36 Questions
What happens to the money supply if Tamika pays off a loan at the bank, ceteris paribus?
The money supply becomes smaller
Which of the following is NOT a reason why a transactions account is considered inconvenient for most people?
Risk of losing physical cash
What is the function of money when you use it to compare two houses in different price ranges?
Standard of value
If a bank has $1,000,000 in deposits, a minimum reserve requirement of 15 percent, and bank reserves of $170,000, how much can the bank make in new loans?
$20,000
In which scenario is money functioning as a medium of exchange?
Purchasing coffee at the local coffee shop before school
According to the monetarist view, what is the nature of the aggregate supply curve at the natural rate of unemployment?
Vertical
What happens to the money supply when the Fed buys bonds through open-market operations?
Decreases
If the Fed announces that it is raising the federal funds rate, what does this signal its intention to do in the open market?
Buy, Increase
What is the key decision-making body for general Federal Reserve policy?
Board of Governors
If the Fed wants to increase the money supply, what action can it take?
Decrease the discount rate
How many members are there in the Board of Governors of the Federal Reserve and how long are they appointed for?
7, 10 years
During periods of high unemployment and low output, what do Keynesian economists advocate?
Active government policy
What happens when government purchases are decreased?
Aggregate demand curve shifts to the left
What is the principal mechanism for directly changing the reserves of the banking system?
Open-market operations
What is the purpose of the discount window for banks?
To borrow reserves from other banks
What does it mean when money serves as a medium of exchange?
Money is exchanged for goods and services
How does an increase in government spending affect total aggregate spending when the marginal propensity to save is 0.1?
$50 billion increase in total aggregate spending
What happens to deposit creation possibilities with a larger minimum reserve requirement?
Decrease due to less lending capacity
What is the impact on the money supply when the Fed buys bonds through open-market operations?
Increase
In the context of economics, what does a rising federal funds rate signal regarding the Fed's actions in the open market?
Selling bonds, reducing the money supply
What is the role of the 12 regional Federal Reserve banks?
Provide loans to individuals
How many members are there in the Board of Governors of the Federal Reserve, and how long are they appointed for?
7 members, 14-year terms
In macroeconomics, what happens to nominal income if prices rise while the amount received annually remains constant?
Stays the same
According to Keynesian economists, what is their view on government intervention during periods of high unemployment and low output?
Active government policy is advocated
What happens to a bank's excess reserves if it decreases its loans?
They increase
Why is money considered a store of value?
Because it can be saved and used to make purchases in the future
What is the primary purpose of Federal Reserve open-market operations?
To influence interest rates and the money supply
What characterizes the aggregate supply curve at the natural rate of unemployment according to the monetarist view?
Vertical
In terms of structure, how long is the typical term served by a member of the Federal Reserve Board of Governors?
6 years
If a bank has insufficient reserves to meet its requirements, what is a possible action it can take?
Borrow reserves from the Fed's discount window
What happens to bank reserves when Tamika pays off a loan at the bank, ceteris paribus?
They decrease
Which of the following is not a characteristic of money as a store of value?
Protection against inflation
What happens to interest rates when the Fed sells bonds in the open market?
Increase
According to the monetarist view, what is the nature of the aggregate supply curve during the natural rate of unemployment?
Perfectly vertical
What is the role of the Federal Reserve Board of Governors in relation to the Federal Reserve System?
Set monetary policy and oversee the Federal Reserve Banks
When the Fed sells bonds in the open market, what is the impact on aggregate demand?
Shifts to the left
Test your knowledge on the Federal Reserve, monetary policy, and the impact of buying bonds through open-market operations. Questions cover topics such as the Board of Governors and the effects of raising the federal funds rate.
Make Your Own Quizzes and Flashcards
Convert your notes into interactive study material.
Get started for free
