Unit 4 AP Macro Monetary Policy

Question 1

The Federal Reserve is responsible for...

Accepted Answer

All of these are correct

Question 2

In an ample reserve system, which of the following would be an effective policy in fighting a recession?

Accepted Answer

The Fed decreasing the discount rate and the interest on reserves

Question 3

Which of the following is NOT part of M1?

Accepted Answer

Money in your savings account

Question 4

If the state of the economy is as depicted below, the FED should

Accepted Answer

embark on an tight (contractionary) money policy

Question 5

In an ample reserve system, the ceiling of the demand for bank reserves is set by...

Accepted Answer

The Discount Rate

Question 6

If the state of the economy is as depicted below, the FED should

Accepted Answer

easy (expansionary) money policy

Question 7

Which graph is being shown?

Accepted Answer

Ample Reserves Graph

Question 8

Open-market operations refer to:

Accepted Answer

the purchase or sale of gov't securities (Bonds) by the Fed.

Question 9

The federal funds rate is...

Accepted Answer

The rate that banks charge each other for loans.

Question 10

The FED directly sets:

Accepted Answer

the discount rate

Question 11

The three main tools of monetary policy are:

Accepted Answer

the discount rate, the reserve ratio, open-market operations

Question 12

The purpose of the shift on the graph below is to

Accepted Answer

to increase aggregate demand

Question 13

What is the present value of $1,100 given a year from now if the rate of return is 10%?

Accepted Answer

1,000

Question 14

If the FED were to increase the legal reserve ratio, we would expect:

Accepted Answer

higher interest rates.

Question 15

The Loanable Funds Market shows ______ interest rates.

Accepted Answer

Real

Question 16

The Money Market Graph below depicts

Accepted Answer

the result of the "FED" buying bonds

Question 17

Which of the following would NOT shift the demand for money in the money market graph?

Accepted Answer

A change in the money supply

Question 18

Monetary policy is expected to have its greatest impact on:

Accepted Answer

(I) Business Investment

Question 19

A contraction of the money supply:

Accepted Answer

increases the interest rate and decreases aggregate demand.

Question 20

The purpose of a tight money policy (contractionary monetary policy) is to:

Accepted Answer

raise interest rates and restrict the availability of credit

Question 21

In an ample reserve system, what sets the floor for the demand for bank reserves?

Accepted Answer

IORB

Question 22

The Money Market graph shows a supply of money that is...

Accepted Answer

Vertical

Question 23

If I deposit $100 dollars in the bank how much can the entire banking system create? (RR=25%)

Accepted Answer

300

Question 24

Which of the following policy combinations would definitely stimulate aggregate demand?

Accepted Answer

decrease RRR, decrease discount rate, buy bonds

Question 25

Which of the following policy combinations would definitely help fight inflation?

Accepted Answer

raise RRR, increase discount rate, sell bonds

Question 26

I deposit 100 dollars at PNC bank, how much can PNC loan if the RRR is 25%?

Accepted Answer

75

Question 27

The discount rate is...

Accepted Answer

The rate the Fed charges banks for loans

Question 28

If consumers saved a higher percentage of new income than before....

Accepted Answer

All of these are correct

Question 29

Which of the following is NOT a function of money?

Accepted Answer

Foreign Exchange

Question 30

The discount rate is the interest:

Accepted Answer

rate at which the Federal Reserve Banks lend to banks.

Question 31

RRR =10%, and the FED buys a $1 million bond from a bank, which multiplier formula is correct?

Accepted Answer

1/RRR

Question 32

Monetary Policy

Accepted Answer

is quicker and easier to implement than fiscal policy

Question 33

If the reserve requirement is 10%, and the bank has $10 million in Demand Deposits it can lend

Accepted Answer

$9 million

Question 34

If the state of the economy is as depicted below, the FED should

Accepted Answer

nothing

Question 35

If the RRR is 20%, what is the money multiplier?

Accepted Answer

5

Question 36

RRR =10%, and the FED buys a $1 million bond from a bank, M1 can increase by a total of ?

Accepted Answer

$10 million

Question 37

Other things equal, a tight money policy (contractionary monetary policy) will:

Accepted Answer

increase interest rates

Question 38

In an Ample Reserve System, an increase in the money supply will lead to lower interest rates.

Accepted Answer

False

Unit 4 AP Macro Monetary Policy

Questions 38

Unit 4 AP Macro Monetary Policy

Questions 38