Question 1

Part of the reason that people confuse money and income is because

Accepted Answer

A)  money is tangible, but income is intangible. 
B)  money serves as the unit of account. 
C)  money is abstract, but income is concrete. 
D)  income is almost impossible to measure. 
A)  money is tangible, but income is intangible. 
B)  money serves as the unit of account. 
C)  money is abstract, but income is concrete. 
D)  income is almost impossible to measure.

Question 2

When the Fed wishes to decrease the money supply, it can

Accepted Answer

A)  ask people to buy more bonds. 
B)  turn additional funds over to the Treasury. 
C)  increase the required reserve ratio. 
D)  decrease the required reserve ratio. 
A)  ask people to buy more bonds. 
B)  turn additional funds over to the Treasury. 
C)  increase the required reserve ratio. 
D)  decrease the required reserve ratio.

Question 3

Open-market operations generally involve the purchase and sales of

Accepted Answer

A)  government securities. 
B)  stocks and bonds. 
C)  coins and currency. 
D)  Federal Reserve notes. 
A)  government securities. 
B)  stocks and bonds. 
C)  coins and currency. 
D)  Federal Reserve notes.

Question 4

The quantity of reserves demanded decreases as the federal funds rate rises because

Accepted Answer

A)  people want more liquid assets as the federal funds rate rises. 
B)  the price of bonds rise as the federal funds rate rises. 
C)  the opportunity cost of holding excess reserves increases as the federal funds rate rises. 
D)  people want more money to invest as the federal funds rate rises. 
A)  people want more liquid assets as the federal funds rate rises. 
B)  the price of bonds rise as the federal funds rate rises. 
C)  the opportunity cost of holding excess reserves increases as the federal funds rate rises. 
D)  people want more money to invest as the federal funds rate rises.

Question 5

Figure 29-1
 
In Figure 29-1, which panel shows the effect of a recession on the interest rate?

Accepted Answer

A)  Panel (
A)  
B)  Panel (
B)  
C)  Panel (
C)  
D)  Panel (
D)  
A)  Panel (
A)  
B)  Panel (
B)  
C)  Panel (
C)  
D)  Panel (
D)

Question 6

When someone asks how much money you made this year, they are using the term "money" correctly.

Accepted Answer

A) True 
 B)False

Question 7

The Federal Reserve System was established

Accepted Answer

A)  at the request of farmers to keep down interest rates. 
B)  because Americans believe in centralization of authority. 
C)  after four severe bank panics between 1873 and 1907. 
D)  as part of the Treasury Department. 
A)  at the request of farmers to keep down interest rates. 
B)  because Americans believe in centralization of authority. 
C)  after four severe bank panics between 1873 and 1907. 
D)  as part of the Treasury Department.

Question 8

Why is the Chair of the Fed Reserve considered by many to be the most powerful person in the economic world?

Accepted Answer

People in financial markets around the w

Question 9

The main purpose of expansionary monetary policy is to

Accepted Answer

A)  expand Treasury borrowing. 
B)  increase reserve requirements. 
C)  insure deposits. 
D)  reduce interest rates. 
A)  expand Treasury borrowing. 
B)  increase reserve requirements. 
C)  insure deposits. 
D)  reduce interest rates.

Question 10

The Federal Reserve System is controlled by the

Accepted Answer

A)  U.S. Department of the Treasury. 
B)  House of Representatives and the Senate. 
C)  Board of Governors. 
D)  President of the United States. 
A)  U.S. Department of the Treasury. 
B)  House of Representatives and the Senate. 
C)  Board of Governors. 
D)  President of the United States.

Question 11

Which of the following has proved to be spectacularly false, at least recently?

Accepted Answer

A)  As an expansion proceeds, people will hold no more cash. 
B)  As an expansion proceeds, banks will hold no more excess reserves. 
C)  The oversimplified money multiplier formula is predicated on two critical assumptions. 
D)  All of the above are false. 
A)  As an expansion proceeds, people will hold no more cash. 
B)  As an expansion proceeds, banks will hold no more excess reserves. 
C)  The oversimplified money multiplier formula is predicated on two critical assumptions. 
D)  All of the above are false.

Question 12

The Federal Reserve System is a(n)

Accepted Answer

A)  corporation owned by its member banks. 
B)  independent branch of the U.S. government. 
C)  corporation owned by the government and member banks. 
D)  agency created by presidential executive order. 
A)  corporation owned by its member banks. 
B)  independent branch of the U.S. government. 
C)  corporation owned by the government and member banks. 
D)  agency created by presidential executive order.

