lesson 12 quiz - 1. The tools of operation for the Fed...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
1. The tools of operation for the Fed include: All the above 2. The discount rate is the lending rate charged to banks when they borrow from the Fed to meet reserve requirements. 3. When the Fed sells Treasury securities or when a bank sells Treasury securities, bank reserves and M1 will decrease 4. The velocity of money is determined by spending pressures in the economy. 5. If interest rates are low American firms are more likely to expand, but foreign investors may trade their dollars for investments in other nations forcing the value of the dollar to go down . 6. In the equation of exchange, M x V = P x Q, the P represents the average price level 7. Monetarists emphasize changes in the money supply as the most important determinant of all the above 8. Both the Monetarist and the Keynesian (Fiscalist) analytical frameworks are important in understanding our economy today. 9. A All of the above approach to solving the recession in this example would definitely have uncertainty regarding the attainment of the short term benefits and would definitely have risk regarding the possibility of longer run costs. 10 In trying to solve the recession in this example, the Money Supply is expanded and interest rates are lowered when the Fed buys $10 billion of bonds in the Financial Markets. 11. With the multiplier effects in this example, Consumers obtained the income to spend an additional 400 billion on new and efficiently produced products and services. 12. The equation of exchange is: M x V = P x Q . 13. A financial institution with a loss of deposits can borrow from the Fed, if it cannot borrow elsewhere, to maintain its required reserves. (True) 14. The level of reserves (depositor funds held back from making loans) is very important in determining the money supply. (True) 15. A None of the above approach to solving the recession in this example would have no uncertainty regarding the attainment of the short term benefits and would have no risk regarding the possibility of longer run costs. 16. Moral suasion is the application of “suggestion” pressure and not force to encourage banks to increase or decrease loan activity as is appropriate for the national economy. 17. A new round of inflation can be avoided even as the Money Supply increases in this
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 06/18/2011 for the course ECON 2302 taught by Professor Methenitis during the Fall '10 term at Richland Community College.

Page1 / 3

lesson 12 quiz - 1. The tools of operation for the Fed...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online