1. The decline in the value of the dollar from 1985 to 1988 was beneficial to
a. American tourists travelling to Europe. b. firms importing goods into America. c. American exporting businesses. d. foreigners holding U.S. government bonds.
2. Which of the following will increase interest rates in the short run?
a. an decrease in reserve requirements
b. open market sales by the Fed
c. a decrease in real GDP
d. an decrease in the price level
3. The concept of "lender of last resort" is that when
a. lending decreases, the Fed will be the last to resort to higher interest rates.
b. borrowing increases, the Fed will be the last to increase lending.
c. commercial banks are hesitant to lend, the Fed will step in and increase reserves.
d. a borrower has tried everyone else, the Fed will lend directly to them.
4. In its original role as "lender of last resort" the Fed was supposed to
a. lend money to people in regions without banks.
b. lend money to developing nations.
c. keep the money supply from drying up during financial panics.
d. provide mortgage lending to returning soldiers.
5. The Federal Reserve System was established
a. at the request of farmers to keep down interest rates.
b. because Americans believe in centralization of authority.
c. after four severe bank panics between 1873 and 1907.
d. as part of the Treasury Department.