Question

Select the correct answer:

The Fed’s main policy-making committee is the (Board of Governors; Federal Open Market Committee).

The Fed sets the minimum percentage of deposits that must be held as reserves, which is called the (discount rate; required reserve ratio).

The currency in a bank’s vault is part of the bank’s (reserves; loans).

The purchase or sale of government securities by the Federal Reserve is an (unit of account; open market operation).

Along the aggregate (supply curve, demand curve) a rise in the price level increases the quantity of real GDP supplied.

When potential GDP exceeds real GDP, (an inflationary; a recessionary) gap exists.

An increase in the money price of oil might start a (demand-pull; cost-push) inflation.

According to the Eye on The Business Cycles on page 529 textbook, why did the US go into a recession in 2008? (AS and AD shifted leftward; AS shifted leftward and AD shifted rightward).

Answer 1

ANSWER :

Q1. The Fed's main policy making committee is the Board of Governors .The Board of Governors of the Federal Reserve System , is the main governing body of the Fed reserve. Governors are appointed by the President of U.S and confirmed by the Senate for staggered 14 years terms .

Q2. The Fed sets the minimum percentage of deposits that must be held as reserve is called required reserve ratio (RRR) . RRR is the portion of depositors balances that banks must have on hand in cash .This is a requirment determined by the country's central bank . The reserve ratio affects the money supply in a country at any given time .

Q3. The currency in a bank's vault is a part of the banks reserves .

Q4. The purchase or sale of government securities by the Federal Reserve is an open market operation . Thus open market operation refer to the buying and selling of government securities in order to expand or contract the amount of money in the banking system .

NOTE : 4 question answer at a time .