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33 Cards in this Set
- Front
- Back
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What institution has formal responsibility for setting US monetary policy?
a) Each federal reserve district sets policy for its region b) The Board of Governors c) The Congress d) The FOMC (Federal Open Market Committee) |
The FOMC
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Which of the following best describe the function of the Federal Reserve?
a) clearing interbank payments, regulating the banking system, and keeping inflation low b) clearring interbank payments, regulating the banking system, fiscal policy, and assisting banks in financial trouble c) clearing interbank payments, regulating the banking system, and managing the nations foreign exchange reserves |
c) clearing interbank payments, regulating the banking system, and managing the nations foreign exchange reserves
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The FOMC consists of ___ voting members.
Seven of the members are ________. __ of the 12 presidents of the Federal Reserve district banks vote on a rotating basis. The president of the NY Federal Reserve bank _______ gets a vote. |
a) 12
b) The Board of Governors c) 4 d) always |
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Asset or liability?
1) Federal Reserve notes (outstanding) 2) Bank Reserves (from depository institutions) 3) Gold 4) Loans to banks 5) Deposits made by the U.S. Treasury 6) U.S. Treasury securities |
1) Liability
2) Liability 3) Asset 4) Asset 5) Liability 6) Asset |
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The rate that the least risky firms pay on bonds that they issue is the
A. Triple-A corporate bond rate B. federal funds rate C. prime rate D. commercial paper rate |
A. Triple-A corporate bond rate
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Government securities with terms of more than one year are called
A. federal funds bonds B. capital bills C. government bonds D. Treasury bills |
C. Government bonds
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What is the most widely followed short-term interest rate?
A. The three-month Treasury bill rate B. The commercial paper rate C. The government bond rate D. The federal funds rate |
A. The three-month Treasury bill rate
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Government securities that mature in less than a year are called.
A. Federal Reserve bonds B. Federal funds bonds C. government bonds D. Treasury bills |
D. Treasury bills
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The Fed can influence long-term interest rates by
A. affecting people's expectations of future short-term rates B. influencing the current one-year rate C. influencing the demand for money in the short run D. both A and B are correct |
A. affecting people's expectations of future short-term rates
B. influencing the current one-year rate |
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The interest rate on a two-year security will continue to adjust until it is equal to
A. an average of the current one-year rate and the expected one-year rate for next year B. half the interest rate on a 1-year security C. twice the interest rate on a 1-year security D. the sum of the current one-year rate and the expected one-year rate for next year |
A. an average of the current one-year rate and the expected one-year rate for next year
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Assume the current one-year interest rate on a bond is 2% and the 1-year expected rate a year from now is 3%. According to the expectations theory of the term structure of interest rates, the 2-year interest rate is
A. 2% B. 2.5% |
B. 2.5%
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Assume the one-year interest rate on a bond is 8% and the expected 1-year rate a year from now is 12%. According to the expectations theory of the term structure of interest rates, the 2-year rate will be
A. 12% B. 22% C. 10% |
C. 10%
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On an unsecured loan, your bank will highly likely charge an interest rate
A. below the prime rate B. below the federal funds rate C. below the discount rate D. above the prime rate |
D. above the prime rate
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Which of the following types of interest rates change daily?
A. the prime rate B. the discount rate C. the corporate rate D. the federal funds rate |
D. the federal funds rate
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The interest rate that commercial banks charge each other for borrowing and lending reserves is called
A. the commercial rate B. the price interest rate C. the discount rate D. the federal funds rate |
D. the federal funds rate
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The treasury bill rate is the interest paid
A. on government securities that mature in less than a year B. on government securities that mature in 5 years C. on government securities that mature in 10 years D. on government securities that mature in 30 years |
A. on government securities that mature in less than a year
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Which of the following leads to an increase in the interest rate?
A. a decrease in the discount rate B. a decrease in aggregate output C. a sale of government securities by the Fed D. a decrease in the price level |
C. a sale of government securities by the Fed
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Which of the following pairs of events will definitely lead to a decrease in the equilibrium interest rate?
B. a decrease in the required reserve ratio and a decrease in the level of aggregate output C. an increase in the discount rate and an increase in the price level D. the sale of gov. securities by the Federal Reserve and a decrease in the price level |
B. a decrease in the required reserve ratio and a decrease in the level of aggregate output
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135. An increase in the level of aggregate output and the purchase of gov securities by the Fed will have what effect on the equilibrium interest rate?
A. an increase in the interest rate B. a decrease in the interest rate C. an indeterminate effect on the interest rate D. no effect on the interest rate |
C. an indeterminate effect on the interest rate
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Decreasing the required reserve ratio shifts the money supply curve to the __ and __ the equilibrium interest rate.
A. right; increases B. right; decreases C. left; decreases D. left; increases |
B. right; decreases
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When the Fed sells government securities, ceteris paribus, the money supply shifts to the __ and the equilibrium interest rate__.
A. left; falls B. right; rises C. left; rises D. right; falls |
C. left; rises
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If there is a surplus in the money market, the Fed can eliminate it by
A. increasing money demand B. decreasing money supply C. increasing money supply D. decreasing money demand |
B. decreasing money supply
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A surplus in the money market causes
A. a decrease in the equilibrium interest rate. B. a decrease in the money supply C. an increase in the demand for money D. a decrease in the quantity demanded of money |
A. a decrease in the equilibrium interest rate
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If the quantity of money demanded is greater than the quantity of money supplied, then the interest rate will
A. fall B. remain constant C. change in an uncertain direction D. rise |
D. rise
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What will happen to the equilibrium interest rate when both money supply and GDP decrease?
A. The equilibrium interest rate remains constant B. The equilibrium interest rate increases C. The equilibrium interest rate decreases D. The impact on the equilibrium interest rate is ambiguous |
D. the impact on the equilibrium interest rate is ambiguous
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A decrease in the price level will lead to an increase in the interest rate.
True. False. |
False
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A mismatch between the timing of money inflow to the household and the timing of money outflow for household expenses is known as the nonsynchronization of income and spending
True False |
True
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Related to the Economics in Practice: The increase in the number of ATMs in Italy has had what impact on the market for cash?
A. demand has increased B. demand has decreased C. supply has increased D. supply had decreased |
B. demand has decreased
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When the aggregate price level (P) is multiplied by real aggregate income (Y), the result is
A. the aggregate money multiplier B. aggregate money demand C. the real aggregate price level D. nominal aggregate output |
D. nominal aggregate output
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Which of the following will most likely cause a decrease in the quantity of money demanded?
A. an increase in the interest rate B. an increase in the price level C. a decrease in the interest rate D. an increase in nominal aggregate output |
A. an increase in the interest rate
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As the interest rate falls, people hold __ money instead of bonds because the opportunity cost of holding money has __.
A. less; fallen B. more; risen C. less; risen D. more; fallen |
D. more; fallen
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The transactions demand for money is
A. positively related to the interest rate. B. negatively related to the interest rate. C. positively related to aggregate income D. negatively related to the price level |
C. positively related to aggregate income
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The speculative demand for money is
A. positively related to interest rate B. positively related to income C. negatively related to interest rate D. negatively related to income |
C. negatively related to interest rate
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