Macro Unit 7

The group that is comprised of five presidents of Fed regional banks and seven Fed governors that gathers around a table to discuss whether to increase interest rates is the:

Federal Open Market Committee.

Who determines U.S. monetary policy?

The Federal Reserve

The central bank of the United States is:

the Fed.

All of the following are components of the Federal Reserve system except the:

Federal Deposit Insurance Corporation.

Which of the following is an operating target for the Fed?

Federal funds rate

Which of the following gives the correct relationship between nominal and real interest rates?

Nominal interest rate = real interest rate + expected inflation rate

The federal funds rate is the interest rate the:

banks charge each other in the Fed funds market.

The monetary base includes:

currency and cash plus commercial bank deposits at the Fed.

In 2008, the Fed followed an expansionary monetary policy, which was evident by the:

decrease in the federal funds rate from 4 percent in January to 0.25 percent in December.

By law, a commercial bank is allowed to lend out of all its:

excess reserves.

Monetary policy is one of the two main macroeconomic tools governments use to control the aggregate economy. The other is:

fiscal policy.

The standard discussion of monetary policy is based on the assumption that:

long-term rates will rise when the Fed pushes up short-term interest rates.

In the AS/AD model, an effect of an expansionary monetary policy is to:

lower interest rates.

The primary tool of monetary policy is:

open market operations.

In the AS/AD model, a contractionary monetary policy:

reduces both investment and aggregate demand.

The discount rate is the interest rate:

the Fed charges on loans to commercial banks.

Most decisions about implementing monetary policy are made by:

the Federal Open Market Committee.

Unlike the practice in many other countries, in the United States:

the agency responsible for monetary policy is not directly controlled by the government.

Monetary policy directly affects:

the availability of credit.

The curve most economists use to follow the relationship between the interest rates and bonds' time to maturity is the:

yield curve.