Chapter 17 Monetary Policy and Inflation

| November 9, 2018

21)
Recall the Application. Prior to the financial crisis, the Fed primarily held
________ as assets.
A)
mortgage-backed securities
B)
cash
C)
corporate stocks and bonds
D)
Treasury securities

22)
Recall the application. In 2010 the Fed
A)
ended its support of the mortgage market.
B)
converted all its assets to cash.
C)
held over $1 trillion in mortgage-backed securities.
D)
stopped trading in Treasury securities.

23)
The Fed has immense power and there are no limits to the extent to which it can
effectively control the economy.

24)
We use interest rates to measure the opportunity cost of holding money.

25)
The quantity of money demanded will increase as interest rates increase.

26)
Both increases in the price level and increases in real GDP will decrease the
demand for money.

27)
If your assets are highly liquid, this means you can make transactions on short
notice.

28)
What three factors affect the demand for money?

29)
Explain the three different types of money demand.

17.2 How the Federal Reserve Can Change the Money
Supply

1)
The one organization that has the power to change the total amount of reserves
in the banking system is the
A)
Congress.
B)
Executive Branch of the Federal Government.
C)
U.S. Treasury.
D)
Federal Reserve System.

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