, and financial crises do not occur. b. unemployment is low, prices are stable, and regulation is minimal. c. prices are stable, interest rates are stable, and unemployment is low. d. regulation is minimal, prices are stable, and interest rates are stable.
a
When the price level falls, indebted persons will be __________ off because the real value of their debt will have __________. a. worse; increased b. better; increased c. worse; decreased d. better; decreased
a
Prior to the 1980s, the Federal Reserve could use targets for M1 and M2 to conduct monetary policy because a. inflation was well under control. b. there was a fairly good link between M1, M2, and inflation. c. business cycles were fairly predictable. d. M1 and M2 were easy to measure and report.
b
Asset bubbles make it plain that monetary policy must be made in a world full of a. irrationality. b. political pressure. c. uncertainty. d. instant media scrutiny.
c
Joe has a $1,000 debt. He is a plumber and earns $50 per hour. The real burden of Joe's debt is a. $1,000. b. $50 per hour. c. 20 hours of work. d. not enough information to tell.
c
One of the concerns about the Federal Reserve targeting high employment is that it might a. sacrifice its focus on regulation. b. lose sight of its responsibility as a lender of last resort. c. neglect the goal of stable prices. d. become subject to greater influence by the executive branch of government.
c
Irving Fisher's equation of exchange is expressed as a. MS × PL = V × T. b. MS / V = PL × T. c. MS × T = PL × V. d. V = (PL × T) / MS.
d
One thing on which both the political right and the political left in the United States agree regarding the Federal Reserve is that its a. chairperson should be an elected position. b. primary focus should be on price stability. c. regulatory authority should be strengthened. d. independence should be limited.
d
Suppose the current real federal funds rate in the economy is 2.0%, the current inflation rate is 1.0%, the Federal Reserve's target inflation rate is 2.0%, and the output gap is -2.0%. According to the Taylor Rule, the Federal Reserve's target federal funds rate should be a. 3.0%. b. 2.5%. c. 2.0%. d. 1.5%.
d
In modern times, the primary goal of central banks is a. the regulation of financial markets. b. price stability. c. financing government spending. d. supporting economic growth.
b
In the 1990s, dot-com companies flourished and their valuations rose dramatically. This phenomenon has been referred to as a(n) a. rational market. b. asset bubble. c. irrational market. d. irrational bubble.
b
A potential problem of a more politically controlled central bank is that a. politicians may want to pursue monetary policies that are bad in the short run but good in the long run. b. politicians may want to pursue monetary policies that are good in the short run but bad in the long run. c. politicians may take too long to decide on the direction of monetary policy. d. conducting both monetary policy and fiscal policy as part of the political process may produce inconsistent results.
b
Actual bank reserves are equal to a. deposits at the Fed + excess reserves. b. required reserves + excess reserves. c. vault cash + required reserves. d. deposits at the Fed + required reserves.
b
Banks that have some financial difficulty and borrow from the Federal Reserve in what is known as secondary credit will pay an interest rate equal to the a. discount rate. b. discount rate plus a penalty. c. federal funds rate. d. federal funds rate plus a penalty.
b
Consider the following data about the economy: currency outstanding (C) = $1 trillion, total deposits (D) = $750 billion, total reserves (R) = $76 billion, and the required reserve ratio (RR ratio) = 10%. If the Federal Reserve increases the monetary base by $1 billion, the money supply will increase by a. $1.00 billion. b. $1.63 billion. c. $2.06 billion. d. $3.15 billion.
b
A proposed alternative to the Taylor Rule that uses the consumer price index core inflation rate over the previous 12 months and the seasonally adjusted unemployment rate is known as the __________ Rule. a. Bernanke b. Greenspan c. Mankiw d. Yellen
c
Among the responsibilities of the Fed is a. printing US currency. b. repaying the federal government debt. c. acting as the fiscal agent of the US Treasury. d. setting market interest rates.
c
At its inception, the power of the Federal Reserve rested in the a. board of governors housed in the Treasury department. b. New York Federal Reserve bank. c. 12 independent regional Federal Reserve banks. d. commercial banks that became members of the Federal Reserve system.
c
Federal Reserve notes are considered to be a. assets of the US Treasury. b. liabilities of the US Treasury. c. liabilities of the Federal Reserve. d. assets of the Federal Reserve.
c
Consider the following data about the economy: currency outstanding (C) = $1 trillion, total deposits (D) = $750 billion, total reserves (R) = $76 billion, and the required reserve ratio (RR ratio) = 10%. What is the level of excess reserves for this economy? a. $1 billion b. $10 billion c. $75 billion d. $76 billion
a
If the European Central Bank is pursuing a contractionary monetary policy, it will a. raise the minimum reserve requirement. b. lower the interest rate paid by its deposit facility. c. sell assets to financial institutions through its open market operations. d. lower the minimum reserve requirement.
