Exam Eleven & Twelve Flashcards
T/F: A car would be considered a highly liquid asset.
False
T/F: Contractionary monetary policy would most likely be implemented when the inflation rate is considered to be too high.
True
T/F: Expansionary monetary policy has a tendency to lower interest rates.
True
T/F: Gold coins would be considered a type of commodity money.
True
T/F: If the Fed increases the reserve requirements of banks, the money supply would tend to increase.
False
T/F: If the Fed makes an open market purchase of government bonds, the federal funds rate will tend to fall.
True
T/F: If the demand for federal funds increases and the Fed does nothing in response, the federal funds rate would tend to increase.
True
T/F: If the supply of federal funds decreases and the Fed does nothing in response, the federal funds rate would tend to decrease.
False
T/F: Money has three roles: as a medium of exchange, as a store of value, and as a unit of account.
True
T/F: Nearly all economists agree that keeping unemployment low is more important than keeping inflation low.
False
T/F: One reason that private banks hold government bonds is that such binds are more liquid than other types of loans such as business loans and mortgages.
True
T/F: Open market operations involve the Federal Reserve changing the reserve requirements of private banks.
False
Suppose the Federal Reserve purchases $5 million in government bonds from First Liquidity Bank. Which one of the following statements is NOT true?
First Liquidity Bank will now be able to make more than $5 million in new loans.
What is the main difference between M1 and M2 as measures of money?
M2 includes the value of savings accounts while M1 does not.
What is the main reason that currency in the United States has value?
Because the federal government declares currency to have value
