Economics: The Basics 1st Edition by Mike Mandel

Exercise 3

Say whether each of the following statements is true or false.
a) Buying a bottle of water with two dollar bills is an example of money as a medium of exchange.
b) Choosing a job because it pays you more is an example of money as a store of value.
c) The Federal Reserve was created in 1949, after World War II.
d) One of the main goals of monetary policy is controlling inflation.
e) One of the main goals of monetary policy is electing politicians.
f) As the lender of last resort, the Fed tries to make sure that banks and Wall Street firms have the money they need to function.
g) By controlling short-term interest rates, the Fed can influence the interest rate for auto loans.
h) A decrease in the fed funds rate lowers GDP.
i) A decrease in the fed funds rate lowers inflation.
j) The discount window can be used to help out financial institutions which are hit by an unexpected shock.
k) Typically, interest rate cuts can be reversed more easily than tax cuts.
l) Inflation targeting allows the Fed to do whatever it wants to achieve a goal of 2 percent inflation.