Ch. 16 Quiz

*A sale of government bonds by the Fed... a. increases the money supply and decreases the federal funds rate. b. decreases the money supply and increases the federal funds rate. c. increases the money supply and increases the federal funds rate. d. decreases the money supply and decreases the federal funds rate.

The money supply decreases if... a. households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively less excess reserves and make more loans. b. households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively fewer excess reserves and make more loans. c. households decide to hold relatively less currency and relatively more deposits and banks decide to hold relatively more excess reserves and make fewer loans. d. households decide to hold relatively more currency and relatively fewer deposits and banks decide to hold relatively more excess reserves and make fewer loans.

An item that people can use to transfer purchasing power from the present to the future is called... a. a medium of exchange. b. a unit of account. c. a store of value. d. None of the above is correct.

An increase in the money supply might indicate that the Fed had... a. purchased bonds in an attempt to increase the federal funds rate. b. sold bonds in an attempt to increase the federal funds rate. c. sold bonds in an attempt to reduce the federal funds rate. d. purchased bonds in an attempt to reduce the federal funds rate.

If the Federal Open Market Committee decides to increase the money supply, then the Federal Reserve... a. sells various types of stocks and bonds from its portfolio to the public. b. creates dollars and uses them to purchase various types of stocks and bonds from the public. c. sells government bonds from its portfolio to the public. d. creates dollars and uses them to purchase government bonds from the public.

If an economy used gold as money, its money would be... a. functioning as a store of value and as a unit of account, but not as a medium of exchange. b. fiat money, but not commodity money. c. commodity money, but not fiat money. d. both fiat and commodity money.

To decrease the money supply, the Fed can... a. sell government bonds or decrease the discount rate. b. buy government bonds or increase the discount rate. c. sell government bonds or increase the discount rate. d. buy government bonds or decrease the discount rate.

*The federal funds rate is the interest rate that... a. banks charge the Fed for loans. b. banks charge one another for loans. c. the Fed charges Congress for loans. d. the Fed charges banks for loans.

The federal funds rate is the... a. percentage of deposits that banks must hold as reserves. b. percentage of face value that the Federal Reserve is willing to pay for Treasury Securities. c. interest rate at which the Federal Reserve makes short-term loans to banks. d. interest rate at which banks lend reserves to each other overnight.

The Federal Reserve... a. was created in 1913. b. has more than one specific job to perform. c. is an example of a central bank. d. All of the above are correct.

Decisions by policymakers concerning the money supply constitute... a. operations policy. b. fiscal policy. c. banking policy. d. monetary policy.

The discount rate is... a. the rate at which the Fed lends to banks. b. the percentage difference between the face value of a Treasury bond and what the Fed pays for it. c. the rate at which public banks lend to other public banks. d. the percentage of deposits banks hold as excess reserves.

In which of the following sets of assets are the assets correctly ranked from most liquid to least liquid? a. money, cars, houses, bonds b. money, bonds, cars, houses c. bonds, money, cars, houses d. bonds, cars, money, houses

Imagine that the federal funds rate was above the level the Federal Reserve had targeted. To move the rate back towards it's target the Federal Reserve could... a. sell bonds. This selling would increase the money supply. b. sell bonds. This selling would reduce the money supply. c. buy bonds. This buying would increase the money supply d. buy bonds. This buying would reduce the money supply.

Which of the following is not included in M1? a. a $5 bill in your wallet b. $100 in your checking account c. $500 in your savings account d. All of the above are included in M1.

In a fractional-reserve banking system, an increase in reserve requirements... a. decreases both the money multiplier and the money supply. b. decreases the money multiplier, but increases the money supply. c. increases the money multiplier, but decreases the money supply. d. increases both the money multiplier and the money supply.

Monetary policy affects employment... a. only in the short run. b. only in the long run. c. in both the long run and the short run. d. in neither the long run nor the short run.

Regulations on the... a. extent to which banks can make new loans are called open-market requirements. b. extent to which banks can buy and sell bonds are called open-market requirements. c. maximum amount of reserves that banks can hold against deposits are called reserve requirements. d. minimum amount of reserves that banks must hold against deposits are called reserve requirements.