Which of the following is NOT true about the Federal Reserve?

A. Fiat money is

 

a. a type of money with intrinsic value.

b. a type of money set by government decree.

c. any asset used as the medium of exchange.

d. any asset used as the unit of account.

B. T he money stock includes all of the following EXCEPT

a. metal coins.

b. paper currency.

c. lines of credit accessible with credit cards.

d. bank balances accessible with debit cards.

C. Which of the following is NOT true about the Federal Reserve?

a. It was established by the U.S. Constitution.

b. It regulates the banking system.

c. It lends to banks.

d. It conducts open-market operations.

D. I f the Fed wants to increase the money supply, it can

a. raise income tax rates.

b. reduce income tax rates.

c. buy bonds in open-market operations.

d. sell bonds in open-market operations.

E. I sabella takes $100 of currency from her wallet and deposits it into her checking account. If the bank adds the entire $100 to reserves, the money supply _________, but if the bank lends out some of the $100, the money supply _________.

a. increases; increases even more

b. increases; increases by less

c. is unchanged; increases

d. decreases; decreases by less

F. I f the reserve ratio is 1/4 and the central bank increases the quantity of reserves in the banking

system by $120, the money supply increases by

a. $90.

b. $150.

c. $160.

d. $480.

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