QUESTION 1

If the Fed Reserve wanted to stimulate lending, which of the following would be an expansionary monetary policy?

A. Discretionary fiscal policy

B. Open market operations

C. Progressive taxes

D. Tax cuts

QUESTION 2

The Federal Reserve adjusts the money supply of the United States largely by

A. auditing commercial banks.

B. printing currency.

C. adjusting the reserve requirement.

D. conducting open market operations.

QUESTION 3

Which of the following institutions has the greatest control over money creation in the United States?

A. The Office of the Comptroller of the Currency

B. The United States Mint

C. The Treasury Department

D. The Federal Reserve System

QUESTION 4

An asset that can easily be exchanged for goods and services is referred to as:

a. an intangible asset.

b. a scarce resource.

c. a liquid asset.

d. a fixed asset.

e. a productive resource.

QUESTION 5

An increase in the money supply will:

a. decrease investment spending and increase aggregate demand

b. increase both investment spending and aggregate demand.

c. decrease both consumption spending and aggregate demand.

d. decrease both investment spending and aggregate demand.

QUESTION 6

A decrease in the discount rate:

a. increases reserve holdings of the commercial banks.

b. causes an increase in the federal funds rate.

c. lowers the cost of borrowing from the Fed.

d. leads to an increase in the interbank rate charged by commercial banks.

e. decreases the money supply.

QUESTION 7

An increase in the reserve requirement from 20 percent to 25 percent is most likely to:

a. increase the money supply.

b. increase total deposits and the deposit expansion multiplier.

c. reduce total deposits in the banking system.

d. reduce the amount of reserves required.

e. reduce excess reserves and the deposit expansion multiplier.

QUESTION 8

An decrease in the required reserve ratio will raise the value of the deposit expansion multiplier.

True

False

QUESTION 9

An individual who holds some of her wealth in the form of money in order to pay rent and buy groceries is illustrating the transactions demand for money.

True

False

QUESTION 10

A decrease in the quantity of money demanded results from:

a. a decrease in the interest rate.

b. an increase in real income.

c. an increase in the interest rate

d. a decrease in the money supply.

e. a decrease in the price level.

QUESTION 11

An increase in nominal income will increase Money Demand and result in:

a. an increase in bond prices.

b. a higher interest rate, given that Money Supply is vertical.

c. an excess supply of money.

d. an excess demand for bonds.

e. a decrease in money market equilibrium.

QUESTION 12

The quantity theory of money asserts that:

a. changes in the output level are unrelated to changes in the price level.

b. changes in the money supply are directly related to changes in nominal GDP.

c. changes in nominal GDP are inversely related to changes in the velocity of money.

d. changes in money supply are positively related to changes in the velocity of money.

e. changes in the money supply are unrelated to changes in the price level.

QUESTION 13

The rate of interest that the Federal Reserve charges on loans to member banks is the:

a. open market rate.

b. reserve lending rate.

c. discount rate.

d. federal funds rate.

e. prime interest rate.

QUESTION 14

The Fed can enhance liquidity in the U.S. economy by increasing the federal funds rate.

True

False