In the United States, the discount rate charged by the Fed differs from bank to bank.
112.Suppose the aggregate supply curve for the economy is upward sloping. Then, other things being equal, an open market purchase by the Federal Reserve will raise both the equilibrium price level and equilibrium national income.
113.One of the functions of the Fed is to watch the foreign exchange market and intervene if it considers exchange rates to be moving in undesirable ways.
114.When the Federal Reserve buys or sells foreign exchange to move exchange rates to targeted levels, it engages in foreign reserve coordination.
115.Increased demand for U.S. products by foreigners will lead to a depreciation of the U.S. dollar relative to foreign currencies.
116.Suppose the Fed intervenes in the foreign exchange market by buying Euros with U.S. dollars. To offset the effect of the intervention on the domestic money supply, the Fed has to purchase U.S. government bonds on the domestic open market.
117.The demand for money consists of transactions demand, speculative demand, and precautionary demand.
118.There is an inverse relationship between the interest rate and the quantity of money demanded.
119.When individuals travel away from home, they usually carry more money than they expect to spend. This illustrates the precautionary demand for money.
120.The current yield on a bond equals the annual interest payment it gives the holder.
121.Suppose you hold $5,000 in cash when the interest rate on bonds is 4 percent. Other things being equal, as the bond interest rate declines to 3 percent, you want to hold more money because the opportunity cost of holding money has decreased.
122.The transactions demand for money varies directly with the nominal income level.
123.An excess demand for money leads to a rise in the equilibrium interest rate.
124.All members of the European Union are members of the European Central Bank.
125.The European Central Bank works on the principle that Governing Council members should think only in terms of the common good.
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