FP1 5.02 - Money Supply and GDP

What does the money supply include?

• Only cash

• Currency and other liquid instruments

• Only savings deposits

• Only government bonds

What is GDP a measurement of?

• The total value of all finished goods and services produced within a country's borders

• The total amount of exports and imports

• The total amount of money in circulation

• The total number of jobs in an economy

What is nominal GDP?

• GDP adjusted for inflation

• GDP calculated at current market prices

• GDP including only consumer spending

• GDP excluding government spending

What is the relationship between money supply and nominal GDP?

• Nominal GDP is inversely related to the money supply

• Nominal GDP is unaffected by the money supply

• Nominal GDP tends to rise with the money supply

• Nominal GDP tends to fall with the money supply

What is real GDP?

• GDP adjusted for inflation

• GDP excluding exports

• GDP including only government spending

• GDP at current market prices

What is one effect of increasing the money supply in the short term?

• Decreased lending

• Decreased consumption

• Lower interest rates

• Higher interest rates

What is a potential long-term impact of increasing the money supply?

• Stable asset prices

• Deflation

• Speculative investments and asset price escalation

• Decreased economic activity

What is one of the U.S. Federal Reserve's macroeconomic goals?

• Reducing employment

• Decreasing GDP

• Price stability

• Increasing the money supply indefinitely

What are open market operations?

• The control of government spending

• The buying or selling of Treasury bonds and other securities by the Federal Reserve

• The regulation of stock market prices

• The adjustment of tax rates

Who controls the money supply in the United States?

• The Department of Treasury

• The Congress

• The Federal Reserve

• The President