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ihw7ANS - IHW7ans Question16 Single Correct Currency held...

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IHW7ans Question16 - Single Correct 1.0 Point Currency held by the public A and by banks is part of the money supply. B is part of the money supply, but currency held by banks is not. C is not part of the money supply, but currency held by banks is. D or banks is not part of the money supply since it is not included in M1. BY DEFINITION. M1 IS CURRENCY, CHECKABLE DEPOSITS IN HANDS OF PUBLIC (NOT BANKS, NOT FED, NOT TREASURY) – MAKES SENSE, WE WANT TO EXPLAIN/PREDICT IMPACT OF MONEY SUPPLY ON ECONOMY – DEPENDS ON WHAT PUBLIC DOES WITH IT. Question18 - Single Correct 1.0 Point The Fed effectively controls the Fed Funds rate by controlling A the money supply B the supply of bank reserves C interest rates D money demand BANK RESERVES MARKET – S CONTROLLED BY FED, D FROM BANKS. FED FUNDS RATE IS THE ‘PRICE’ OF BANK RESERVES. FED CHANGES SUPPLY OF RESERVES THROUGH OPEN MARKET OPERATIONS WHICH CHANGES THE EFFECTIVE FED FUNDS RATE TO MEET THE FED’S TARGET.
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