Test 10, Chapter 12

Answer the questions below and then click "submit" to send your answers.

  1. An expansion of the money supply, ceteris paribus, will

    2. Your answer:
    Reduce investment demand
    Contract aggregate demand
    Lower prices
    Increase investment in the economy
    Raise interest rates

  2. On a one-dollar bill the letter in the middle of the seal indicates the

    3. Your answer:
    Year of planned removal from circulation
    Legal reserve requirement
    currency printing batch
    District bank issuing the bill
    Type of paper used

  3. In 1791, Alexander Hamilton suggested

    4. Your answer:
    The abolition of the money supply
    The abolishment of all state-chartered banks
    Creative accounting to deny Revolutionary debt
    The creation of open market operations
    The creation of a nationally chartered bank

  4. Thomas Jefferson and James Madison

    5. Your answer:
    Opposed the idea of a central bank because they believed it was unconstitutional
    Were instrumental in the creation of the First Bank of the United States.
    Served as governors on the first Board of Governors
    Changed the U.S. currency from the dollar to the British pound to avoid financial panic
    Originally came up with the idea for the Federal Reserve System

  5. The Fed

    6. Your answer:
    Levies a variety of taxes – from sales tax to direct income tax – to control the money supply
    Bails out savings and loans on a regular basis
    Serves as the central bank for the United States
    Ensures commercial bank profitability to stabilize the money economy
    Issues currency but has little control over U.S. monetary policy

  6. The interest rate that the Fed charges banks that borrow reserves from it is the

    7. Your answer:
    Check rate
    federal funds rate
    Discount rate
    Reserved rate
    Investment rate

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