1 Marks: 1 Decreasing the reserve requirement ratio is Choose one answer. a. a c

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1 Marks: 1 Decreasing the reserve requirement ratio is Choose one answer. a. a contractionary policy because it lowers the amount of total reserves in the banking system. b. a contractionary policy because it lowers the amount of excess reserves in the banking system. c. an expansionary policy because it raises the amount of excess reserves in the banking system. d. an expansionary policy because it raises the amount of required reserves in the banking system. Question 2 Marks: 1 A primary function of a central bank is to Choose one answer. a. regulate dividend payments by corporations. b. act as a regulator of banks. c. control the bond market. d. publish statistics on banking and related financial matters. Question 3 Marks: 1 If the Fed buys U.S. government bonds from the public, it Choose one answer. a. increases the volume of reserves in the banking system and the money supply tends to grow. b. decreases the volume of reserves in the banking system and the money supply tends to grow. c. increases the volume of reserves in the banking system and the money supply tends to fall. d. decreases the volume of reserves in the banking system and the money supply tends to fall. Question 4 Marks: 1 Lowering the discount rate is Choose one answer. a. a contractionary policy stance because the cost of borrowing funds falls, thereby encouraging consumption and investment spending. b. a contractionary policy because it reduces banks' profit margins by lowering the return on lending. c. an expansionary policy stance because consumers and businesses can now borrow funds directly from the Fed at a lower cost, thereby encouraging private spending. d. an expansionary policy stance because it will be less costly for banks to borrow funds and this puts downward pressure on interest rates in the economy. Question 5 Marks: 1 To reduce the political influence on the Board of Governors, Choose one answer. a. the president of the United States appoints a new board every four years. b. the reelection campaign for each member is less than one year. c. each member is appointed for 7 years, with one term expiring every year. d. each member is appointed for 14 years, with one term expiring every two years. Question 6 Marks: 1 Which of the following describes the store of value function of money? Choose one answer. a. noting that Audible.com sells downloadable audio books for $10 per book b. making a monthly payment toward your car loan c. paying $30 for a haircut d. putting away $50 each month into your savings account Question 7 Marks: 1 The Federal Reserve buys $10,000 of government securities from commercial banks. If the required reserve ratio is 25%, what is the maximum amount of change in the nation's money supply? Assume that no banks keep excess reserves and no individuals or firms hold cash. Choose one answer. a. the money supply will expand by $10,000 b. the money supply will expand by $30,000 c. the money supply will expand by $40,000 d. the money supply will expand by $7,500 Question 8 Marks: 1 Which of the following statements is false about M1 and M2? Choose one answer. a. M2 is a broader measure of the money supply than M1. b. M2 contains assets that are less liquid than those in M1. c. All the assets included in M1 are also included in M2. d. All the assets included in M2 are also included in M1. Question 9 Marks: 1 Inflation reduces the ability of money to function as a Choose one answer. a. medium of exchange. b. medium of value. c. unit of account. d. store of value.

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c

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