When the Fed conducts an open market operation by purchasing securities from the public, _____________.

bank deposits increase but reserves do not change
bank deposits increase but reserves decrease
public holdings of securities increase
reserves increase

The change in the quantity of money divided by the change in the monetary base is called the ___________ multiplier.

monetary base
monetary policy
deposit
money

An increase in the interest rate creates a _______ the money demand curve, and an increase in real GDP creates a _______ the money demand curve.

movement down along; leftward shift of
leftward shift of; rightward shift of
movement up along; rightward shift of
rightward shift of; movement up along

The ripple effects that occur when the Fed sells securities in the open market include ________________.

a decrease in consumption and investment
an increase in short-run aggregate supply
an increase in net exports
a decrease in interest rates

The demand for money is the relationship between _______ and ________, other things remaining the same.

the money demanded; the money supplied
the quantity of money demanded; the real interest rate
the quantity of real money demanded; the quantity of real money supplied
the quantity of real money demanded; the interest rate

In the United States, the demand for M1 between 1970 and 1998 shifted leftward as a result of _____________ and shifted rightward as a result of __________.

a decrease in real GDP; financial innovations
an increase in the price level; financial innovations
financial innovations; an increase in real GDP
an increase in interest rates; an increase in real GDP

When the quantity of money demanded is less than the quantity of money supplied, people _________ bonds and the interest rate ___________.

buy; falls
sell; rises
sell; falls
buy; rises

The Fed directly controls the ____________ rate, closely monitors the __________ rate, and influences all ______________ interest rates.

federal funds; discount; long-term
discount; Treasury bill; short-term
Treasury bill; commercial bill; long-term
discount; federal funds; short-term

If people anticipate that the Fed is going to increase the money supply, they will ____________.

buy more imports
consume less
buy bonds
sell bonds

To combat inflation, the Fed _______ between 1979 and 1981.

increased interest rates
increased income taxes
increased the money supply
decreased interest rates

Please enter your name and press the SEND button