Question 1

As a result of an open market purchase, bank reserves

Accepted Answer

A) rise and interest rates fall. 
B) fall and interest rates rise. 
C) and interest rates both rise. 
D) and interest rates both fall. 
A) rise and interest rates fall. 
B) fall and interest rates rise. 
C) and interest rates both rise. 
D) and interest rates both fall.

Question 2

The Fed

Accepted Answer

A) controls discount policy more completely than it controls open market operations. 
B) must abide by discount rates set by Congress. 
C) controls discount policy less completely than it controls open market operations. 
D) controls discount policy completely, just as it controls open market operations. 
A) controls discount policy more completely than it controls open market operations. 
B) must abide by discount rates set by Congress. 
C) controls discount policy less completely than it controls open market operations. 
D) controls discount policy completely, just as it controls open market operations.

Question 3

A matched sale-purchase transaction is also known as a

Accepted Answer

A) reverse repo. 
B) discount loan. 
C) put option. 
D) federal funds loan. 
A) reverse repo. 
B) discount loan. 
C) put option. 
D) federal funds loan.

Question 4

The Fed

Accepted Answer

A) is obliged to make whatever discount loans are requested by banks that are members of the Federal Reserve System. 
B) has been obliged since 1980 to make whatever discount loans are requested by any depository institution. 
C) will make a discount loan only if it appears certain that the institution requesting the loan would fail without it. 
D) extends discount loans at its discretion. 
A) is obliged to make whatever discount loans are requested by banks that are members of the Federal Reserve System. 
B) has been obliged since 1980 to make whatever discount loans are requested by any depository institution. 
C) will make a discount loan only if it appears certain that the institution requesting the loan would fail without it. 
D) extends discount loans at its discretion.

Question 5

An open market purchase

Accepted Answer

A) increases the monetary base. 
B) decreases the monetary base. 
C) increases the federal funds rate. 
D) is another name for a discount loan. 
A) increases the monetary base. 
B) decreases the monetary base. 
C) increases the federal funds rate. 
D) is another name for a discount loan.

Question 6

If the account manager does not use a Federal Reserve repurchase agreement or a matched sale-purchase transaction in carrying out open market operations, he will use

Accepted Answer

A) an outright purchase or sale. 
B) a limited-duration purchase or sale. 
C) an indirect purchase or sale. 
D) a reverse duration purchase or sale. 
A) an outright purchase or sale. 
B) a limited-duration purchase or sale. 
C) an indirect purchase or sale. 
D) a reverse duration purchase or sale.

Question 7

Temporary, short-term discount loans to banks in areas in which agriculture and tourism are important are known as

Accepted Answer

A) primary credit. 
B) secondary credit. 
C) seasonal credit. 
D) repo loans. 
A) primary credit. 
B) secondary credit. 
C) seasonal credit. 
D) repo loans.

Question 8

How does the reserve policy of the European Central Bank (ECB) differ from the reserve policy of the Fed?

Accepted Answer

A) The ECB has a required reserve ratio of 100%. 
B) The ECB pays interest on reserve balances. 
C) The ECB does not apply reserve requirements to checkable deposits. 
D) The ECB applies the same required reserve ratio to all banks and all deposits. 
A) The ECB has a required reserve ratio of 100%. 
B) The ECB pays interest on reserve balances. 
C) The ECB does not apply reserve requirements to checkable deposits. 
D) The ECB applies the same required reserve ratio to all banks and all deposits.

Question 9

The Fed generally conducts open market operations in

Accepted Answer

A) long-term corporate bond markets. 
B) the federal funds market. 
C) the Treasury securities market. 
D) the commercial paper market. 
A) long-term corporate bond markets. 
B) the federal funds market. 
C) the Treasury securities market. 
D) the commercial paper market.

Question 10

Which of the following statements is correct?

Accepted Answer

A) The discount rate is generally above the federal funds rate. 
B) The discount rate is generally below the federal funds rate. 
C) The discount rate is generally equal to the federal funds rate. 
D) There is no general pattern to the relation between the discount rate and the federal funds rate. 
A) The discount rate is generally above the federal funds rate. 
B) The discount rate is generally below the federal funds rate. 
C) The discount rate is generally equal to the federal funds rate. 
D) There is no general pattern to the relation between the discount rate and the federal funds rate.

As a result of an open market purchase, bank reserves

The Fed

A matched sale-purchase transaction is also known as a

The Fed

An open market purchase

If the account manager does not use a Federal Reserve repurchase agreement or a matched sale-purchase transaction in carrying out open market operations, he will use

Temporary, short-term discount loans to banks in areas in which agriculture and tourism are important are known as

How does the reserve policy of the European Central Bank (ECB) differ from the reserve policy of the Fed?

The Fed generally conducts open market operations in

Which of the following statements is correct?

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Inflation: Causes and Consequences

Filters

Exam 20: Monetary Policy Tools

As a result of an open market purchase, bank reserves

The Fed

A matched sale-purchase transaction is also known as a

The Fed

An open market purchase

If the account manager does not use a Federal Reserve repurchase agreement or a matched sale-purchase transaction in carrying out open market operations, he will use

Temporary, short-term discount loans to banks in areas in which agriculture and tourism are important are known as

How does the reserve policy of the European Central Bank (ECB) differ from the reserve policy of the Fed?

The Fed generally conducts open market operations in

Which of the following statements is correct?

Introducing Money and the Financial System

Money and the Payments System

Overview of the Financial System

Interest Rates and Rates of Return

The Theory of Portfolio Allocation

Determining Market Interest Rates

Risk Structure and Term Structure of Interest Rates

The Foreign-Exchange Market and Exchange Rates

Derivative Securities and Derivative Markets

Information and Financial Market Efficiency

Reducing Transactions Costs and Information Costs

What Financial Institutions Do

The Business of Banking

The Banking Industry

Banking Regulation: Crisis and Response

Banking in the International Economy

The Money Supply Process

Changes in the Monetary Base

Organization of Central Banks

The Conduct of Monetary Policy

The International Financial System and Monetary Policy

The Demand for Money

Linking the Financial System and the Economy: the Is-Lm-Fe Model

Aggregate Demand and Aggregate Supply

Money and Output in the Short Run

Information Problems and Channels for Monetary Policy

Inflation: Causes and Consequences

Filters