Unit 4 review

Which of the following is a function of money?

• Value unit

• Medium of exchange

      2.   Which of the following necessary qualities and definitions of money is correct?

• Divisible

• Durable

• Portable

• ALL

      3.  What two main goals(dual mandate) has Congress given the Federal Reserve?

• Price stability and maximum employment

• economic stability and maximum stock market value

      4.  What is the FOMC’s target rate for inflation?

• Average of 2% over time

• No inflation at all

      5.  How are the seven members of the Board of Governors chosen and how long is their term?

• Nominated by the president, approved by the Senate, serve a 14 year 

                         staggered term.

• Appointed by the Federal Reserve chairman and serve 6 years.

 6. How can the FOMC adjust policy if it thinks the economy is overheating with inflation rising above its price stability target?

•  raise the unemployment rate

• Raise the fed funds rate(interest rates)

7. How can the FOMC adjust policy if it thinks the economy is weakening with employment falling below its maximum level?

•  raise the unemployment rate

• Lower the fed funds rate(interest rates)

 8. How does a lower federal funds rate transmit to achieving the dual mandate?

• It will encourage other interest rates to fall and result in less spending and

                           more savings by households and businesses

• It will encourage other interest rates to fall and result in more spending and 

                           less saving by households and businesses.

9.  How does a higher federal funds rate transmit to achieving the dual mandate?

•  It will encourage other interest to fall and result in less spending and more

                              Savings by households and businesses.

• It will encourage other interest to rise and result in less spending and more 

                           savings by households and businesses

10. During the pandemic, the FOMC lower the fed funds rate to historical lows and issued stimulus checks.  This is an example of 

• the economy overheating

• a “easy money” policy