QUESTION 2

1. Which of the Fed's tools has become largely symbolic?

a.altering the required reserve ratio

b.changing the discount rate

c.buying or selling securities on the open market

d.lowering bank taxes

QUESTION 3

1. Which of the following is NOT a tool of monetary policy used by the Fed?

a.determining the discount rate

b.setting the reserve requirement

c.adjusting the market interest rate

d.conducting open market operations

QUESTION 7

1. Capital gains are

a.the profit received by investors when stocks are sold for more than their purchase price.

b.the interest earned on a bond.

c.the dividend payments issued to equity holders.

d.government payments to holders of T-bills.

QUESTION 13

1. Which type of bond would usually pay the highest interest rate?

a.U.S. government bonds

b.junk bonds

c.corporate bonds

d.municipal bonds

QUESTION 18

1. Large corporations, the federal government, or state and local governments usually issue _________ in order to finance their purchases.

a.mutual funds

b.stocks

c.bonds

d.insurance policies

QUESTION 19

1. The U.S. dollar is considered money because

a.it is convertible to gold or silver.

b.it is easily portable.

c.it has been decreed by the U.S. government as legal tender.

d.all of the above.

QUESTION 23

1. The money demand curve shows an inverse relationship between the quantity of money and

a.the interest rate.

b.the supply of money.

c.the price level.

d.income.

QUESTION 25

1. If the reserve requirement is 12%, the increase in the money supply that results from $880,000 in new deposits equals __________.

a.$7,333,333

b.$1,000,000

c.$105,600

d.$774,400

QUESTION 26

1. Which of the following formulas is correct?

a.nominal interest rate = price + % change in real interest rate

b.nominal interest rate = real interest rate + % change in prices

c.real interest rate = price + % change in nominal interest rate

d.real interest rate = price + nominal interest rate

QUESTION 31

1. Which of the following will happen if a customer puts more money into a checking account at her bank?

a.The bank's liabilities increase by the amount of the deposit.

b.The bank will be able to turn around and loan out an amount of money equal to the deposit.

c.The bank will ship the money to the Federal REserve Bank so that it is insured in full.

d.The bank's total required reserves will increase by the same amount as the deposit.

QUESTION 35

1. If the Fed wants to increase the money supply, it can

a.buy Treasury securities.

b.lower the interest rate on Treasury securities.

c.increase the discount rate.

d.require banks to hold more reserves.

QUESTION 37

1. If a bank currently has $1000 in deposits and the required reserve ratio is 20%, then that single bank can make loans of

a.$200.

b.$800.

c.$5,000.

d.$20,000.

QUESTION 38

1. The opportunity cost of money is

a.the interest rate.

b.the price of stocks.

c.the price level.

d.real GDP.

QUESTION 41

1. Which of the following factors would be likely to increase households' supply of loanable funds at every interest rate?

a.a tax credit on savings

b.a tax on savings

c.an increase in consumer spending

d.an increase in interest rates

QUESTION 47

1. When the Fed decreases the reserve requirement,

a.banks lend more and the money supply decreases.

b.banks lend more and the money supply increases.

c.banks lend less and the money supply decreases.

d.banks lend less and the money supply increases.

QUESTION 50

1. Funds borrowed and saved are brought into equilibrium through adjustments in ______________.

a.inflation

b.the money supply

c.deposits

d.interest rates