Exam 10: Money, the Federal Reserve, and the Interest Rate

The Fed can influence long-term interest rates by

Dollar Bank is currently loaned up. If the required reserve ratio is lowered,

When you keep your savings under your mattress, you are using money as a(n)

When the Fed raises the required reserve ratio, the banks' excess reserves will initially ________ and the money supply ________.

Firms and governments pay interest to the lenders that purchase their bonds.

The multiple by which total deposits can increase for every dollar increase in ________ is the money multiplier.

The M2 definition of money includes traveler's checks.

Refer to the information provided in Figure 10.1 below to answer the questions that follow. Figure 10.1 -Refer to Figure 10.1. The money demand curve will shift from to if

When the Fed lowers the required reserve ratio, the banks' excess reserves ________ and the money supply ________.

What is the most widely followed short-term interest rate?

Assume the current one-year interest rate on a bond is 4%, and the one-year expected rate a year from now is 8%. According to the expectations theory of the term structure of interest rates, the two-year interest rate is

Commercial paper is a short term IOU of a corporation.

When Mexico experiences a period of high inflation and Mexicans lose confidence in their peso as a store of value, which of the following would be most likely to occur?

Federal funds are

A decrease in the required reserve ratio

Which of the following are new assets of the Fed as of 2008?

Members of the Federal Reserve Board of Governors

Which of the following instruments is not used by the Federal Reserve to change the money supply?

Fiat monies, but not commodity monies, can be used as a store of value.

Investors may wish to hold money in savings accounts when interest rates are low with the intention of moving the money to non-interest-bearing checking accounts when interest rates increase.