Only the Federal Reserve can create money.
If the Fed increases the supply of money, unemployment increases also.
The Fed can increase the money supply by buying securities.
The main reason the Fed changes the discount rate is to signal investors of future short-term interest rates.
National Banks have the option to be members of the Federal Reserve System.
Money is defined as currency and coins only.
Even though the Fed is independent of Congress, it still hesitates to make politically unpopular monetary policy decisions.
If the Fed were to sell securities, total reserves in the banking system would decrease.
When the Fed decreases the supply of money, the supple curve shifts left.
The President of the United States and the Senate choose the members of the Board of Governors.
Of its three functions, it is as a unit of account that distinguishes money from other assets.
Currency held by depository institutions (banks) is added to currency circulation in the hands of the public to get total currency in circulation.
A sale of government bonds by the Fed, all else the same, increase the monetary base.
Monetary policy is set by the Board of Governors.
If the Fed targets a monetary aggregate it is likely to lose control over the interest rate because of fluctuations in the money demand function.
Which of these terms does not refer to the same bank?
the Fed
central bank
member bank
The Federal Reserve Bank
__________ is the governing body of the Federal Reserve System.
The President
Congress
The Senate
The Board of Governors
When interest rates have increase, __________?
investments decrease
unemployment decreases
economic activity increases
firms borrow more money
__________ influences the economy through changes in interest rates.
The discount rate
Monetary policy
The money multiplier
What is the most important tool for controlling the money supply?
discount rate
open market operations
reserve requirements
investment spending
How many years is the Board of Governors appointed?
2
12
14
life
Who demands the loanable funds?
individuals
businesses
government
all the above
If the fed buys $350 million in government securities and the reserve requirement is 5%, what is the change that would result in the money supply?
$7,000 million
$700 billion
$1,750 billion
$175 billion
If there is an increase in business development, the demand curve will __________?
shift left
shift right
not be effected
increase up
Which of the following is not one of the four primary responsibilities of the Fed?
Supervising and regulating commercial banks
Maximizing the profit to satisfy the investors
Holding the US treasury checking account
Implementing monetary policy
The Fed lacks complete control over the money supply because it cannot perfectly predict..
the amount of discount borrowing by banks
shifts from deposit to currency
the level of excess reserves held by banks
all of the above
For a given level of monetary base, a decrease in the required reserve ratio on checkable deposits will mean..
decrease in the money supply
an increase in the money supply
a decrease in checkable deposits
an increase in discount borrowing
The money multiplier is..
negatively related to high-powered money
negatively related to the required reserve ratio
positively related to holdings of excess reserve
positively related to the discount borrowing from the Fed
According to the Loanable Funds Theory of Interest Rates, which of the following statement is true?
an increase in interest rates results in greater savings
there is little relationship between the level of interest rates and the amount of new money created
the demand for loanable funds is a function of the demand for funds by individuals, business, and government
all of the above are true
Explain what happens when the money supply increases.
When the money supply increases, interest rates tend to fall. This causes firms to borrow more money to invest in new equipment and buildings.
Since industries are expanding, there would be an increase in jobs, which in turn would increase consumer spending.
All of the above.
What will happen to the supply curve if the Fed sells securities?
Interest rates will rise.
This would cause the supply curve to shift left because there is a decrease in the amount of loanable funds.
The Federal Reserve can influence __________.
the money supply
interest rates
politicians
and and b