a
Initially, quantitative easing was not much help in creating economic growth because a. banks did not lend out the excess reserves that were created by quantitative easing. b. the Federal Reserve also increased the required reserve ratio so additional reserves were not available for lending. c. the Federal government began to cut spending, which counteracted the expansionary monetary policy. d. the expansion of the monetary base was inflationary.
a
John Maynard Keynes argued that there were three reasons that people demand money. They are the a. transactions motive, precautionary motive, and speculative motive. b. quantity motive, speculative motive, and transparency motive. c. transactions motive, precautionary motive, and transparency motive. d. precautionary motive, speculative motive, and wealth motive.
a
Monetization of public debt can lead to a rapid increase in the money supply and hence to a. inflation. b. stagflation. c. unemployment. d. economic growth.
a
The academic literature on central bank independence shows a. a strong negative correlation between independence and inflation. b. mixed results with some studies showing a negative correlation between central bank independence and inflation and other studies showing a positive correlation. c. a strong positive correlation between independence and inflation. d. absolutely no relationship between independence and inflation.
b
Nobel Prize-winning economist Joseph Stiglitz has argued that, at the time of the Great Recession, the conduct of monetary policy in the United States focused on six generally accepted principles, including a. price stability is a necessary and almost sufficient condition for economic stability. b. among the twin evils of unemployment and inflation, inflation is the more important on which to focus. c. inflation is always and everywhere a monetary phenomenon. d. asset bubbles are a common occurrence in market economies.
a
One of the biggest challenges the Federal Reserve faces in conducting monetary policy is the existence of __________ lags. a. information and impact b. excess reserve and money supply c. meeting and analysis d. information and analysis
a
The Bank of England has two primary responsibilities, which are __________ and __________. a. monetary stability; financial stability b. employment stability; monetary stability c. economic growth; employment stability d. economic growth; financial stability
a
The responsibilities of the European Central Bank include a. monetary policy, foreign exchange operations, and maintenance of the payments system. b. management of gold reserves, monetary policy, and foreign exchange operations. c. holding and management of official foreign reserves of Euro area countries, monetary policy, and management of economic growth in EuroZone countries. d. management of economic growth in EuroZone countries, monetary policy, and foreign exchange operations.
a
The securities that the Federal Reserve holds on its balance sheet include a. US Treasury securities, federal agency debt, and privately issued mortgage-backed securities. b. privately issued stocks, US Treasury securities, and federal agency debt. c. municipal bonds, privately issued stocks, and US Treasury securities. d. US Treasury securities, municipal bonds, and federal agency debt.
a
Consider the following data about the economy: currency outstanding (C) = $1 trillion, total deposits (D) = $750 billion, total reserves (R) = $76 billion, and the required reserve ratio (RR ratio) = 10%. What is the level of required reserves for this economy? a. $50 billion b. $75 billion c. $76 billion d. $100 billion
b
Consider the following data about the economy: currency outstanding (C) = $1 trillion, total deposits (D) = $750 billion, total reserves (R) = $76 billion, and the required reserve ratio (RR ratio) = 10%. What is the money multiplier for this economy? a. 1.00 b. 1.63 c. 2.06 d. 3.15
b
Following the 2007 financial crisis, the Federal Reserve created the term auction facility (TAF) in order to a. reduce excess bank reserves and take liquidity out of financial markets. b. overcome the stigma banks experienced from borrowing from the Fed at the discount window in order to add liquidity to financial markets. c. better regulate the financial system. d. force banks to make loans to add liquidity to financial markets.
b
Following the Great Depression, the power of the Fed shifted to the a. New York Federal Reserve Bank. b. Federal Open Market Committee. c. board of governors of the Federal Reserve. d. Secretary of the Treasury.
b
Government deficits can complicate monetary policy because government borrowing can lead to a. "crowding out," which leads to lower interest rates. b. "crowding out," which leads to higher interest rates. c. "crowding in," which leads to lower interest rates. d. "crowding in," which leads to higher interest rates.
b
If the US Treasury engages in a foreign exchange intervention to lower the value of the dollar relative to the euro by having the Federal Reserve sell dollars and buy euros in the foreign market, how will this affect the monetary base? a. There will be no impact on the monetary base. b. The monetary base will increase. c. The monetary base will decline. d. The composition of the monetary base will change with no impact on the overall size of the monetary base.
