Quiz 16

The asset demand for money is most closely related to money functioning as a

• unit of account.

• measure of value.

• medium of exchange.

• store of value.

Refer to the above graph, in which D_t is the transactions demand for money, D_m is the total demand for money, and S_m is the supply of money. If the interest rate was 4 percent, then the asset demand for money in this money market is:

• $200

• $175

• $125

• $325

In which case would the quantity of money demanded by the public tend to increase by the greatest amount?

• Both the interest rate and nominal GDP increase.

• the interest rate decreases and nominal GDP increases.

• The interest rate increases and nominal GDP decreases.

• Both the interest rate and nominal GDP decrease.

Refer to the above graph, if the supply of money was $250 billion, the interest rate would be:

• 3 percent.

• 2 percent

• 4 percent.

• 1 percent.

The interest rate will fall when the:

• demand for money increases.

• supply of money decreases.

• quantity of money demanded exceeds the quantity of money supplied.

• quantity of money supplied exceeds the quantity of money demanded.

The conduct of monetary policy in the United States is the main responsibility of the:

• Bureau of the Public Debt.

• Bureau of Economic Analysis.

• Federal Reserve.

• U.S. Treasury.

The tools of monetary policy for altering the reserves of commercial banks are the:

• discount rate, reserve ratio, interest on reserves, and open market operations.

• public debt, budget surplus, and budget deficit.

• Consumer Price Index and unemployment rate.

• tax rate and level of government spending.

A consumer holds money to meet spending needs. This would be an example of the:

• use of money as a measure of value

• transactions demand for money.

• asset demand for money.

• use of money as legal tender.

The major purpose of the Federal Reserve buying government securities in open-market operations is to:

• increase interest rate.

• reduce the excess reserves of banks.

• increase the excess reserve of banks and allow banks to increase their lending.

• raise money for government spending.

The most frequently used monetary policy tool for achieving price stability is:

• the discount rate.

• the prime interest rate.

• open-market operations.

• the reserve ratio.