Chapter 8

The sum of all currency in the hands of the public, checkable deposits and traveler's checks is the official definition of __________.

M1

When we say that one of the functions of the Fed is to be a lender of last resort, we mean that the Fed __________.

lends to banks that are short of reserves and cannot find any other source of funds

The Federal Reserve System is __________.

the central bank of the United States

Credit cards are:

Not part of the money supply

The Fed conducts monetary policy primarily through

open market operations

The name given to the fraction of deposits that a bank is legally required to hold in its vault, or as deposits at the Fed, is __________.

Requirement reserves

Which body of the Federal Reserve System sets the majority of U.S. monetary policy?

The Federal Open Market Committee

When is the opportunity cost of holding money higher?

When interest rates are high

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

If real GDP increases:

the money demand curve shifts to the right.

How many Federal Reserve districts are there?

12

Which of these will shift the money demand curve to the right?

An increase in real GDP

The actions the Federal Reserve takes to manage the money supply and interest rates in order to pursue economic objectives are called __________.

Monetary policy

When we say that money serves as a unit of account, we mean that:

Prices are quoted in terms of money

To increase the money supply, the Fed __________.

buys securities from the public

Assuming there are no leakages out of the banking system, a money multiplier equal to 5 means that:

each additional dollar of reserves creates $5 of deposits.