Econ

If you are estimating your total expenses for school next semester, you are using money primarily as:

A unit of account

Using the concept of arbitrage, when the interest on reserve balances rate is lower than the federal funds rate, how will bank likely responds?

Banks will withdraw from their account at their Federal Reserve Bank and lend the funds in the federal funds market.

Which best describes how interest on reserve balances serves as a reservation rate?

Because interest on reserve balances is a risk-free option, banks should not be willing to lend their funds for less than they can earn on their reserve balances.

The Federal Reserve System consists of which of the following?

Board of Governors and the 12 Federal Reserve Banks

Which monetary policy tool serves as a ceiling for the federal funds rate?

Discount rate

Which group aids the Board of Governors of the Federal Reserve System in conducting monetary policy?

Federal Open Market Committee

in the U.S. economy, the money supply is controlled by the

Federal Reserve System

Which monetary policy implementation tool is the primary tool the Fed uses to steer the federal funds rate into the FOMC's target range?

Interest on reserve balances

Which best describes how the FOMC conducts monetary policy during an inflationary period to achieve its price stability objective?

It increases the target rate range for the federal funds rate.

Which best describes how the FOMC conducts monetary policy to increase employment during a recession to achieve its maximum employment objective?

Lower the target range for the federal funds rate and simultaneously decrease the interest on reserve balances rate, overnight reverse repurchase agreement offering rate, and discount rate.

Assuming no other changes, if checkable deposits increase by $40 billion and currency in circulation decreases by $40 billion, the

M1 money supply will not change.

Currency held in the vault of First National Bank is:

Not counted as part of the money supply

Which monetary policy tool is a supplementary tool that sets a floor for the federal funds rate?

Overnight reverse repurchases agreement facility

What role do open market operations play in monetary policy?

The Fed uses open market operations to ensure that the level of reserves remains ample.

The discount rate is the rate that banks pay for loans from

The fed

Reservation rate

The lowest rate that banks are likely willing to accept for lending out their funds

Arbitrage

The simultaneous purchase and sale of funds in order to profit from a difference in price

If you write a check on a bank to purchase a used Honda Civic, you are using money primarily as

a medium of exchange

What function is money serving when you use it when you go shopping?

a medium of exchange

Compared to fiscal policy, monetary policy has a much shorter

administrative lag.

A contractionary monetary policy is designed to shift the

aggregate demand curve leftward.

the members of the Federal Reserve Board

are appointed for 14-year terms.

The money supply is backed

by the government's ability to control the supply of money and therefore to keep its value relatively stable.

in the United States, the money supply (M1) includes

coins, paper currency, checkable and savings deposits

The Federal Deposit Insurance Corporation (FDIC) insures deposits in

commercial banks and thrifts.

The main function of the Federal Reserve System is to

control the money supply.

Which of the following is the basic economic policy function of the Federal Reserve Banks?

controlling the supply of money

Which of the following is a monetary policy intended to combat a recession?

decrease the federal funds target range to shift the aggregate demand curve rightward

Other things equal, a contractionary monetary policy during a period of demand-pull inflation will

increase interest rates, reduce investment, and reduce aggregate demand

An important reason why members of the Federal Reserve's Board of Governors are each given extremely long, 14-year terms is to:

insulate members from political pressures that could result in inflation.

The value of money varies

inversely with the price level

the value of money varies

inversely with the price level

The amount of money reported as M2:

is larger than the amount reported as M1.

Coins held in commercial bank vaults are

not part of the nation's money supply.

Which of the following is a tool of monetary policy?

overnight reverse repurchases agreement facility

What are the Fed's dual mandate goals?

price stability and maximum employment

Which of the following "backs" the value of money in the United States?

the acceptability of it as a medium of exchange

The interest rate that banks charge other banks for loans

the federal funds rate.

When the FOMC conducts monetary policy, it sets the target range for

the federal funds rate.

What is not one of the advantages of monetary policy over fiscal policy?

the lack of any timing lags

Research for industrially advanced countries indicates that

the more independent the central bank, the lower the average annual rate of inflation

The Federal Open Market Committee (FOMC) is made up of

the seven members of the Board of Governors of the Federal Reserve System along with the president of the New York Federal Reserve Bank and four other Federal Reserve Bank presidents on a rotating basis