1. Briefly define the following terms:
a. M1
b. FOMC
c. Discount rate
2. Why aren't checks counted as money? Why aren't credit cards counted as money?
3. Describe the Federal Reserve System. Be sure to mention and discuss the Board of Governors, the regional Federal Reserve banks, and the Federal Open Market Committee.
Answer the following multiple-choice questions.
4. A bank's total reserves equal its
a. total cash in its vaults.
b. total cash in its vaults plus its deposits at the Federal Reserve banks.
c. total cash in its vaults plus its total liquid deposits.
d. total cash in its vaults plus its total liquid deposits plus its total deposits at the Federal Reserve banks.
5. The discount rate is the interest rate
a. on time deposits.
b. on funds banks borrow from other banks.
c. on funds that banks borrow from the Federal Reserve.
d. that banks charge their "best" customers.
6. If the amount of currency (that is, Federal Reserve notes) increases and also the reserves of depository institutions increase, the monetary base
a. definitely increases.
b. definitely decreases.
c. definitely does not change.
d. might increase, decrease, or not change depending on the relative sizes of the change in currency and reserves of depository institutions.