b
If the goal of monetary policy is to keep interest rates stable, the Federal Reserve's response to increases in the demand for money will be to a. decrease the supply of money. b. increase the supply of money. c. hold the supply of money constant. d. decrease the demand for money.
b
In its early days, the Fed's role as a lender of last resort was subject to a. the gold standard. b. the real bills doctrine. c. the discount rate doctrine. d. approval by the Secretary of the Treasury.
b
In the face of a credit crunch, the Federal Reserve will most likely attempt to a. raise interest rates in order to inject liquidity into the financial system. b. lower interest rates to inject liquidity into the financial system. c. raise interest rates in order to take liquidity out of the financial system. d. lower interest rates in order to take liquidity out of the financial system.
b
Irving Fisher's equation of exchange led to the conclusion that the __________ is a function of the level of __________ income in the economy. a. demand for money; real b. demand for money; nominal c. supply of money; real d. supply of money; nominal
b
Open market operations in which the European Central Bank specifies an interest rate at which it will lend and then participating banks submit bids on the amount of money they wish to borrow at that rate are known as __________ tenders. a. fixed-rate reverse b. fixed-rate standard c. variable-rate standard d. variable-rate reverse
b
The Federal Reserve was created largely in response to the a. start of World War I. b. Panic of 1907. c. European immigration at the end of the nineteenth and beginning of the twentieth centuries. d. rise of industrial trusts.
b
The biggest change in the Federal Reserve's balance sheet between May 2007 and March 2013 was the __________ on the __________ side of the balance sheet. a. increase in gold; asset b. jump in depository institution deposits; liability c. increase in currency outstanding; liability d. decrease in repurchase agreements; asset
b
The board of governors of the Federal Reserve has three primary responsibilities, which are a. oversight of the printing of money, commercial bank regulation, and the operations of the Fed. b. the operations of the Fed, commercial bank regulation, and monetary policy. c. monetary policy, fiscal policy, and the operations of the Fed. d. maintenance of the gold standard, the operations of the Fed, and monetary policy.
b
The central bank of Elousia has an inflation target of 1.5%. In the current year, a shock has lowered the inflation rate to 1.0%. Following the shock, firms and households can expect an inflation rate of a. 1.0%. b. 1.5%. c. 2.0%. d. 2.5%.
b
The entity responsible for making the monetary policy decisions in the European Central Bank is the a. president of the ECB. b. governing council. c. general council. d. executive board.
b
The main responsibility of the Bank of Japan is to use monetary policy to a. pursue employment stability. b. pursue price stability. c. pursue economic growth. d. eliminate poverty.
b
The president of which district bank is a permanent member of the Federal Open Market Committee? a. San Francisco b. New York c. Boston d. Washington
b
The purchase of direct debt and mortgage-backed securities by the Federal Reserve in November 2008 is referred to as a. qualitative easing. b. quantitative easing. c. a repurchase agreement. d. liquidity easing.
b
The three governing bodies of the European Central Bank are the a. open market committee, executive board, and governing council. b. governing council, general council, and executive board. c. governing council, general council, and executive committee. d. executive board, general council, and monetary authority.
b
The two major goals of Canadian monetary policy are __________ and __________. a. flexible exchange rates; economic growth b. flexible exchange rates; inflation control c. inflation control; economic growth d. economic growth; low unemployment
b
Those who argue against the pursuit of the dual objectives of stable prices and high employment point to the __________ as evidence that the pursuit of dual objectives is misguided. a. Great Depression b. inflation of the 1970s c. inflation of the 1990s d. Great Recession
b
Today in the Federal Reserve system, the power rests with the a. board of governors of the Federal Reserve. b. chair of the Federal Reserve. c. regional Federal Reserve banks. d. member banks.
b
When the Federal Reserve began its policy of quantitative easing in November 2008, there was __________ in the monetary base. a. no change b. a dramatic increase c. a slight increase d. a decline
b
When there is a high degree of trust in a country's banking system, the currency ratio will be a. zero. b. low. c. moderate. d. high.
