Chapter 34 (Final Exam)

  1. The organization directly responsible for monetary policy in the United States is the
    Federal Reserve
  2. There is an asset demand for money because money is
    a store of value
  3. An increase in the rate of interest would increase
    the opportunity cost of holding money
  4. The largest single asset in the Federal Reserve Banks' consolidated balance sheet is
  5. The largest single liability of the Federal Reserve Banks is
    Federal Reserve Notes
  6. Assuming that the Federal Reserve Banks sell $20 million in government securities to commercial banks and the reserve ratio is 20%, then the effect will be
    to reduce the potential money supply by $100 million
  7. Lowering the reserve ratio...
    changes required reserves to excess reserves
  8. Commercial bank borrowing from the Federal Reserve
    increases the excess reserves of commercial banks and their ability to offer credit
  9. Which is the most important control used by the Federal Reserve to regulate the money supply?
    open-market operations
  10. The federal funds rate is the rate that
    banks charge for overnight use of excess reserves held at the Federal Reserve banks
  11. When the Federal Reserve Banks decide to buy government bonds from banks and the public, the supply of reserves in the federal funds market
    increases and the federal funds rate decreases
  12. When the Federal Reserve uses open-market operations to reduce the federal funds rate several times over a year, it is pursuing
    an expansionary monetary policy
  13. The economy is experiencing high unemployment and a low rate of economic growth and the Fed decides to pursue an expansionary monetary policy. Which set of actions by the Fed would be most consistent with this policy
    buying government securities and lowering the reserve ratio
  14. The economy is experiencing inflation and the Federal Reserve decides to pursue a restrictive monetary policy. Which set of actions by the Fed would be most consistent with this policy?
    selling government securities and raising the discount rate
  15. In the chain of cause and effect between changes in the excess reserves of commercial banks and the resulting changes in output and employment in the economy,
    a decrease in the money supply will increase the rate of interest
  16. Which is most likely to be affected by changes in the rate of interest?
    investment spending
  17. A restrictive monetary policy would be most consistent with
    an increase in the federal funds rate and a decrease in the money supply
  18. Image Upload 1
    A shift from AD1 to AD2 would be most consistent with...
    the buying of securities by the Federal Reserve
  19. Image Upload 2
    Assume that the Federal Reserve lowers interest rates to increase investment spending. The monetary policy is most likely to shift...
    AD3 to AD4
Card Set
Chapter 34 (Final Exam)
Chapter 34 (Final Exam)