Study Guide Prep :

What would be the effect if interest rates in the economy decrease (choose one):

1.Aggregate demand would decrease and Real GDP would decrease

2.Aggregate demand would decrease and Real GDP would increase

3.Aggregate demand would increase and Real GDP would decrease

4.Aggregate demand would increase and Real GDP would increase

At a bank, what are excess reserves (choose one)?

1.(Bank deposits at the Fed) - (Vault cash) - (Required reserves)

2.(Bank deposits at the Fed) + (Vault cash) - (Required reserves)

3.(Bank deposits at the Fed) + (Vault cash) + (Required reserves)

What is an example of assets to a bank (choose one)?

1.Loans the bank has made to borrowers

2.Deposits the bank holds for customers

3.Funds borrowed from other banks

Business debt is a form of public debt:trueorfalse(pick one)?

Riskier loans are loans to people less likely to have income or the ability to repay their debt:trueorfalse(pick one)?

Arbitrage is the simultaneous purchase and sale of a good in order to profit from a difference in price:trueorfalse(pick one)?

Which of the following refers to the federal funds rate (FFR) (choose one)?

1.Interest rate on a bank's reserve deposits at the Fed

2.Rate on Treasury bills purchased by a bank

3.Interest rate on a non-bank financial institution's reserve deposits at the Fed

4.Interest rate on loans a bank makes to other financial institutions

What is NOT part of the Federal Reserve's (Fed's) dual mandate (choose one)?

1.Price stability

2.Sustaining deflation

3.Maximum employment

The Federal Reserve's structure allows it to makedecisionsthat (i) can focus on the economy's health further in the future (i.e., long-term health) and (ii) are less influenced by pressure from elected officials:trueorfalse(pick one)?

The Federal Reserve's Federal Open Market Committee (FOMC) makes decisions on monetary policy:trueorfalse(pick one)?

The Federal Reserve's monetary policy tools today are different than earlier, when banks had limited reserves:trueorfalse(pick one)?

What would the Federal Reserve (Fed) need to do to increase spending in the economy? (choose one):

1.Increase the Federal Funds Rate (FFR) target range

2.Decrease the Federal Funds Rate (FFR) target range

3.Decrease aggregate demand (AD)

4.Decrease short-run aggregate supply (SRAS)

If the Federal Reserve (Fed) decides on contractionary monetary policy, part of what the Fed would need to do is decrease the Interest on Reserve (IOR) and ON RRP rates:trueorfalse(pick one)?

What would be the effect of expansionary monetary policy? (choose one):

1.Aggregate demand would decrease and Real GDP would decrease

2.Aggregate demand would decrease and Real GDP would increase

3.Aggregate demand would increase and Real GDP would decrease

4.Aggregate demand would increase and Real GDP would increase