Macroeconomics Unit 3 Challenge 2: Monetary Policy with Complete Solutions

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Macroeconomics Unit 3 Challenge 2: Monetary Policy with Complete Solutions The M1 definition of money includes ___________ ✔✔Physical currency and demand deposits Select the answer below that ... has the three examples of money in order from most liquid to least liquid. ✔✔Dollar bills, checking account balances, money market mutual funds Which of the following statements regarding different types of money is true? ✔✔Time deposits belong in the least liquid category of money. If the reserve requirement of a bank is 25%, then the multiplier effect will be ________ and $200 in M1 will increase the money supply by ________. ✔✔4; $800 If the reserve requirement of a bank is 50%, then the multiplier effect will be ________ and $100 in M1 will increase the money supply by ________. ✔✔2; $200 Which statement is NOT true regarding the way that the Federal Reserve controls the money supply? ✔✔The U.S. Treasury sends the money it prints directly into circulation. What is the result when the Federal Reserve buys Treasury bonds? ✔✔More currency in the hands of the public When the Fed sells bonds, the result is an increase in __________. ✔✔Interest rates Fed member banks enter the federal funds market in order to __________. ✔✔Meet reserve requirements The federal funds rate is paid to __________. ✔✔banks who lend excess reserves to other member banks Which of the following statements is true as it relates to banks and the federal funds market? ✔✔Banks with less than the reserve requirement need overnight loans to meet their obligations. Which statement below is true about the discount rate? ✔✔This is the rate used when banks borrow directly from the Fed. Which of the following statements is associated with deflation? ✔✔Prices fall, but loan payments stay the same. Which of the following statements regarding inflation is true? ✔✔When inflation is extreme, it can destroy a country's currency. All of the following are examples of expansionary policy EXCEPT __________. ✔✔selling Treasury bonds Which of the following is associated with contractionary monetary policy? ✔✔Increasing the reserve requirement [Show More]

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