Which of the following services is performed by the regional Federal Reserve banks?
A. Issuing government bonds.
B. Holding bank reserves.
C. Bailing out or liquidating failed banks.
D. Determining open market operations.
Answer: B
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When a man invests in controlling weeds and trash that tend to accumulate in his yard, both he and his neighbors benefit from his action
Is an externality associated with his private decision? If so, explain its effect, and determine whether the efficient level of weed control occurs when the individual invests in weed control.
If the government wished to shift aggregate demand to the right, it might:
A. increase government spending. B. increase income taxes. C. pressure the Fed to decrease the money supply. D. Any of these things might cause aggregate demand to shift to the right.
Demand deposits are liabilities to a bank because
a. the bank must pay interest on these accounts b. we need some method of creating a balance c. the bank must be willing to account for loans and bonds d. the bank could potentially lose this money if loans are not repaid e. the customers have the right to withdraw the funds from their checking accounts
What impact does the Fed's raising the interest rate have on the money supply and on the price level?
A. An increase in interest rates raises the money supply and eventually reduces prices. B. An increase in interest rates reduces the money demand which will slow the growth in prices. C. An increase in interest rates lowers the money supply and raises the money demand, which will neutralize price increases. D. An increase in interest rates will increase investment spending and GDP, which will lower prices.