CORRECTANSWERS2025
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Characteristics that enable an item to serve well as money include each of the following, except - t t t t t t t t t t t t t t t t
correct answer-abundant
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In addition to the chairman of the Board of Governors, the FOMC consists of - correct answer-
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Six other members of the Board of Governors, four rotating bank presidents and the president of t
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he New York Federal Reserve
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The FOMC - correct answer-
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meets eight times a year to decide on how to conduct open market operations that influence the money
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supply and interest rates
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When the Fed sells government securities in the open market, the money supply
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e
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decreases; banks lose liquidity, they make fewer loans and checking account deposits decrease
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When the Fed buys government securities in the open market, the money supply
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increases; banks gain liquidity, they make more loans and checking account deposits increase
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Which of the following is true for the European Central Bank (ECB)? - correct answer-
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A) it is housed in Frankfurt, Germany
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B) each member countryʹs central bank has similar functions to the Federal Reserve Banks
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C) its executive board meets more often than the FOMC
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D) all of the above** t t t
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it is a more decentralized system than the Federal Reserve
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Current Federal Reserve policy focuses on interest rates, rather than on monetary aggregates, beca
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use - correct answer-
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monetary aggregates do not provide clear or consistent signals to guide policymakers
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, M1 differs from M2 because
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A) M1 does not include savings deposits and M2 does
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B) M2 includes components that are less liquid than any component of M1
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C) M1 is included in M2 but M2 has more components
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D) all of the above** t t t
Financial innovations such as direct deposit of paychecks, electronic payment of bills, and automate d
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teller machines (ATMs) have likely - correct answer-reduced the size of M1 relative to M2
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Which of these transactions results in an increase in M2? - correct answer-
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depositing a bank loan of $400 into your savings account
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As of 2010 the outstanding U.S. currency is $872 billion, which implies that the typical U.S. citizen
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holds $2,800 in cash. Is this an accurate inference? Why? - correct answer-
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No; because criminals and foreigners hold large sums of dollars, so the average citizen holds far les s.
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The principal reason(s) that so much U.S. currency is held outside the U.S is (are) - correct answer- many
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people around the world trust the U.S. dollar more than any other currency
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The velocity of money - correct answer-
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A) times the money supply should equal total income according to the equation of exchange
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B) provides the link between the money supply and nominal income t t t t t t t t t
C) represents the average number of times a dollar turns over through the year t t t t t t t t t t t t
D) all of the above** t t t
The equation of exchange
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A) states that the quantity of money multiplied by velocity must equal nominal income in a given
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year
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B) shows that real GDP must equal real money balances times the number of times a dollar turns
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over in a year
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C) describes a relationship that is true by definition t t t t t t t
D) all of the above** t t t