• 1
  • When the Fed conducts an open market operation by purchasing securities from the public, _____________.

    bank deposits increase but reserves do not change
    bank deposits increase but reserves decrease
    public holdings of securities increase
    reserves increase

  • 2
  • The change in the quantity of money divided by the change in the monetary base is called the ___________ multiplier.

    monetary base
    monetary policy

  • 3
  • An increase in the interest rate creates a _______ the money demand curve, and an increase in real GDP creates a _______ the money demand curve.

    movement down along; leftward shift of
    leftward shift of; rightward shift of
    movement up along; rightward shift of
    rightward shift of; movement up along

  • 4
  • The ripple effects that occur when the Fed sells securities in the open market include ________________.

    a decrease in consumption and investment
    an increase in short-run aggregate supply
    an increase in net exports
    a decrease in interest rates

  • 5
  • The demand for money is the relationship between _______ and ________, other things remaining the same.

    the money demanded; the money supplied
    the quantity of money demanded; the real interest rate
    the quantity of real money demanded; the quantity of real money supplied
    the quantity of real money demanded; the interest rate

  • 6
  • In the United States, the demand for M1 between 1970 and 1998 shifted leftward as a result of _____________ and shifted rightward as a result of __________.

    a decrease in real GDP; financial innovations
    an increase in the price level; financial innovations
    financial innovations; an increase in real GDP
    an increase in interest rates; an increase in real GDP

  • 7
  • When the quantity of money demanded is less than the quantity of money supplied, people _________ bonds and the interest rate ___________.

    buy; falls
    sell; rises
    sell; falls
    buy; rises

  • 8
  • The Fed directly controls the ____________ rate, closely monitors the __________ rate, and influences all ______________ interest rates.

    federal funds; discount; long-term
    discount; Treasury bill; short-term
    Treasury bill; commercial bill; long-term
    discount; federal funds; short-term

  • 9
  • If people anticipate that the Fed is going to increase the money supply, they will ____________.

    buy more imports
    consume less
    buy bonds
    sell bonds

  • 10
  • To combat inflation, the Fed _______ between 1979 and 1981.

    increased interest rates
    increased income taxes
    increased the money supply
    decreased interest rates

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