Block 4 Module Quiz Q's

what is inflation? a. a sustained increase in the average price level of goods and services b. an increase in the prices of important goods and services that people need on a regular basis c. a sustained increase in average wages d. a sustained decrease in the amount of goods and services available

a. a sustained increase in the average price level of goods and services

the federal reserve is composed of the a. board of governors, the reserve banks, and the federal open market committee b. U.S. Treasury, the reserve banks, and the federal open market committee c. board of governors, the national banks, and the federal open market committee d. U.S. Treasury, the national banks, an the federal open market committee

a. board of governors, the reserve banks, and the federal open market committee

josie is working part time, but wants full time work. she is applying for jobs. currently, josie is: a. employed b. unemployed c. out of the labor force

a. employed

if the FOMC determines that employment or inflation are too low, what kinds of policy might it use? a. expansionary/accommodative b. contractionary/tighter

a. expansionary/accommodative

"Hi. I'm Brian. I recently graduated college with a master's degree in Computer Science. I have been filling out applications in hopes of getting an interview for my first job." Which unemployment category fits Brian? a. frictional b. structural c. cyclical

a. frictional

commodity money has intrinsic value. this means: a. it has value outside of its use as a medium of exchange b. it can be converted into gold c. it is stable in value d. its value is derived from a government decree or fiat

a. it has value outside of its use as a medium of exchange

how does a higher federal funds rate transmit to achieving the dual mandate? a. it will encourage other interest rates to rise, and result in less spending and more saving by households and businesses b. it will encourage other interest rates to fall, and result in more spending and more saving by households and businesses c. it will encourage other interest rates to rise, and result in more spending and more saving by households and businesses d. it will encourage other interest rates to fall, and result in less spending and more saving by households and businesses

a. it will encourage other interest rates to rise, and result in less spending and more saving by households and businesses

how long is a typical federal funds market loan between banks? a. overnight b. one week c. one month d. one year

a. overnight

according to mike bryan, what is one of the greatest risks associated with fiat money? a. overprinting by governing authorities to pay for debts b. its conversion into silver or gold c. its use as collateral for short term financing d. the fact that it is virtually costless to produce

a. overprinting by governing authorities to pay for debts

how can the FOMC adjust policy if it thinks the economy is overheating, with inflation rising above its price stability target? a. raise the federal funds rate target range b. lower the federal funds target range c. lower the inflation rate d. raise the unemployment rate

a. raise the federal funds rate target range

what function does interest on reserve balances serve besides an opportunity for banks to earn interest? a. the Fed uses it to steer the federal funds rate into the FOMC's target range b. it is the rate the Fed charges when it lends money to Congress to finance the national debt c. it is the rate the Fed charges when it lends money to banks d. it is the rate the Fed receives when Congress pays back its debts.

a. the Fed uses it to steer the federal funds rate into the FOMC's target range

how are our bank accounts like the stone at the bottom of the ocean? a. the amounts in our bank accounts change without our physically handling dollars b. neither have any value c. both are only used for big purchases d. they are not similar at all; the checking account represents real money, while the stone does not

a. the amounts in our bank accounts change without our physically handling dollars

what does it mean if the CPI rises from 100 to 105 the next year? a. the economy has experienced 5% inflation; average prices are 5% higher b. the economy has experienced 5% deflation; average prices are 5% lower c. the economy has experienced 5% inflation; 5% more goods and services are available d. the economy has experienced 5% deflation; fewer goods and services are available

a. the economy has experienced 5% inflation; average prices are 5% higher

when the interest on reserve balances rate is higher than the federal funds rate, how will arbitrage pull the two rates together? a. the increase in competition for funds in the federal funds market will pull the federal funds rate higher b. the increase in competition for funds in the federal funds market will push the federal funds rate lower c. when banks deposit the funds in their reserve accounts at the fed, it will pull the interest on reserve balances rate higher d. when banks deposit funds in their reserve accounts at the fed, it will push the interest on reserve balances rate lower

a. the increase in competition for funds in the federal funds market will pull the federal funds rate higher

central banks sell: a. trust that they will maintain the purchasing power of money b. guarantees that they will always maintain the purchasing power of money c. short term corporate bonds to institutional investors d. commodities such as gold and silver to promote price stability

