Macroeconomics Ch 11
A problem that the Fed faces when it attempts to control the money supply is that
Answer
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a. |
since the U.S. has a fractional-reserve banking system, the amount of money in the economy depends in part on the behavior of depositors and bankers. |
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b. |
federal legislation in the 1950s stripped the Fed of its power to act as a lender of last resort to banks. |
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c. |
while the Fed has the ability to change the money supply by a large amount, it does not have the ability to change it by a small amount. |
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d. |
the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools.
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All Fed purchases and sales of
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a. |
corporate stocks and bonds are conducted at the New York Fed’s trading desk. |
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b. |
government bonds are conducted at the New York Fed’s trading desk. |
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c. |
real estate and other real assets are conducted by the Federal Open Market Committee. |
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d. |
All of the above are correct.
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When the Fed conducts open-market purchases,
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a. |
it lends money to member banks, which decreases the money supply. |
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b. |
it buys Treasury securities, which increases the money supply. |
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c. |
it buys Treasury securities, which decreases the money supply. |
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d. |
it borrows money from member banks, which increases the money supply.
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If the reserve ratio is 12.5 percent, then $5,600 of money can be generated by
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a. |
$64 of new reserves. |
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b. |
$448 of new reserves. |
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c. |
$700 of new reserves. |
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d. |
$800 of new reserves.
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If the reserve ratio is 5 percent, then $1,000 of additional reserves can create up to
Answer
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a. |
$200 of new money. |
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b. |
$2,000 of new money. |
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c. |
$20,000 of new money. |
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d. |
None of the above is correct. |
Prisoners sometimes determine a single good to be used as money. This good becomes
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a. |
a medium of exchange, but not a unit of account. |
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b. |
a medium of exchange and a unit of account. |
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c. |
a unit of account, but not a medium of exchange. |
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d. |
neither a unit of account nor a medium of exchange.
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Which of the following is a liability of a bank and an asset of its customers?
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a. |
deposits of its customers but not loans to its customers |
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b. |
loans of its customers but not the deposits of its customers |
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c. |
neither the deposits of its customers nor the loans to its customers |
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d. |
deposits of its customers and loans to it customers
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The set of items that serve as media of exchange clearly includes
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a. |
demand deposits. |
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b. |
short-term bonds. |
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c. |
credit cards. |
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d. |
All of the above are correct.
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The existence of money leads to
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a. |
greater specialization and to a higher standard of living. |
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b. |
neither greater specialization nor to a higher standard of living. |
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c. |
greater specialization in production, but not to a higher standard of living. |
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d. |
a higher standard of living, but not to greater specialization.
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Which of the following is not included in either M1 or M2?
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a. |
large time deposit |
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b. |
demand deposits |
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c. |
money market deposit accounts |
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d. |
money market mutual funds
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Bank runs
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a. |
can be neither prevented nor mitigated by the Federal Reserve. |
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b. |
are a problem because banks only hold a fraction of deposits as reserves. |
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c. |
are only a problem for insolvent banks. |
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d. |
will affect neither the money supply nor the money multiplier.
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The Fed purchases $200 worth of government bonds from the public. The reserve requirement is 8 percent, people hold no currency, and the banking system keeps no excess reserves. The U.S. money supply eventually increases by
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a. |
$16. |
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b. |
$200. |
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c. |
$1,600. |
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d. |
$2,500.
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Which of the following increases when the Fed makes open-market sales?
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a. |
currency and reserves |
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b. |
reserves but not currency |
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c. |
currency but not reserves |
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d. |
neither currency nor reserves
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What does the Fed auction at the Term-Auction Facility?
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a. |
government bonds of a quantity it sets |
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b. |
loans of a quantity it sets |
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c. |
loans with the quantity determined at the auction |
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d. |
government bonds with the quantity determined at the auction
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Demand deposits are included in
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a. |
M1 but not M2. |
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b. |
M2 but not M1. |
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c. |
M1 and M2. |
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d. |
neither M1 nor M2. |