Macroeconomics Set-2 (21-40)

Question 21 of 40
If money is used as a mechanism to hold purchasing power for a period of time, it is functioning as a __________.


A. standard of value

B. store of value

C. medium of exchange

D. unit of account

Question 22 of 40
Money guarantees that there is a(n. __________, because it will always be accepted in exchange for a desired service or good.


A. double coincidence of wants

B. open market

C. fiat

D. human interaction


Question 23 of 40
An open market __________ by the Fed decreases the money supply, which leads to __________ interest rates and a fall in investment spending.


A. sale; increased

B. sale; decreased

C. purchase; increased

D. purchase; decreased

Question 24 of 40
The group responsible for deciding on monetary policy is the __________.


A. Federal Open Market Committee

B. Board of Governors only

C. Federal Advisory Council

D. group of 12 Federal Reserve Bank presidents only

Question 25 of 40
One of the essential functions that a bank performs is __________.


A. purchasing government bonds

B. creating deposits by lending required reserves

C. transferring money from savers to lenders

D. owning assets like real estate


Question 26 of 40
When money is used to express the value of goods and services, it is functioning as a __________.


A. medium of exchange

B. store of value

C. unit of account

D. store of purchasing power


Question 27 of 40
The Fed can change the money supply by buying or selling long-term Treasury bonds. Purchasing long-term securities is commonly called __________.


A. open market operations

B. discount operations

C. federal funds speculation

D. quantitative easing


Question 28 of 40
To increase the money supply using the reserve requirements, what would the Fed typically do?


A. increase the reserve requirement for banks

B. reduce the reserve requirement for banks

C. make each bank set its own reserve levels

D. let each bank get more currency from the Treasury


Question 29 of 40
The Federal Reserve influences the level of interest rates in the short run by changing the __________.


A. demand for money through open market operations

B. demand for money through changes in reserve requirements

C. supply of money through open market operations

D. supply of money through changes in stock market operations


Question 30 of 40
Consider how the value of the U.S. dollar affects the worldwide increase in commodity prices to answer the following two question(s.. Starting in the summer of 2010, there was a rise in prices of commodities such as oil and food worldwide. Some economists suggested that monetary policy in the United States was the cause of the worldwide commodity boom. Some economists noticed that the change in the value of the U.S. dollar was largely due to the change in interest rates, and the change in interest rates occurred because of the Fed's use of __________ to further stimulate the economy.


A. open market sales

B. quantitative easing

C. discount operations

D. open market purchases


Question 31 of 40
All of the following statements are true of the Federal Reserve EXCEPT __________.


A. it acts as the central bank for all countries in the world

B. along with the Board of Governors, the chairperson of the Federal Reserve determines monetary policies and strategies based on the state of economy

C. it supplies currency to the economy

D. it holds reserves from banks and regulates banks


Question 32 of 40
The supply of money in the U.S. economy is determined primarily by __________.


A. decisions made by the Federal Reserve and the U.S. Treasury

B. the actions of the Federal Reserve and the banking system

C. consumers and the banking system

D. the demand for money in the economy


Question 33 of 40
A bank's reserves __________.


A. are the sum of its excess and required reserves

B. can be held as cash in its vault

C. can be held as deposits with the Federal Reserve

D. all of the above


Question 34 of 40
Good news for the economy is bad news for bond prices, because __________.


A. the increased demand for money will increase interest rates

B. when real GDP increases, demand for money will decrease

C. bond prices move in the same direction as interest rates

D. when interest rates increase during growing GDP, bond prices will increase


Question 35 of 40
An increase in the reserve requirement __________.


A. increases the money supply, which leads to increased interest rates and a decrease in GDP

B. increases the money supply, which leads to decreased interest rates and a decrease in GDP

C. decreases the money supply, which leads to increased interest rates and a decrease in GDP

D. decreases the money supply, which leads to decreased interest rates and a decrease in GDP


Question 36 of 40
Loans are examples of a bank's __________.


A. assets

B. liabilities

C. net worth

D. balance sheet


Question 37 of 40
When checks are exchanged between banks, the Fed oversees the banks to ensure the appropriate funds have been transferred. This is known as __________.


A. check kiting

B. check clearing

C. check floating

D. check balancing


Question 38 of 40
The Federal Reserve System was created by the __________.


A. U.S. Treasury

B. President

C. Congress

D. Supreme Court


Question 39 of 40
M1 __________.


A. is the sum of currency plus traveler's checks

B. is the narrowest definition of the money supply

C. includes small time deposits

D. includes credit cards


Question 40 of 40
Equilibrium in the money market occurs when __________.


A. the quantity of money demanded equals the quantity of money supplied

B. the quantity of money demanded is less than the quantity of money supplied

C. the quantity of money demanded is more than the quantity of money supplied

D. the interest rate equals the money supply