Assignment
Question 1. The transactions demand for money depends on
the price level only.
the interest rate only.
real income only.
both the price level and real income.
both the interest rate and the price level.
Question 2. The most important monetary tool of the Federal Reserve System is
changes in the discount rate.
changes in legal reserve requirements.
loans to banks.
loans to the public.
open market operations.
Question 3. The fact that money is legal tender increases its
recognizability.
durability.
acceptability.
divisibility.
portability.
Question 4. 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 5. The transactions demand for money is related to
money as a store of value.
money as a unit of account.
money as a medium of exchange.
the interest rate.
the value of money as a form of wealth.
Question 6. When the Fed sets an interest rate target, the interest rate that it focuses on specifically is
the T-bill rate.
the nominal rate.
the federal funds rate.
the prime rate.
the real rate.
Question 7. All but which one of the following are roles of the Fed?
lender of last resort
controller of the money supply
banker to the public
supervisor of banks
check-clearer for banks
Question 8. The ability of an asset to be converted easily and conveniently into the medium of exchange is called
convertibility.
topicality.
liquidity.
accessibility.
solidity.
Question 9. If the market for money is in equilibrium, then
the money supply is unaffected by the actions of the Federal Reserve.
the demand for money is unaffected by the interest rate.
the demand for money must be equal to the supply of money.
the demand for money may be greater than the supply of money if velocity is low.
Question 10. 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.