Decisions regarding purchases and sales of securities by the Fed are made by:
a. FDIC.
b. Discount Committee.
c. Federal Open Market Committee.
d. Federal Funds Committee.
Question 2Which of the following shifts the aggregate supply curve to the left?
a. An improvement in computer technology
b. A war that forces people to ration their food and their use of energy
c. An increase in real wage rates
d. Discovery of a new oil field
e. Lower oil prices in the world market
Question 3If the income elasticity of demand is less than 1.0, it means it is an inferior good.
a. True
b. False
Indicate whether the statement is true or false
Question 4In its original role as lender of last resort, the Fed was supposed to:
a. provide mortgage money for the poor.
b. keep the money supply from drying up during economic panics.
c. lend money to people in localities not served by commercial banks.
d. lend money to developing nations whose own central banks had failed.
Question 5Consider an economy in equilibrium, and assume no change in aggregate demand. An earthquake that destroys many factories across the country would result in a(n):
a. increase in the average price level and a decrease in real GDP.
b. increase in the average price level and no change in real GDP.
c. increase in the average price level and an increase in real GDP.
d. decrease in the average price level and an increase in real GDP.
e. decrease in the average price level and a decrease in real GDP.
Question 6To assess whether or not a good is normal or inferior, economists are interested in the cross price elasticity of demand.
a. True
b. False
Indicate whether the statement is true or false
Question 7The major objective of the Federal Reserve System is to:
a. make substantial profits for its member banks.
b. help in generating stabilization policies for the economy.
c. distribute paper money and coins to banks and retail stores.
d. prevent closure (failure) of individual member banks.
Question 8A recessionary real shock will:
a. shift the aggregate demand curve to the left and reduce real GDP.
b. shift the aggregate demand curve to the right and increase real GDP.
c. shift the aggregate supply curve to the left and increase real GDP.
d. shift the aggregate supply curve to the left and reduce real GDP.
e. shift the aggregate supply curve to the right and increase real GDP.
Question 9If the cross price elasticity of demand between goods A and B was equal to 0.5, those goods are substitutes.
a. True
b. False
Indicate whether the statement is true or false
Question 10One uniquely American aspect of central banking is that:
a. the United States has 12 central banks rather than one.
b. the Federal Reserve is a private institution with no governmental supervision.
c. the dual banking system created two parallel central banks.
d. the U.S. Treasury runs the Federal Reserve as an extension of the Executive Branch.
Question 11Which of the following would not be considered a real variable in determining a real business cycle?
a. A change in technology
b. A labor strike
c. An increase in the money supply
d. A change in tastes
e. A substantial weather event
Question 12To determine whether or not a pair of goods are complements, economists are interested in the cross price elasticity of demand between the two goods.
a. True
b. False
Indicate whether the statement is true or false
Question 13Which of the following is not a function of the Federal Reserve System?
a. limiting the national debt
b. setting the required reserve ratio for the deposit holdings of depository institutions
c. buying and selling government bonds to control the size and growth rate of the money supply
d. controlling inflation
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