The congressional act passed in 1946 that contained the first official statement of goals for economic performance in the United States was the

a. Federal Reserve Act.

b. Gramm-Rudman Act.

c. Employment Act.

d. Humphrey-Hawkins Act.

In order to move the federal funds rate to the level it desires, the Fed must

a. first change the discount rate to the desired federal funds rate.

b. specify the interest rate on previously issued government bonds.

c. adjust the money supply to achieve the target federal funds rate.

d. limit the amount of bank lending activity.

Financial markets are

a. markets where money is traded between the Fed and economic agents.

b. markets where funds accumulated by one group are made available to another group.

c. banks interact to lend and borrow reserves.

d. the market where capital goods are traded.

On October 12, 1987, the Dow Jones Industrial Average plunged 508 points, wiping out more than $500 billion in a few hours. How did the Fed respond to this drastic fall in the stock market index?

a. The Fed responded precisely as it did when faced with a similar situation in 1929, that is, it deemed that no action was necessary.

b. To encourage the business community to invest in the stock market, the Fed announced that it will sell federal securities to raise the interest rate.

c. In an attempt to ward off a recession, the Fed announced that it will provide adequate liquidity, by buying federal securities.

d. The Fed provided long-term loans to those corporations that experienced significant decreases in their stock value.

An increase in the supply of bonds leads to

a. an increase in the price of bonds, a decrease in the interest rate, and an increase in aggregate demand.

b. an increase in the price of bonds, an increase in the interest rate, and an increase in aggregate demand.

c. a decrease in the price of bonds, an increase in the interest rate, and an increase in aggregate demand.

d. a decrease in the price of bonds, an increase in the interest rate, and a decrease in aggregate demand.

An increase in the supply of bonds generates

a. an increase in both the interest rate and the exchange rate.

b. a decrease in both the interest rate and the exchange rate.

c. an increase in the interest rate and a decrease in the exchange rate.

d. a decrease in the interest rate and an increase in the exchange rate.

A bond is

a. a debt instrument, that is, the issuer has taken out a loan.

b. an equity instrument, that is, the buyer has purchased ownership in the issuer's firm.

c. the same thing as a stock.

d. a short-term loan from the government.

If the U.S. exchange rate falls,

a. foreign products are now more expensive to foreigners.

b. foreign products are now cheaper to U.S. citizens.

c. U.S. products are now more expensive to U.S. citizens.

d. U.S. products are now cheaper to foreign countries.

The Case in Point titled "Velocity and the Confederacy" suggests that during the Civil War, the South faced

a. hyperinflation and rising velocity.

b. hyperinflation and falling velocity.

c. deflation and rising velocity.

d. deflation and falling velocity.

What are the three motives for holding money?

a. the medium of exchange motive, the store of value motive, and the unit of account motive

b. the transaction motive, the speculative motive, and the liquidity motive

c. the transaction motive, the investment motive, and the liquidity motive

d. the transaction motive, the speculative motive, and the precautionary motive