ECO 372 Week 3 Knowledge Check

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ECO/372 Entire Course Link

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ECO 372 Week 3 Knowledge Check

Instructions

Week 3 Knowledge Check
The material presented below is not meant to be a comprehensive list of all you need to know in the content area. Rather it is a starting point for building your knowledge and skills. Additional study materials are recommended in each area below to help you master the material.
Personalized Study Guide Results:
Score: 9 / 9
Concepts Mastery Questions
INTEREST RATE 100% • 1
• 2• 3
MONEY MULTIPLIER 100% • 4
• 5• 6
QUANTITATIVE EASING 100% • 7
MONETARY POLICIES 100% • 8• 9
Concept: INTEREST RATE
Mastery : 100% Questions : • 1
• 2• 3
Materials on the concept:
• The Role of Interest Rates in the Financial Sector
1.
If you expect interest rates to rise, you will want to be holding
• A.
more money because prices will likely fall
• B.
less money because bond prices will likely rise
• C.
more money because bond prices will likely rise
• D.
less money because bond prices will likely fall
2.
The interest rate is the price paid for the use of a
• A.
real liability
• B.
real asset
• C.
financial liability
• D.
financial asset
3.
Which of the following do policy makers tend to target when setting monetary policy?
• A.
Money supply
• B.
Interest rates
• C.
Reserves
• D.
Exchange rates
Concept: MONEY MULTIPLIER
Mastery : 100% Questions : • 4
• 5• 6
Materials on the concept:
• Banks and the Creation of Money
• The U.S. Central Bank: The Fed
• The Process of Money Creation
• The Relationship between Reserves and Total Money
4.
If the Federal Reserve reduced its reserve requirement from 6.5 percent to 5 percent, this policy would most likely
• A.
increase both the money multiplier and the money supply
• B.
increase the money multiplier but decrease the money supply
• C.
decrease the money multiplier but increase the money supply
• D.
decrease both the money multiplier and the money supply
5.
If banks hold excess reserves whereas before they did not, the money multiplier
• A.
will become larger
• B.
will become smaller
• C.
will be unaffected
• D.
might increase or might decrease
6.
The process of money multiplier depends on
• A.
the public holding all the currency
• B.
the banks holding all the currency
• C.
the Fed holding all the currency
• D.
foreigners holding all the currency
Concept: QUANTITATIVE EASING
Mastery : 100% Questions : • 7
Materials on the concept:
• Quantitative Easing
7.
Quantitative easing refers to
• A.
a gradual reduction in interest rates by the Federal Reserve
• B.
Looser restrictions on banks' investments in derivatives
• C.
a gradual reduction in marginal tax rates
• D.
non-standard monetary policy design to extend credit in the economy
Concept: MONETARY POLICIES
Mastery : 100% Questions : • 8• 9
Materials on the concept:
• The Complex Nature of Monetary Policy
8.
If the Fed wants an easier monetary policy, it might
• A.
sell government securities to increase the federal funds rate
• B.
sell government securities to reduce the federal funds rate
• C.
buy government securities to increase the federal funds rate
• D.
buy government securities to reduce the federal funds rate
9.
When the Fed raised the interest rates between 2004 and 2007, the Federal Reserve
• A.
bought U.S. government securities, thereby creating and supplying additional federal funds
• B.
sold U.S. government securities, thereby contracting funds to the federal funds market
• C.
sped up the clearing of checks to make more funds available to banks
• D.
encouraged banks to loan out funds to ease their reserves requirements and thus lower the demand for federal funds

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