One of the strengths of monetary policy relative to fiscal policy is that monetary policy:

can be implemented more quickly.

The Discount Rate is:

the interest rate the Fed offers banks.

If the Federal Reserve were attempting to reduce demand-pull inflation, they would:

sell bonds, raise the res. req., and raise the discount rate

Required Reserves are:

checkable deposits a bank must keep in vault cash.

In the case of the Federal Reserve, "Cyclical Asymmetry" refers to the idea that:

it is easier to slow down business than to speed it up

What are the 3 Tools of Monetary Policy?

Reserve Requirement, Discount Rate, Open Market Operations

The asset demand for money:

varies inversely with the rate of interest.

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AP Macro - Monetary Policy

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Money and Banking, the Fractional Reserve System, the Federal Reserve, and Monetary Policy.

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Questions 25

Answers

1
Company X deposits $100. The res. req. is 10%. How much can Bank Zero expand the money supply?
$100
$1,000
$90
$900
2
Expansionary monetary policy would cause:
AD to decrease.
Net Exports to Increase.
Net Exports to decrease.
bank reserves to decrease.
3
If you are estimating your total costs for school next year, you are using money primarily as:
economic investment
unit of account
store of value
medium of exchange
4
If demand deposits are $100, and required reserves are $25, what is the reserve ratio?
25%
12%
12.5%
1.25%
5
An expansionary or "easy money" policy is designed to shift the:
AS curve to the left
AD curve to the left
AS curve to the right
AD curve to the right
6
How is money created?
When customers pay off their loans.
When businesses build capital.
When banks lend to customers.
When congress buys Sacajawea coins to earn cash back bonuses
7
One of the strengths of monetary policy relative to fiscal policy is that monetary policy:
can be implemented more quickly.
is subject to closer political scrutiny.
is run by congress. You know, for efficiency reasons.....
does not produce a net export effect.
8
By how much can the money supply increase from the fed's purchase of $100 of bonds? RR = 10%
$1,000
-$100
No Change
$100
9
The Discount Rate is:
the interest rate the Fed offers banks.
the rate of unemployment that is acceptable.
the long term yield in interest on government bonds.
the interest rate banks offer other banks.
10
What is the interest rates the banks charge each other called?
the private interest rate
the federal funds rate
the banking standard
the discount rate
11
If you withdraw $100 from your bank account, how much does this change the money supply?
No Change
$100
-$100
$1,000
12
If the fed raised the reserve requirement, the U.S. Dollar would:
depreciate.
replace George Washington's head with President Trump's.
remain stable.
appreciate.
13
If the Federal Reserve were attempting to reduce demand-pull inflation, they would:
buy bonds, raise the res. req., and raise the discount rate
sell bonds, raise the res. req., and raise the discount rate
buy bonds, lower the res. req., and lower the discount rate
sell bonds, lower the res. req., and lower the discount rate
14
If a bank has $1,000, and the reserve requirement is 10%, then checkable deposits must be:
$100
$10,000
$100,000
$20,000
15
Contractionary monetary policy would cause:
Net Exports to decrease.
AD to increase.
Net Exports to increase.
the unemployment rate to decrease.
16
Company X deposits $100. The res. req. is 10%. How much is the value of the banking system?
$90
$100
$900
$1,000
17
The Res. Req. is 20%. A bank has deposits of $5M and actual reserves of $2M, it can lend out:
$500,000
$7 Million
$3 Million
$1 Million
18
How is money destroyed?
When loans are paid off.
When treasury securities are sold by the Fed.
When loans are made.
When congress receives their cash back bonuses.
19
Required Reserves are:
checkable deposits a bank can lend out.
checkable deposits a bank buys securities with.
money issued by the fed.
checkable deposits a bank must keep in vault cash.
20
If the fed buys $100 worth of bonds, how much does the money supply change?
$1,000
$100
-$100
No Change
21
In the case of the Federal Reserve, "Cyclical Asymmetry" refers to the idea that:
it is easier to slow down business than to speed it up
the fed is better earning votes than congress.
congress is better at handling unemployment than the fed.
it is easier to speed up business than to slow it down.
22
Company X deposits $100. The res. req. is 10%. How much can the banking system expand by?
$1,000
$100
$900
$90
23
The sale of government securities from the public to the Fed will cause:
commercial bank reserves to decrease.
the interest rate to decrease.
demand deposits to decrease.
the money supply to decrease.
24
What are the 3 Tools of Monetary Policy?
Discount Rate, Taxes, Electoral College Votes
Hammer, Nails, Screwdriver
Reserve Requirement, Taxes, Bond Rates
Reserve Requirement, Discount Rate, Open Market Operations
25
The asset demand for money:
is unrelated to both the interest rate and the level of GDP.
varies inversely with the level of real GDP.
varies inversely with the rate of interest.
varies directly with the level of nominal GDP.

AP Macro - Monetary Policy Flashcards | StudBud