ECON 252 Final Purdue Vargas Questions with Verified Solutions

ECON 252 Final Purdue Vargas Questions with Verified Solutions To increase the money supply, the FOMC directs the trading desk located at the Federal Reserve Bank of New York to: buy U.S. Treasury securities from the public. When interest rates on Treasury bills and other financial assets are low, the opportunity cost of holding money is __________ , so the quantity of money demanded will be __________. low, high The actions the Federal Reserve takes to manage the money supply and interest rates in order to pursue economic objectives are called __________. Monetary policy The Board of Governors of the Federal Reserve has _________ members that are appointed for staggered _________ by the __________ and confirmed by the Senate. Seven, 14-year terms, President Who is the chairperson of the Federal Open Market Committee (FOMC)? The chairperson of the Board of Governors. Velocity is defined as: V = (P x Q) / M M = money supply V = velocity of money P = price level Q = real output According to the quantity theory of money, if the Fed engages in an open market purchase of bonds _______GDP will __________ Nominal; increase One of the primary goals of the Federal Reserve is __________. price level stability The theory concerning the link between the money supply and the price level that assumes the velocity of money is constant is called the __________. quantity theory of money Credit cards are: not part of the money supply. The Fed conducts monetary policy primarily through: open market operations. Which body of the Federal Reserve System sets the majority of U.S. monetary policy? The Federal Open Market Committee How many Federal Reserve districts are there? 12 The sum of all currency in the hands of the public plus demand deposits and other checkable deposits plus traveler's checks is the official definition of: M1 If the price level increases, __________. the money demand curve shifts to the right Suppose that velocity is 3 and the money supply is $500 million. According to the quantity theory of money, nominal output equals: $1.5 billion. According to the quantity theory of money M x V = P x Q. Because P x Q is equal to output, if V = 3 and M = $500 million then the nominal output is equal to 3 x $500 million = $1.5 billion. A sustained decrease in the average