Money
Fed and the Economy
Monetary Policy I
Monetary Policy II
Anything goes...
100
The measure of money supply that is limited to currency and checking deposits (the most liquid elements).
M1
100
This is the interbank lending rate and represents the primary cost of short-term loanable funds.
Fed Fund Rate
100
An increase in the money supply leads interest rates to do this.
A decrease in interest rates.
100
Interest rates and bond prices have this relationship.
They vary inversely.
100
Hiding money under your bed serves as what type of money function?
Store of Value.
200
If GDP goes up, what happens to the demand for money?
Increases
200
How many Federal Reserve banks make up the Federal Reserve System?
12
200
This is the most immediate and effective tool the Fed uses to impact the money supply?
Open Market Operations
200
The Fed's inability to stimulate the economy by reducing interest rates is known as the
(a) zero lower bound problem.
(b) zero upper bound problem.
(c) negative interest rate problem.
(d) quantitative easing problem.
(a) zero lower bound problem.
200
What is the "price" of money?
Interest Rates
300
Shopping for goods by comparing prices serves as what type of money function?
Unit of Account.
300
As far as the Fed's mandate, there is a tradeoff between inflation and this.
Unemployment
300
Who is the current Federal Reserve chair ?
Jerome Powell
300
The Fed will most likely do this if inflation is above the target rate.
Raise Interest Rates
300
Name the artist who performs this song...
Jessie J -- "Price Tag"
400
M1 plus savings deposits, small time deposits, and market fund deposits.
M2.
400
If the price level in an Economy increases, what happens to the purchasing power of the dollar?
It decreases.
400
In contractionary monetary policy, does the Fed increase or decease the money supply?
Decrease!
400
Assume the economy is operating at less than full employment. An expansionary monetary policy will cause interest rates to _________, which will _________ investment spending.
(a) decrease; decrease
(b) decrease; increase
(c) increase; increase
(d) increase; decrease
(b) decrease; increase
400
What former member of the U.S. Congress tried unsuccessfully to "End the Fed"?
Congressman Ron Paul
500
Why does the US dollar have value?
Relative Scarcity (to a lesser extent, legal tender and acceptability)
500
The rate that financial institutions pay to borrow money from the Fed.
Discount Rate.
500
The numbers in parentheses after the AD1, AD2, and AD3, labels indicate the levels of investment spending associated with each curve, respectively. All numbers are in billions of dollars. If the interest rate is 8 percent and the goal of the Fed is full-employment output of Qf, it should
(a) increase the interest rate from 8 percent to 10 percent.
(b) decrease the interest rate from 8 percent to 4 percent.
(c) decrease the interest rate from 8 percent to 6 percent.
(d) maintain the interest rate at 8 percent.
(c) decrease the interest rate from 8 percent to 6 percent.
500
Refer to the diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels indicate the levels of investment spending associated with each curve. If the money supply is MS1 and the goal of the monetary authorities is full-employment output Qf, they should
(A) increase the money supply from $80 to $100.
(B) increase the money supply from $80 to $120.
(C) maintain the money supply at $80.
(D) decrease the money supply from $80 to $60.
(A) increase the money supply from $80 to $100.
500
Name the band that performs this song...
Pink Floyd's "Money"