Question 13

When the Federal Reserve System was first established, its founders intended the Fed to

Accepted Answer

A)  assist the Treasury in collecting taxes. 
B)  be primarily responsible for government regulations. 
C)  pursue an active monetary policy to stabilize the economy. 
D)  provide protection against financial panics by acting as the lender of last resort. 
A)  assist the Treasury in collecting taxes. 
B)  be primarily responsible for government regulations. 
C)  pursue an active monetary policy to stabilize the economy. 
D)  provide protection against financial panics by acting as the lender of last resort.

Question 14

If interest rates increase, what will happen to the demand for reserves?

Accepted Answer

A)  It will shift outward. 
B)  It will shift inward. 
C)  Nothing, the economy will move to a new quantity demanded. 
D)  It depends on what happens to prices. 
A)  It will shift outward. 
B)  It will shift inward. 
C)  Nothing, the economy will move to a new quantity demanded. 
D)  It depends on what happens to prices.

Question 15

What is the federal funds rate? What are the main determinants of the federal funds rate?

Accepted Answer

The federal funds rate is the interest r

Question 16

If the Fed buys a T-bill from a commercial bank, how will it pay for the T-bill?

Accepted Answer

A)  It will give the bank new reserves. 
B)  It will write the bank a check. 
C)  It will transfer cash to the bank's vault. 
D)  It will take reserves from another bank. 
A)  It will give the bank new reserves. 
B)  It will write the bank a check. 
C)  It will transfer cash to the bank's vault. 
D)  It will take reserves from another bank.

Question 17

If the Fed sells $5 million in government bonds, how much will the money supply change?

Accepted Answer

A)  It will increase by $5 million. 
B)  It will increase by more than $5 million. 
C)  It will decrease by $5 million. 
D)  It will decrease by more than $5 million. 
A)  It will increase by $5 million. 
B)  It will increase by more than $5 million. 
C)  It will decrease by $5 million. 
D)  It will decrease by more than $5 million.

Question 18

The principal difference between income and money is that income is a ____ and money is a ____.

Accepted Answer

A)  schedule; curve 
B)  point; line 
C)  stock; flow 
D)  flow; stock 
A)  schedule; curve 
B)  point; line 
C)  stock; flow 
D)  flow; stock

Question 19

Some form of financial distress can become a full-blown recession if risk lead to ____ interest rates and ____ aggregate demand.

Accepted Answer

A)  higher; increased 
B)  higher; decreased 
C)  lower; increased 
D)  lower; decreased 
A)  higher; increased 
B)  higher; decreased 
C)  lower; increased 
D)  lower; decreased

Question 20

Money and income are used interchangeably by noneconomists but mean different things.

Accepted Answer

A) True 
 B)False

Exam 29: Monetary Policy: Conventional and Unconventional

Part of the reason that people confuse money and income is because

When the Fed wishes to decrease the money supply, it can

Open-market operations generally involve the purchase and sales of

The quantity of reserves demanded decreases as the federal funds rate rises because

Figure 29-1 In Figure 29-1, which panel shows the effect of a recession on the interest rate?

When someone asks how much money you made this year, they are using the term "money" correctly.

The Federal Reserve System was established

Why is the Chair of the Fed Reserve considered by many to be the most powerful person in the economic world?

The main purpose of expansionary monetary policy is to

The Federal Reserve System is controlled by the

Which of the following has proved to be spectacularly false, at least recently?

The Federal Reserve System is a(n)

When the Federal Reserve System was first established, its founders intended the Fed to

If interest rates increase, what will happen to the demand for reserves?

What is the federal funds rate? What are the main determinants of the federal funds rate?

If the Fed buys a T-bill from a commercial bank, how will it pay for the T-bill?

If the Fed sells $5 million in government bonds, how much will the money supply change?

The principal difference between income and money is that income is a ____ and money is a ____.

Some form of financial distress can become a full-blown recession if risk lead to ____ interest rates and ____ aggregate demand.

Money and income are used interchangeably by noneconomists but mean different things.

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

The Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Contemporary Issues in the Us Economy

Filters

The principal difference between income and money is that income is a and money is a .

Some form of financial distress can become a full-blown recession if risk lead to interest rates and aggregate demand.