a. trust that they will maintain the purchasing power of money

after 1980, what change occurred in the unemployment rates of men and women during recessions? a. women have had lower rates of unemployment than men b. men have had lower rates of unemployment than women c. women and men have had similar unemployment rates d. neither women nor men have experienced unemployment during recessions

a. women have had lower rates of unemployment than men

how is the interest on reserve balances rate a reservation rate? a. banks should not demand a higher rate for their funds b. banks should not be willing to accept a lower rate for their funds

b. banks should not be willing to accept a lower rate for their funds

when the interest on reserve balances rate is higher than the federal funds rate, how will banks respond? a. banks will withdraw from their account at their federal reserve bank and lend the funds in the federal funds market b. banks will borrow in the federal funds market and deposit funds at their federal reserve bank

b. banks will borrow in the federal funds market and deposit funds at their federal reserve bank

if the FOMC thinks the economy is overheating (growing too fast), what kind of policy might it use? a. expansionary/accommodative b. contractionary/tighter

b. contractionary/tighter

the federal reserve system is an example of a ___ central bank a. centralized b. decentralized c. fiscal d. monetary

b. decentralized

which of the following necessary qualities and definitions of money is correct? a. divisible - there must be a limited amount of it available b. durable - it holds its value over time and isn't expensive to maintain c. portable - the value of it has to be understood d. recognizable - the ability to buy big things and small things with money

b. durable - it holds its value over time and isn't expensive to maintain

to conduct monetary policy, the FOMC sets a target range for which important rate? a. interest on reserve balances rate b. federal funds rate c. discount rate d. prime rate

b. federal funds rate

wampum: a. is a block of tea b. is a bead made from a quahog clam shell c. is a Congolese sword d. is a stone disc from the island of Yap

b. is a bead made from a quahog clam shell

the great benefit of a fiat money: a. is its ability to be converted into gold or silver b. is its efficiency to serve as a medium of exchange, especially since much of it is electronic money c. is that nations using fiat money avoid inflation d. is its physical form; it is all paper currency and coin

b. is its efficiency to serve as a medium of exchange, especially since much of it is electronic money

how is the federal funds rate determined? a. it is set by the Federal Reserve b. it is determined in the federal funds market c. it is set by the FOMC d. it is set by Congress

b. it is determined in the federal funds market

how does a lower federal funds rate transmit to achieving the dual mandate? a. it will encourage other interest rates to rise, and result in less spending and more saving by households and businesses b. it will encourage other interest rates to fall, and result in more spending and more saving by households and businesses c. it will encourage other interest rates to rise, and result in more spending and more saving by households and businesses d. it will encourage other interest rates to fall, and result in less spending and more saving by households and businesses

b. it will encourage other interest rates to fall, and result in more spending and more saving by households and businesses

How can the FOMC adjust policy if it thinks the economy is weakening, with employment falling below its maximum level? a. raise the federal funds rate target range b. lower the federal funds rate target range c. raise the inflation rate d. lower the unemployment rate

b. lower the federal funds rate target range

where did the first coins emerge? a. syria b. lydia c. china d. africa

b. lydia

what function of money did the people of Yap recognize they needed? a. money that was divisible b. money that had a store of value c. money that has unit of account d. money that was portable

b. money that had a store of value

when there is ___ ___, businesses and consumers can spend and invest with confidence. As they spend and invest with confidence, more goods and services are produced and more workers are hired, which moves the economy toward ___ employment. a. price stability; minimum b. price stability; maximum c. high inflation; maximum d. low inflation; minimum

b. price stability; maximum

"Hi, I'm Mary. My business repairs VCRs and DVD players, but people are streaming video content more than ever. Not many consumers are fixing their DVD players anymore. I had to close my business." Which unemployment category fits Mary? a. frictional b. structural c. cyclical

b. structural

when the types of jobs available do not match the types of workers seeking jobs, a skills mismatch occurs that can result in ___ unemployment a. cyclical b. structural c. frictional d. seasonal

b. structural

if the FOMC pursues expansionary policy, how will it adjust the federal funds target and the interest on reserves balances rate? a. the FOMC will lower the federal funds target range, and the fed will raise the interest on reserve balances rate b. the FOMC will lower the federal funds rate target range, and the fed will lower the interest on reserves balances rate c. the FOMC will raise the federal funds target range, and the fed will raise the interest on reserves balances rate d. the FOMC will raise the federal funds target range, and the fed will lower the interest on reserves balances rate

