What are the Fed's three policy tools?
What will be an ideal response?
The Federal Reserve has three policy tools: required reserve ratio, last resort loans, and open market operations.
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A sum of $10,000 is deposited in a bank. Consider two situations: the bank offers an annual rate of interest of 10% and the bank offers an annual rate of interest of 15%. Compare the time value of money generated in both cases after:
a) one year. b) five years.
Which of the following theories of expectations holds that individuals form expectations by looking only to past values of the variable to be forecast?
A. Rational expectations theory B. Certainty equivalent theory C. Expected value analysis D. Adaptive expectations theory
When the money market is drawn with the value of money on the vertical axis, long-run equilibrium is obtained when the quantity demanded and quantity supplied of money are equal due to adjustments in
a. nominal interest rates. b. real interest rates. c. the price level. d. the money supply.
Diana tutors Tiago for two hours before his economics final exam. Tiago pays Diana through a direct transfer from his bank on a payment app. Diana then uses her debit card to buy pizza for dinner from the local pizza parlor. This is an example of
a. the exchange of money facilitating production and trade b. trade between two people who each have a good or service that the other wants. c. an inefficient allocation of scarce resources. d. the creation of money through monetary policy.