Questions:
Question 1 The lender of last resort function refers to controlling the money supply.
regulating banks.
loaning money to the public
preventing bank panics.
purchasing government bonds when no one else wishes to purchase them.
Question 2.According to the M1 definition, the money supply consists of currency held by the public plus
time deposits.
negotiable certificates of deposit.
time deposits plus demand deposits.
demand deposits, NOW accounts, credit union share drafts, and traveler's checks.
M2 minus money market mutual fund shares.
Question 3.If the money supply expands, according to monetarists, what is the most likely response by households?
Spend it.
Lend it.
Save it.
No change in behavior unless real income has changed.
Question 4.If the Fed sells government bonds on the open market, which of the following is likely to occur?
The money supply will expand.
The yield on government bonds will increase.
The yield on corporate bonds will decrease.
The amount of investment spending will increase.
The amount of investment spending will decrease.
Question 5. The medium of exchange function of money refers to money as
a form of wealth.
a common denominator.
a means of payment.
a measure of value.
a representation of a commodity such as gold.
Question 6.A bank's lending out a portion of the deposits of its customers is
not allowed in banking practice today.
allowed with the permission of the borrower.
called fractional reserve banking.
not as important as it was in the Middle Ages.
called 100 percent.
reserves.
Question 7.If the Fed sells government bonds on the open market, which of the following will NOT occur?
the money supply will contract.
the yield on corporate bonds will increase.
the yield on government bonds will increase.
the interest rate will fall.
the amount of investment spending will decrease.
Question 8. According to most monetarists, the primary goal of monetary policy should be to
stabilize the federal funds rate.
support fiscal policy.
maintain noninflationary growth of the money supply.
ensure that the interest rate is low enough to encourage a large amount of investment spending.
prevent the yields on corporate bonds from falling.
Question 9.The M1 money supply includes
small-denomination time deposits.
certificates of deposit.
money market accounts.
checkable deposit accounts.
Question 10.To keep the federal funds rate from rising above the target zone, the Fed must
sell government bonds in the open market.
raise the discount rate.
increase the reserve requirement.
buy government bonds in the open market.
increase the GDP.