1. The discount rate is the interest rate charged by
• a) the Fed to its member banks
• b) banks to other banks
• c) banks to their best customers
• d) banks for mortgage loans
2. If the required reserve ratio was 0.10 and the Fed bought $500,000 of Treasury Bills, we would expect the money supply to
• a) rise by $5,000,000
• b) rise by $50,000
• c) fall by $5,000,000
• d) fall by $50,000
3.If the Fed wanted to decrease the money supply it could
• a) lower the discount rate
• b) raise the required reserve ratio
• c) buy Treasury Bills
• d) lend to its member banks
• e) lower the federal funds rate
4. If the Fed bought Treasury Bills, we would expect
a) the money supply to increase
b) interest rates to decrease
c) investment to increase
d) none of the above
e) all of the above
5. Which is NOT an asset for a bank
• a) the cash held by the bank
• b) the savings deposits offered by the bank
• c) the loans made by the bank
• d) the bank's computers
6. If the economy was experiencing high inflation, how would we want the Fed to use monetary policy?
• a) It should reduce the money supply to reduce interest rates
• b) It should increase the money supply to reduce interest rates
• c) It should reduce the money supply to raise interest rates
• d) It should increase the money supply to raise interest rates
7. In the 1990s the dollar was worth approximately 100 yen. Now it is worth approximately 76 yen. This change in the value of the dollar would be called
a) a devaluation of the dollar
b) a devaluation of the yen
c) a depreciation of the dollar
d) a depreciation of the yen
8. An increase in US imports would be counted in which section of the Balance of Payments statement for the US?
a) the current account
b) the capital account
c) the financial account
d) the official reserves account
e) all of the above
9. If the quantity of euros demanded were greater than the quantity supplied, then the price of the
a) euro would rise
b) euro would fall
c) dollar would rise
d) euro would be in equilibrium
10. A recession in the US will tend to cause a recession in other countries because as US GDP falls, US
a) tariffs will automatically rise
b) exports will rise
c) imports will fall
d) exports will fall
e) interest rates will rise
11. The main problem with flexible exchange rates is that
a) they are inflationary
b) they have reduced the amount of international trade
c) the government loses more control over the economy
d) exchange controls become necessary
e) importers and exporters face risks due to unpredictable exchange rate
changes
12. Which of these would cause an increase in the value of the US dollar versus the Japanese Yen?
a) Higher inflation in the US than in Japan
b) Higher income in the US than in Japan
c) Higher interest rates in the US than in Japan