b
Consider the following data about the economy: currency outstanding (C) = $2 trillion, total deposits (D) = $1 trillion, total reserves (R) = $60 billion, and the required reserve ratio (RR ratio) = 5%. If the Federal Reserve increases the monetary base by $1 billion, the money supply will a. increase by $1.00 billion b. decrease by $1.00 billion c. increase by $1.46 billion d. decrease by $1.46 billion
c
Consider the following data about the economy: currency outstanding (C) = $2 trillion, total deposits (D) = $1 trillion, total reserves (R) = $60 billion, and the required reserve ratio (RR ratio) = 5%. What is the money multiplier for this economy? a. 1.00 b. 1.26 c. 1.46 d. 2.46
c
Damon goes to the ATM machine and withdraws $500 in cash. How will this affect the monetary base? a. The monetary base will increase with the increase in currency in circulation. b. The monetary base will decline as bank reserves fall. c. The monetary base will remain unchanged with the increase in the currency in circulation being exactly offset by a decrease in bank reserves. d. The monetary base will increase by less than the size of the withdrawal as the increase in the currency in circulation will not be completely offset by a decrease in bank reserves.
c
If Clem were to buy a US Treasury security from the Federal Reserve in the secondary market, paying cash, then a. the monetary base will increase but bank reserves will stay the same. b. both the monetary base and bank reserves will increase. c. the monetary base will decrease but bank reserves will stay the same. d. both the monetary base and bank reserves will decrease.
c
If the US Treasury engages in a foreign exchange intervention to increase the value of the dollar relative to the yuan renminbi by having the Federal Reserve buy dollars and sell yuan renminbi in the foreign market, how will this affect the monetary base? a. There will be no impact on the monetary base. b. The monetary base will increase. c. The monetary base will decline. d. The composition of the monetary base will change with no impact on the overall size of the monetary base.
c
In 1968, Congress passed a key piece of legislation to protect consumers called the __________ Act. a. Fair Credit Reporting b. Fair Credit Billing c. Truth in Lending d. Truth in Savings
c
Overnight bank borrowing from the Federal Reserve is known as a. seasonal credit. b. secondary credit. c. primary credit. d. federal funds borrowing.
c
Some would argue that, even if asset bubbles exist, it is better to "clean up" the mess after the bubble breaks than to interfere with markets beforehand. Nobel Prize-winning economist Joseph Stiglitz argues that this is ill-advised because a. financial markets behave irrationally. b. uncertainty makes such attempts impossible. c. the attempt to do so immediately following the Great Recession was insufficient to the task. d. the Federal Reserve lacks the necessary tools.
c
Term auction lending was introduced by the Fed in the early stages of the 2007 financial crisis in order to a. increase market interest rates. b. stabilize inflation rates. c. increase the amount of liquidity in the financial system. d. decrease the amount of liquidity in the financial system.
c
The Bank of Canada conducts monetary policy by setting a target for the a. rate of inflation. b. rate of growth of the money supply. c. overnight interest rate. d. rate of economic growth.
c
The Bank of Japan's ability to respond to the global financial crisis that began in 2007 was limited by a. the control exerted on the Bank of Japan by the central government. b. high interest rates in Japan. c. a bloated balance sheet, which was a result of its response to a financial crisis in Japan in the late 1990s. d. lack of coordination between the Bank of Japan and the US Federal Reserve Bank.
c
The Federal Reserve district banks are primarily responsible for a. interacting with the state governments within their districts, tracking the flow of money in and out of their districts, and tracking the flow of commerce in and out of their districts. b. the check-clearing system, supervising and examining banks in their districts, and interacting with the state governments within their districts. c. the check-clearing system, supervising and examining banks in their districts, and keeping track of the economy in their districts. d. supervising and examining banks in their districts, keeping track of the economy in their districts, and tracking the flow of money in and out of their districts.
c
The Federal Reserve notices an increase in the public's desire to hold cash and fears that it may cause an increase in interest rates. To keep interest rates steady, the Federal Reserve would likely execute a a. repurchase agreement to provide a short-term reduction in the money supply. b. reverse repurchase agreement to provide a short-term reduction in the money supply. c. repurchase agreement to provide a short-term boost to the money supply. d. reverse repurchase agreement to provide a short-term boost to the money supply.
c
The central bank of Substantia uses a price level target to conduct monetary policy. In the current year, a shock has lowered the inflation rate from 1.5% to 1.0%. Following the shock, firms and households can expect an inflation rate of a. 1.0%. b. 1.5%. c. 2.0%. d. 2.5%.
c
The most important of the open market operations the European Central Bank has in its tool kit are its __________ operations. a. longer-term refinancing b. fine-tuning c. main refinancing d. structural liquidity-providing
c
The most often used of the Federal Reserve's monetary tools is a. discount window lending. b. changing the reserve requirement. c. open market operations. d. quantitative easing.
c
The rising popularity of ATMs has resulted in a(n) __________ as a tool of monetary policy. a. decline in the usefulness of open market operations b. decline in the usefulness of the discount rate c. decline in the usefulness of the reserve ratio d. increase in the usefulness of the reserve ratio
c
To ensure financial stability, the United Kingdom has a three-part system of regulators consisting of the a. Bank of England, Financial Services Authority, and House of Lords. b. Treasury Department, Bank of England, and House of Commons. c. Bank of England, Financial Services Authority, and Treasury Department. d. Financial Services Authority, British Parliament, and Bank of England.
c
When the required reserve ratio decreases, the impact of changes in the monetary base on the money supply is a. reversed. b. unchanged. c. strengthened. d. weakened.
c
As a country's financial markets become more highly developed, we can expect monetary policy to be a. completely ineffective. b. no more or less effective than before. c. less effective. d. more effective.
d
By far, the largest asset on the Federal Reserve's balance sheet is a. gold. b. coin. c. discount loans. d. securities.
d
Consider the following data about the economy: currency outstanding (C) = $1 trillion, total deposits (D) = $750 billion, total reserves (R) = $76 billion, and the required reserve ratio (RR ratio) = 10%. What is the currency ratio in this economy? a. 0.10 b. 0.50 c. 0.75 d. 1.33
d
Currency in circulation plus bank reserves plus US Treasury currency in circulation is referred to as a. M1. b. M2. c. M3. d. the monetary base.
d
During the Great Recession, the price level in the United States a. increased slightly. b. increased sharply. c. remained stable. d. fell sharply.
d
In order to overcome the stigma that might come from borrowing from the Federal Reserve following the 2007 financial crisis, the Federal Reserve created a. the discount window. b. quantitative easing. c. the Federal Open Market Committee (FOMC). d. the term auction facility (TAF).
d
In the 1970s, the Fed created the automated clearing house (ACH) in order to a. more effectively fulfill its financial market oversight function. b. centralize the collection and dissemination of economic information. c. enhance the protection of consumers. d. keep up with the increased paperwork associated with the administration of federal government debt.
d
Of the policy tools available to the European Central Bank, the most frequently used are the a. discount rates. b. standing lending facilities. c. minimum reserve requirements. d. open market operations (OMOs).
d
Suppose the current real federal funds rate in the economy is 1.5%, the current inflation rate is 3.0%, the Federal Reserve's target inflation rate is 2.0%, and the output gap is 1.0%. The Taylor Rule would suggest that the Federal Reserve's target federal funds rate should be a. 0.0%. b. lower than the current federal funds rate. c. about the same as the current federal funds rate. d. much higher than the current federal funds rate.
d
Suppose the current real federal funds rate in the economy is 2.0%, the current inflation rate is 1.0%, the Federal Reserve's target inflation rate is 2.0%, and the output gap is -2.0%. According to the Taylor Rule, the Federal Reserve's target federal funds rate should be a. 4.0%. b. 4.5%. c. 5.0%. d. 5.5%.
d
The Federal Reserve operates as a. a department of the executive branch of government. b. part of the legislative branch of government. c. part of the judicial branch of government. d. an independent entity.
d
The chair of the Federal Reserve becomes the chair by being a. elected in a vote of the members of Congress. b. elected by the people of the United States. c. appointed by the president of the United States and confirmed by both the House of Representatives and the Senate. d. appointed by the president of the United States and confirmed by the US Senate.
d
To achieve its goal of monetary stability, the Bank of England sets a target a. interest rate of 2%. b. economic growth rate of 2% per year. c. growth rate of the money supply of 2% per year. d. inflation rate of 2% per year.
d
Unemployment is not only terribly costly to people who are unemployed but also to society as a whole because a. unemployment will depress the price level. b. businesses will suffer the cost of underutilization of machinery and equipment. c. government must step in and support those who are unemployed. d. unemployment represents an underutilization of society's available resources.
d
When central banks were first created, their primary function was to a. regulate financial institutions. b. control inflation. c. stabilize the economy. d. finance government spending.
d
When the Federal Reserve increases the reserve ratio, the impact will be to a. increase the size of the spending multiplier. b. decrease the size of the spending multiplier. c. increase the size of the money multiplier. d. decrease the size of the money multiplier.
d
When the Federal Reserve makes a loan at the discount window to a bank, it will __________ the monetary base by __________ bank reserves. a. decrease; decreasing b. increase; decreasing c. decrease; increasing d. increase; increasing
d
When the Federal Reserve was created in 1913, its two primary purposes were to a. regulate the financial sector of the US economy and maintain the gold standard. b. be the banker for the US government and be a "lender of last resort" to commercial banks. c. regulate the financial sector and be a "lender of last resort" to commercial banks. d. maintain the gold standard and be a "lender of last resort" to commercial banks.
d
