Question

Stocks change​ ________ whereas flows relate to​ ________.

A.

within a given period of​ time; changes between points in time

B.

between points in​ time; changes within a given time period

C.

and that causes flows to​ change; changes that have no impact on stocks

D.

only at the end of each​ year; amounts at a given point in time

2)

The Board of Governors of the Federal Reserve System is

A.

composed of 12 members of the Senate and the U.S. House of Representatives.

B.

composed of seven members who are appointed by the President and approved by the Senate.

C.

composed of representatives from the​ country's 12 largest commercial banks.

D.

elected by the general public.

3)

The public debt is

A.

all federal government debt irrespective of who owns it.

B.

a situation in which the​ government's spending is exactly equal to the total taxes and other revenues it collects during a given time period.

C.

the total value of all outstanding federal government securities.

D.

an excess of government spending over government revenues during a given time period.

4)

The purchase of government bonds by the Fed leads to​ a(n)

A.

decrease in the demand of bonds and an increase in the price of bonds.

B.

increase in the supply of bonds and a decrease in bond prices.

C.

increase in the demand of bonds and a decrease in the price of bonds.

D.

decrease in the supply of bonds and an increase in bond prices.

5)

Interest rates typically rise when

A.

bond prices decrease.

B.

bond prices increase.

C.

the maturity date on existing bonds extends farther into the future.

D.

the coupon payout on existing bonds increase.

Answer 1

Answer 1- The correct answer is B ie., between points in time; changes within a given time period. A stock represents quantity owned at a specific point of time like a person owns 5 stocks on 25th January,2019. While on the other hand flows represent to the transactions that took place during a given period say one year. A stock is something which is accumulated in the past and itMs value is being seen at a given point of time. An example of flow would be GDP of an economy which measured for a year.

Answer 2- The correct answer is B ie., Composed of seven members who are appointed by the president and approved by the senate. These seven members play a very essential role in shaping the monetary policy of the economy and thus these members are appointed for a period of seven years. Federal system is there to shape the economy financially and it helps in regulation and administration of banks and it also helps in managing the finances of the government.

Answer 3- The correct answer is A ie., All federal government debt irrespective of who owns it. Public debt that the government owns to the lenders and it does not matter who the lenders are. It may include debt which owned internally as well as externally. Government debt or public debt is different from government deficit which is the net of government spending and the government revenue. It may include bonds, loans from creditors in other countries and it may also he short term or long term.

Answer 4- The correct answer is D ie., decrease in supply of bonds and increase in price of bonds. The federal government buys bonds so as to increase the level of money supply in the economy and sells the bonds when it has to decrease the money supply level in the economy. This process of buying and selling bonds is called as open market operations. When the fed sells the bonds the interest rates in the economy increase as money in the economy is reduced and interest rates decrease as the fed buys the bonds as more money is injected in the evonomy.