If the real interest rate is 3% and expected inflation is 5%, then the nominal interest rate is

	A.	2%.
	B.	-2%.
	C.	8%.
	D.	unknown.

QUESTION 1

1. The Fed took action to lower interest rates in late 2007 and 2008 due to

   	A.	an unprecedented financial crisis that started in the housing market and spread to the broader economy.
   	B.	escalating inflation.
   	C.	a burgeoning government deficit.
   	D.	None of the above; the Fed increased interest rates through 2008.

2.5 points

QUESTION 2

1. Which market is often referred to as the long-term market?

   	A.	the primary market
   	B.	the capital market
   	C.	the money market
   	D.	the discount market

2. QUESTION 6

3. If a commercial bank has checkable deposit liabilities of $50,000 and the required reserve ratio is set at 12%, the commercial bank must hold how much in reserves assets?

   	A.	None. It is not mandatory to hold reserves.
   	B.	$3,000
   	C.	$6,000
   	D.	$44,000

4. 2.5 points

   QUESTION 7

5. The __________ is the market for financial assets with an original maturity of one year or less.

   	A.	money market
   	B.	commercial paper market
   	C.	capital market
   	D.	Eurodollar market

6. QUESTION 11

7. If the Fed wants to encourage bank lending, then it should ________ the required reserve ratio on checkable deposits.

   	A.	lower
   	B.	raise
   	C.	maintain at a constant
   	D.	the Fed cannot change the required reserve ratio