b. the FOMC will lower the federal funds rate target range, and the fed will lower the interest on reserves balances rate

at its root, what causes inflation? a. too little money chasing too many goods b. too much money chasing too few goods

b. too much money chasing too few goods

people who have a job, but are not working as much as they would like, are classified as: a. discouraged workers b. underemployed c. part-time unemployed d. seasonally unemployed

b. underemployed

when money is used to price goods and services, it is acting as a(n): a. store of value b. unit of account c. medium of exchange d. bill of attainder

b. unit of account

the federal reserve system has ___ regional reserve banks spread across the United States a. 8 b. 10 c. 12 d. 14

c. 12

during the 2007-2009 recession, workers experiencing more than 27 weeks of unemployment made up about what percentage of the unemployed? a. 10% b. 25% c. 45% d. 55%

c. 45%

how many regularly schedules FOMC meetings are scheduled per year? a. 12 b. 10 c. 8 d. 6

c. 8

most central banks in the world today: a. are managed directly by their nation's elected officials b. have to submit their monetary policy decisions to the fiscal authorities for approval c. are given certain independence from the government d. do not set inflation targets to promote price stability

c. are given certain independence from the government

what is the FOMC's target for the inflation rate? a. average 3% over time b. no higher than 2% c. average 2% over time d. no inflation, in other words 0%

c. average 2% over time

according to many economists, what was one of the earliest forms of money to be used as a medium of exchange? a. gold coins b. chocolate c. cows d. tea

c. cows

"Hi, I'm Joanna. I was recently laid off. Sales slowed several months ago as a result of an economic downturn, so the company was forced to downsize." Which unemployment category fits Joanna? a. frictional b. structural c. cyclical

c. cyclical

the unemployment rate is determined by: a. dividing the number of adults in the United States by the number of unemployed b. dividing the number of employed by the number of unemployed c. dividing the number of unemployed by the labor force d. multiplying the number of unemployed by the labor force

c. dividing the number of unemployed by the labor force

unemployment that occurs when people transfer from job to job, or when new graduates enter the labor force is known as: a. seasonal underemploymnet b. cyclical unemployment c. frictional unemployment d. structural unemployment

c. frictional unemployment

when banks deposit funds at their Federal Reserve Bank, what interest rate do they earn? a. Federal fund rate b. discount rate c. interest on reserve balances rate d. prime rate

c. interest on reserve balances rate

why do economists consider unemployment harmful to society overall? a. it results in depressed wages for workers b. it leads to businesses decreasing prices of goods and services c. it represents unused resources d. it drives businesses to outsource production to other countries

c. it represents unused resources

what made this money abstract (stone money on Yap)? a. only people on Yap used it, so it never became a mainstream store of value b. those who lived on Yap preferred to use it as decoration instead of a medium of exchange c. it was so large that it often wouldn't physically change hands, but people knew who held it and what it was worth d. the limestone disks couldn't be used to pay for things in reality

c. it was so large that it often wouldn't physically change hands, but people knew who held it and what it was worth

when money is used to purchase goods and services and circulates in our economy, it is acting as a(n): a. store of value b. unit of account c. medium of exchange d. bill of attainder

c. medium of exchange

the federal open market committee (FOMC) makes decisions on how ___ policy should be managed a. fiscal b. governmental c. monetary d. treasury

c. monetary

what does a 2 percent annual inflation rate mean? a. there is 2 percent more money in circulation than the year before b. wages increase by 2 percent fewer goods and services than it did the year before c. on average, a dollar buys 2 percent fewer goods and services than it did the year before d. on average, a dollar buys 2 percent more goods and services than it did the year before

c. on average, a dollar buys 2 percent fewer goods and services than it did the year before

