Eco 372 Week 3 Knowledge Check Study Guide Concepts Mastery Questions

eco 372 week 3 knowledge check
Week 3 Knowledge Check Study Guide
Concepts Mastery Questions
INTEREST RATE
MONEY MULTIPLIER
100%
QUANTITATIVE EASING
100%
MONETARY POLICIES
100%
Concept: INTEREST RATE
100%
Mastery 100% Questions
1 2 3
4 5 6
7
8 9
1.
If you expect interest rates to rise, you will want to be holding
1 2 3
Score: / 9 9
A.
B.
C.
D.
more money because prices will likely fall
less money because bond prices will likely rise
more money because bond prices will likely rise
less money because bond prices will likely fall
Correct:

2.
The interest rate is the price paid for the use of a
A.
B.
C.
real liability
real asset
financial liability
D.
financial asset
Correct:

3.
Which of the following do policy makers tend to target when setting monetary policy?
A.
B.
C.
D.
Money supply
Interest rates
Reserves
Exchange rates
Correct:

Concept: MONEY MULTIPLIER
Mastery 100% Questions
Correct:

4 5 6
4.
If the Federal Reserve reduced its reserve requirement from 6.5 percent to 5 percent, this
policy would most likely
A.
B.
C.
D.
increase both the money multiplier and the money supply
increase the money multiplier but decrease the money supply
decrease the money multiplier but increase the money supply
decrease both the money multiplier and the money supply
5.
If banks hold excess reserves whereas before they did not, the money multiplier
A.
B.
C.
D.
will become larger
will become smaller
will be unaffected
might increase or might decrease
Correct:

6.
The process of money multiplier depends on
A.
B.
the public holding all the currency
the banks holding all the currency
C.
D.
the Fed holding all the currency
foreigners holding all the currency
Correct:

Concept: QUANTITATIVE EASING
Mastery 100% Questions
7.
Quantitative easing refers to
A.
B.
C.
a gradual reduction in interest rates by the Federal Reserve
Looser restrictions on banks’ investments in derivatives
a gradual reduction in marginal tax rates
7
D.
non-standard monetary policy design to extend credit in the
economy
Correct:

Concept: MONETARY POLICIES
Mastery 100% Questions
8.
If the Fed wants an easier monetary policy, it might
A.
B.
C.
sell government securities to increase the federal funds rate
sell government securities to reduce the federal funds rate
buy government securities to increase the federal funds rate
8 9
D.
buy government securities to reduce the federal funds rate
Correct:
.
9.
When the Fed raised the interest rates between 2004 and 2007, the Federal Reserve
A.
B.
C.
D.
bought U.S. government securities, thereby creating and
supplying additional federal funds
sold U.S. government securities, thereby contracting funds to
the federal funds market
sped up the clearing of checks to make more funds available
to banks
encouraged banks to loan out funds to ease their reserves
requirements and thus lower the demand for federal funds
Correct: