Macroeconomics final unit

The purpose of a restrictive monetary policy is to

increase interest rates to rein in spending

If the Fed wants to discourage bank lending, it will

increase the interest paid on reserve balances held at the Fed

The purchasing power of the dollar

is the reciprocal of price level

In terms of the mechanics of quantitative easing

it works the same as open-market operations

An increase in the money supply will

lower interest rates and increase the equilibrium GDP

Joe deposits $200 in currency into his checking account at a bank. This deposit is treated as

no change in the money supply because the $200 decrease in currency has been converted to a $200 increase in checkable deposits

Time deposits of $100,000 or more are

not a component of M1 or M2

Currency held in the vault of First National Bank is

not counted as part of the money supply

Which of the following actions by the Fed would cause the money supply to increase?

optimistic forward guidance

The term "bankers' banks" means that the Federal Reserve

performs essentially the same functions for banks and thrifts as those institutions perform for the public

Open-market operations include

quantitative easing

The Fed's response to the zero lower bound problem was

quantitative easing

The administered rates are the rates of interest at which

set by a central bank to help it manage market-determined interest rates

Which of the following will happen when the Federal Reserve lowers the interest rate paid on reserve balances?

Banks will choose to lend into the money market instead of lending to the Fed

In a reverse repo transaction,

the Fed borrows money from nonbank financial firms

An expansionary monetary policy is a Fed policy in which

the administered rates may be lowered to encourage bank and nonbank lending

To say that the Federal Reserve Banks are quasi-public banks means that

they are privately owned but managed in the public interest

Checkable deposits are classified as money because

they can be readily used in purchasing goods and paying debts

When a consumer wants to compare the price of one product with another, money is primarily functioning as a

unit of account

Interest paid on reserve balances held at the Fed

will incentivize banks to hold more reserves and reduce riskier lending

Stabilizing a nation's price level and the purchasing power of its money can be achieved

with both fiscal and monetary policy

An interest rate set by a central bank to help it manage market-determined interest rates defines

an administered rate

Members of the Federal Reserve Board of Governors are

appointed by the president to staggered 14-year terms

The seven members of the Board of Governors of the Federal Reserve System are

appointed by the president with the confirmation of the Senate

The Federal Reserve System's three administered rates are the

IORB rate, ON RRP rate, and discount rate

Assume the economy is operating at less than full employment. An expansionary monetary policy will cause interest rates to ________, which will ___________ investment spending.

decrease; increase

"Near-monies" are included in

M2 only

The interest rate at which the Federal Reserve Banks lend to banks is called the

discount rate

Why doesn't the Fed want to drive nominal interest rates below zero in response to a financial crisis and recession?

Negative nominal rates would cause people to withdraw their money from banks, reducing the ability of banks to extend loans

The functions of money are to serve as a

Unit of account, store of value, and medium of exchange

Refer to the table. Money supply M1 for this economy is

$220

The Federal Reserve System was established by the Federal Reserve Act of

1913

The group that sets the Federal Reserve System's policy on buying and selling government securities is the

FOMC

As it relates to Federal Reserve activities, the acronym FOMC describes the

Federal Open Market Committee

A $20 bill is a

Federal Reserve Note

Monetary policy is expected to have its greatest impact on

Ig

Which of the following statements about quantitative easing is most accurate?

Quantitative easing refers to the Fed's use of open-market operations to buy hundreds of billions of dollars' worth of long-term bonds

The money supply is backed

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

PayPal and Venmo are

cash-transfer systems

The money market comprises short-term lending markets that include markets for

commercial paper