Questions 1:
1. Explain which of the following are counted as part of the money supply (M1):
a. Checking account deposits
b. Stocks
c. Savings account deposits
d. Government bonds
Questions 2
2. If the reserve requirement (rr) is 0.2, what is the simple deposit multiplier? If, in addition, the currency deposit ratio (c) is 0.05 and the excess reserve ratio (e) is 0.15, what is the money multiplier?
Explain why the money multiplier differs from the simple deposit multiplier.
Questions 3
3. Explain which of these interest rates the Federal Reserve sets:
a. The discount rate
b. The federal funds rate
c. The prime rate
4. In current business publications or on the Federal Reserve Web site (www.federalreserve.gov), findthe press release from the most recent meeting of the FOMC. What is the targeted federal funds rate?How does the FOMC evaluate the balance of risks between its goals of price stability and sustainable economic growth?
Describe how the following statements relate to the AD-AS model:
a. The Fed has bought more than $2 trillion ofTreasury and mortgage bonds to stimulate theeconomy.
b. The above actions by the Fed may cause inflation to rise to levels that most would considerunacceptable.
c. The Fed expected a weaker dollar to help increase exports.
d. Businesses already have ample access to cheapcredit and are reluctant to borrow, hire, and investfor other reasons.