Yvonne lost her job in the last recession. She looked for work for a few months, but didn't have any luck. She wants a job, but is not actively looking. Yvonne is: a. employed b. unemployed c. out of the labor force

c. out of the labor force

frank is retired. he doesn't have a job, and doesn't want one. frank is: a. employed b. unemployed c. out of the labor force

c. out of the labor force

If the FOMC raises the target range, how does arbitrage ensure the policy change is implemented? a. the fed raises the federal funds rate, and arbitrage ensures the interest on reserves balances rate moves up b. the fed lowers the federal funds rate, and arbitrage ensures the interest on reserves balances rate moves up c. the fed raises the interest on reserves balances rate, and arbitrage ensures the federal funds rate moves up d. the fed lowers the interest on reserves balances rate, and arbitrage ensures the federal funds rate moves up

c. the fed raises the interest on reserves balances rate, and arbitrage ensures the federal funds rate moves up

which of the following statements about the federal reserve system is true? a. the federal reserve system is made up of four major parts, which are part of the treasury department b. the federal reserve system is made up of six regional reserve banks, which are independent within the government c. the federal reserve system is in part a governmental agency, which is independent within the government d. the federal reserve system is part of the judicial branch of government and reports to the attorney general

c. the federal reserve system is in part a governmental agency, which is independent within the government

the employment to population ratio measures: a. the number of adults over 21 who have a job b. the number of people working, divided by the unemployed c. the number of people working, divided by the population d. the unemployment rate divided by the population

c. the number of people working, divided by the population

each reserve bank has ___ members on its Board of Directors. a. 3 b. 5 c. 7 d. 9

d. 9

fiat money: a. exists by government decree b. only has use as a medium of exchange, store of value, and unit of account c. is divisible, recognizable, portable, and acceptable d. all of the above

d. all of the above

how does consumer price index (CPI) measure inflation? a. by tracking the price of a different market basket of goods year after year b. by tracking the number of goods and services a certain amount of money can buy year after year c. by tracing the prices pai for all the goods and services sold in an economy over time d. by tracking the prices paid for a market basket of consumer goods and services over time

d. by tracking the prices paid for a market basket of consumer goods and services over time

this type of unemployment that is typical when aggregate demand falls, such as in recessions, is called: a. structural unemployment b. seasonal unemployment c. recessionary unemployment d. cyclical unemployment

d. cyclical unemployment

what metal was used to mint the first coins? a. silver b. bronze c. gold d. electrum

d. electrum

the three main types of unemployment are: a. frictional, seasonal, and structural b. frictional, structural, and recessionary c. cyclical, temporary, and long-term d. frictional, cyclical, and structural

d. frictional, cyclical, and structural

what was this stone money used for? a. everyday purchases like food b. purchasing more limestone c. just decoration, as it was difficult to move d. infrequent occurrences like a dowry

d. infrequent occurrences like a dowry

what is the fed's primary tool for steering the federal funds rate into the target range? a. open market operations b. reserve requirements c. discount rate d. interest of reserve balances

d. interest of reserve balances

what two main goals has Congress given the Federal Reserve System? a. maximum prices and employment stability b. maximum stock market values and economic stability c. maximum economic growth and employment stability d. maximum employment and price stability

d. maximum employment and price stability

which of the following is a function of money? a. bill of attainder b. store account c. value unit d. medium of exchange

d. medium of exchange

what is the correct order of events? a. the FOMC adjusts the federal funds rate, the fed adjusts the interest on reserves balances rate, and arbitrage moves the target range b. the FOMC adjusts the interest on reserve balances rate, the fed adjusts the target range, and arbitrage moves the federal funds rate into the target range c. the FOMC adjusts the target range, the fed adjusts the federal funds rate, and arbitrage moves the interest on reserve balances into the target range d. the FOMC adjusts the target range, the fed adjusts the interest on reserves balances rate, and arbitrage moves the federal funds rate into the target range

d. the FOMC adjusts the target range, the fed adjusts the interest on reserves balances rate, and arbitrage moves the federal funds rate into the target range

which of the following statements is true? a. the store value function helps people know what items are worth b. the unit of account function helps people keep wealth for the future c. the definition of money is clear to most everyone d. the medium of exchange function is money being used for purchases

d. the medium of exchange function is money being used for purchases

why was money made from limestone on Yap? a. they had no other materials they could use to make coins b. they found it easier to make very large coins if they used limestone c. they have abundant amounts of limestone that was easy to mine on the island d. they thought because it was pretty, like gold in other places, it would be a good form of money

d. they thought because it was pretty, like gold in other places, it would be a good form of money

the federal reserve's goal of price stability means that the fed tries: a. to prevent prices from rising b. to reward companies that do not change their prices c. to prevent inflation by maintaining an inflation rate of 0% d. to maintain an inflation rate of about 2%

d. to maintain an inflation rate of about 2%