Question

1.

Which of the following individuals benefits from inflation?

Mark, who lent his friend $1,000 and agreed to accept repayment of the same amount one year later.

Ben, who borrowed $1,000 from a friend (Mark?) and agreed to pay the same amount one year later.

Randall, who lives on a fixed income of $800 per month.

Asuza, who keeps her savings in the form of cash in a safe at home

2.

The monetary policy tool that involves the buying and selling of government bonds (mainly US Treasury bills) is

open-market operations.

reserve requirements.

moral suasion.

the discount rate.

3.

When interest rates go up the demand for money

goes down.

may not be affected.

goes up.

4.

The four main monetary policy instruments are

the interest rate the Fed pays to banks on their reserve accounts, open market operations, reserve requirement ratio, and the discount rate.

the interest rate the Fed charges on loans to the Federal government, the money supply, the market interest rate, and deposit insurance.

the interest rate the Fed pays on its Federal Reserve notes, open market operations, reserve requirement ratio, and the market interest rate.

the interest rate the Treasury Department pays on its short-term loans, open market operations, deposit insurance, and the money supply.

5.

Which of the following is an example of a bank’s liabilities?

its loans

checkable deposits

its holdings of U.S. government bonds

its reserves

Answer 1

a) Ben benefited from the inflation. the inflation transfer the wealth from the lender to the borrower. The answer is "B".

b) "A"

The open market operation is related to buying and selling of the bonds.

c) "Goes down"

When the interest rates go up the demand for money go down.

d) "A"

the four main tools are Open market operations, Discount rate, reserve ratio and the interest rate the Fed pays to banks on their reserve accounts.

e) "B"

The checkable deposits are the example of bank liabilities.