Question 1

Which of the following is not among the primary responsibilities of the Fed?

1. Conducting the nation's monetary policy with the goal of maintaining full employment, price stability, and economic growth
2. Regulating, supervising, and examining the nation's banks
3. Ensuring the velocity of money does not exceed the nation's rate of economic growth
4. Maintaining the stability of the financial system
5. Serving as a "bankers' bank"

Question 2

Explain how open market operations can lead to an increase in aggregate demand. Hint: Your explanation should mention the role the interest rate plays in the sequence of events.

Question 3

Which of the following constitutes easy money policy and is carried out directly by the Fed?

1. The sale of Treasury securities
2. A decrease in the federal funds rate
3. A decrease in the discount rate
4. An increase in the reserve requirement

Question 4

Suppose the money supply increases by 8 percent.

1. Given what monetarists believe about the equation of exchange, what do they predict will be the result of the increase?
2. If prices and the velocity of money remain unchanged, what will be the result of the increase?

Question 5

Which of the following would not shift the money demand curve to the right?

1. A decrease in the interest rate
2. An increase in the price level
3. An increase in real GDP
4. A computer glitch that prevented ATMs from working for an indeterminate period of time.