Using the five criteria in the book, explain how U.S. currency is suitable to use as a medium of exchange
What will be an ideal response?
1. Dollars are acceptable to most traders, either in exchange for goods and services or as payment of debts.
2. Coin and currency in circulation are of standardized quality. Bills of the same denomination are identical in appearance.
3. Coins and currency in circulation are durable: their value is not altered by spoilage.
4. Dollars are light in weight so that they are very valuable relative to their weight and they are easily transported.
5. Finally, dollars are divisible.
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The sale of Treasury securities by the Federal Reserve will, in general
A) not change the quantity of reserves held by banks. B) decrease the quantity of reserves held by banks. C) increase the quantity of reserves held by banks. D) not change the money supply.
Which of the following would shift the aggregate demand curve to the left?
A) an increase in the money supply B) a cut in federal income taxes C) an expected decrease in future income D) an increase in the price level
If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by
a. buying bonds. This buying would increase the money supply. b. buying bonds. This buying would reduce the money supply. c. selling bonds. This selling would increase the money supply. d. selling bonds. This selling would reduce the money supply.
If Janella increases her supply of labor by 6 percent in response to a 5 percent increase in the wage rate, her elasticity of labor supply must be
A. 5.0. B. 1.2. C. 6.0. D. 0.83.