1.People hold money as opposed to financial assets such as stocks or bonds because money

Select one:

A.is perfectly liquid.

B.earns interest.

C.can be converted to gold

D.earns a higher return than other financial assets.

2. Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%.

As a result of Kristy's deposit, Bank A can make a maximum loan of

Select one:

A.$2,000.

B.$8,000.

C.$10,000.

D.$50,000.

3. Imagine that Kristy deposits $10,000 of currency into her checking account deposit at Bank A and that the required reserve ratio is 20%.

As a result of Kristy's deposit, checking account deposits in the banking system as a whole (including the original deposit) could eventually increase up to a maximum of

Select one:

A.$8,000.

B.$10,000.

C.$50,000.

D.$100,000.

4. To increase the money supply, the Federal Reserve could

Select one:

A.raise the required reserve ratio.

B.conduct an open market purchase of Treasury securities.

C.require credit cards to charge lower interest rates

D.raise the discount rate.

5. Which of the following isnota major function of the Federal Reserve System?

Select one:

A.clearing checks between banks

B.controlling the money supply

C.lender of last resort

D.setting income tax rates

6. According to the quantity theory of money, if the money supply grows at 6%, real GDP grows at 2%, and the velocity of money is constant, then the inflation rate will be

Select one:

A.8%.

B.6%.

C.4%.

D.2%.

7. An open market sale of Treasury securities by the Federal Reserve would cause the equilibrium interest rate to

Select one:

A.increase.

B.decrease.

C.not change.

D.increase, then decrease.

8. Which of the following payment mechanisms would NOT be considered part of the money supply?

Select one:

A.Paying with a check

B.Paying with cash

C.Paying with a credit card

D.Paying with a travelers check

9. Individuals who put their money in a certificate of deposit or passbook savings account are using money as a

Select one:

A.store of value

B.medium of eschange

C.unit of account

D.substitute for gold

10. Federal regulations require that banks must doall of the following EXCEPT

Select one:

A.deposits are insured up to $250,000

B.10% of deposits must be held as reserves

C.banks must be closed on Sunday

D.banks must maintain a minimum amount of capital

11. Today the Federal Reserve mainly focuses on controlling

Select one:

A.velocity

B.federal funds rate

C.growth rate of money supply

D.security of gold in Fort Knox

12. The real interest rate is

Select one:

A.the federal funds rate

B.the difference between the federal funds rate and the inflation rate

C.the sum of the federal funds rate and the inflation rate

D.the inflation rate

13. When the fed buys short term Treasury securities (those maturing within a year or less) it is

Select one:

a.lowering the discount rate

b.increasing reserve requirements

c.engaging in open market operations

d.engaging in quantitative easing

14. This question is based on the New York Times article "The Year the Fed Changed Forever."The economic damage from the coronavirus pandemic became obvious in March and April 2020.At that time the Fed took a number of actions to stimulate the economy that it had never undertaken before, including

Select one:

a.emergency loans to small and medium size businesses

b.buying corporate debt (bonds)

c.both of the above

d.none of the above

15. This question is based on the New York Times article "The Year the Fed Changed Forever."The article makes clear that Democrats and Republicans have different perspectives about the role the Fed plays in economic policy.They especially disagree on how much the Fed should worry about

Select one:

a.open market operations

b.climate change

c.controlling inflation

d.lowering unemployment

16. This question is based on the New York Times article "The Year the Fed Changed Forever."The article shows that actions taken by the Fed in spring 2020 to lower interest rates helped the recovery by

Select one:

a.letting many households generate cash flow by refinancing their mortgage

b.increasing demand for new homes, appliances and furniture

c.making borrowing more affordable for small and medium-sized businesses

d.all of the above