Week 5- Monetary system problem set

Question 1

Ben Bernanke appointed___

Answer 1

Chair of the Board of Governor in 2009 by President Obama.

Question 2

Federal Reserve responsible for___

Answer 2

regulating money supply in the US.

Question 3

What do you call a Common function of most other financial assets?

Answer 3

store of value.

Question 4

ALL items that are included in M1 are also___

Answer 4

included in M2.

Question 5

Discount rate are___

Answer 5

interest rate that the Fed charges banks that borrow reserves from it.

Question 6

Increasing the gov’t budget deficit is not a tool for___

Answer 6

monetary policy.

Question 7

When Fed conducts open-market sales it sells___

Answer 7

Treasury securities which decreases money supply.

Question 8

Fed sells gov’t bonds, and in so doing___

Answer 8

decreases money supply.

Question 9

Fed buys gov’t bonds from___

Answer 9

the public.

Question 10

When Fed conducts open-market purchases it buys___

Answer 10

Treasury securities, which increases the money supply.

Question 11

The Most liquidity: highest to lowest___

Answer 11

currency, stocks, fine art.

Question 12

Liquidity refers to___

Answer 12

the ease with which an asset is converted to the medium exchange.

Question 13

IF discount rate lowered, banks borrow___

Answer 13

more from Fed so reserves increase.

Question 14

In fractional-reserve banking system, bank keeps___

Answer 14

only a fraction of its deposit in reserve. Banks generally lend out a majority of the funds deposited.

Question 15

Credit cards not included in___

Answer 15

M1.

Question 16

There’s a short-run trade-off btwn___

Answer 16

inflation and unemployment.

Question 17

Demand deposits are a type of___

Answer 17

checking account.

Question 18

Fed has power to increase or decrease number of dollars in the economy through___

Answer 18

FOMC

Question 19

In recent years, Federal Open Market Committee focused on a target for___

Answer 19

federal funds rate.

Question 20

Federal funds rate is the interest rate___

Answer 20

banks charge each other for short-term loans.

Question 21

Prisoners sometimes determine a single goods to be used as money. The good___

Answer 21

becomes a medium of exchange and a unit of account.

Question 22

Voting members of Federal Open Market Committee includes: 5, president of, and 7___

Answer 22

• 5 presidents of regional Federal Reserve banks.
• President of the Federal Reserve Bank of New York.
• 7 Board of Governors.

Question 23

When bank loans out $1,000, the money supply___

Answer 23

increases.

Question 24

M1 consist of___

Answer 24

currency + checkable deposits.

Question 25

Federal Reserve note are___

Answer 25

nation’s currency in paper money.

Question 26

M2 are highly___

Answer 26

liquid assets. They do not function as medium of exchange but can be converted into currency.

M2= M1 + near monies.

Question 27

Money zero maturity___

Answer 27

monetary balances that are immediately available at 0 cost.