front 1 For purposes of analyzing the money stock and its relationship to relevant economic variables, money is best thought of as | back 1 those items that can be readily accessed and used to buy goods and services. |
front 2 In the United States, currency holdings per person average about | back 2 $4,490; one explanation for this relatively large amount is that criminals probably prefer currency as a medium of exchange. |
front 3 Liquidity refers to | back 3 the ease with which an asset is converted to the medium of exchange. |
front 4 Which of the following might explain why the United States has so much currency per person? | back 4 Currency may be a preferable store of wealth for criminals. |
front 5 An important function of the U.S. Federal Reserve is to | back 5 control the supply of money. |
front 6 The Fed has the power to increase or decrease the number of dollars in the economy through the decisions of | back 6 the FOMC. |
front 7 Which of the following does the Federal Reserve not do? | back 7 convert Federal Reserve Notes into gold |
front 8 When conducting an open-market purchase, the Fed | back 8 buys government bonds, and in so doing increases the money supply. |
front 9 Which of the following is correct concerning the FOMC? | back 9 a. the members of the Board of Governors have the majority of the votes b. the New York Federal Reserve Bank District President is always a voting member c. all Federal Reserve Bank presidents attend the meetings All of the above are correct |
front 10 A bank’s assets equal its liabilities under | back 10 both 100-percent-reserve banking and fractional-reserve banking. |
front 11 In a 100-percent-reserve banking system, if people decided to decrease the amount of currency they held by increasing the amount they held in checkable deposits, then | back 11 M1 would not change. |
front 12 If a bank has a reserve ratio of 8 percent, then | back 12 the bank keeps 8 percent of its deposits as reserves and loans out the rest. |
front 13 If the reserve ratio is 12.5 percent, then $1,000 of additional reserves can create up to | back 13 $8,000 of new money. |
front 14 If the reserve ratio is 8 percent, then a decrease in reserves of $6,000 can cause the money supply to fall by as much as | back 14 $75,000. |
front 15 If you deposit $100 of currency into a demand deposit at a bank, this action by itself | back 15 does not change the money supply. |
front 16 If the Fed raised the reserve requirement, the demand for reserves would | back 16 increase, so the federal funds rate would rise. |
front 17 A problem that the Fed faces when it attempts to control the money supply is that | back 17 the Fed does not control the amount of money that households choose to hold as deposits in banks. |
front 18 During a bank run, depositors decide to hold more currency relative to deposits and banks decide to hold more excess reserves relative to deposits. | back 18 Both the decision to hold relatively more currency and the decision to hold relatively more excess reserves would make the money supply decrease. |
front 19 If the discount rate is lowered, banks borrow | back 19 more from the Fed so reserves increase. |
front 20 If the Fed sells government bonds to the public, then reserves | back 20 decrease and the money supply decreases. |
front 21 The Fed purchases $200 worth of government bonds from the public. The reserve requirement is 12.5 percent, people hold no currency, and the banking system keeps no excess reserves. The U.S. money supply eventually increases by | back 21 $1,600. |
front 22 In 1991, the Federal Reserve lowered the reserve requirement from 12 percent to 10 percent. Other things the same this should have | back 22 increased both the money multiplier and the money supply. |
front 23 In a fractional-reserve banking system with no excess reserves and no currency holdings, if the central bank buys $100 million worth of bonds, | back 23 reserves increase by $100 million and the money supply increases by more than $100 million. |
front 24 Which of the following is not a tool of monetary policy? | back 24 increasing the government budget deficit |