Please help with review questions. 1. The primary responsibility of conducting m
ID: 1195796 • Letter: P
Question
Please help with review questions.
1. The primary responsibility of conducting monetary policy rests with the:
Select one:
a. Board of Governors.
b. Federal Open Market Committee.
c. Federal Deposit Insurance Corporation.
d. U.S. Treasury.
2. Credit cards do not fulfill the three functions of money.
Select one:
True
False
3. If there is an autonomous decrease in spending (a leftward shift in the aggregate demand curve) and the Fed wishes to hold real income constant, then the Fed would:
Select one:
a. decrease the money supply yielding a leftward shift in the aggregate demand curve.
b. increase the money supply yielding a rightward shift in the aggregate demand curve.
c. hold the money supply constant.
d. none of the above.
Explanation / Answer
1.The primary responsibility of conducting monetary policy rests with the b. Federal Open Market Committee. The FOMC buys and sells federal government bonds in order to influence the money supply and interest rate.
2. Credit cards do not fulfill the three functions of money.
True.
The main functions of money:
a medium of exchange: Money is always accepted in exchange for goods everywhere. However credit card facilities may not be everywhere.
a unit of account: There are many places where credit cards are not accepted.
a store of value : Since credit cards are only short –term loans they do not serve as store of value.
3. If there is an autonomous decrease in spending (a leftward shift in the aggregate demand curve) and the Fed wishes to hold real income constant, then the Fed would:
a. decrease the money supply yielding a leftward shift in the aggregate demand curve.