Question 1

Most reserves tned to consist of

Accepted Answer

A) nonborrowed reserves. 
B) borrowing from the Fed. 
C) free reserves. 
D) excess reserves. 
A) nonborrowed reserves. 
B) borrowing from the Fed. 
C) free reserves. 
D) excess reserves.

Question 2

About what percentage of the federal budget deficits of the 1980s and early 1990s did the Fed monetize?

Accepted Answer

A) 0% 
B) 10% 
C) 75% 
D) 100% 
A) 0% 
B) 10% 
C) 75% 
D) 100%

Question 3

In the United States, budget deficits are financed by

Accepted Answer

A) the Fed borrowing from the general public. 
B) the Fed borrowing from banks. 
C) the Treasury selling securities. 
D) Congress borrowing from foreign governments. 
A) the Fed borrowing from the general public. 
B) the Fed borrowing from banks. 
C) the Treasury selling securities. 
D) Congress borrowing from foreign governments.

Question 4

Which is the correct expression for currency in circulation?

Accepted Answer

A) Federal Reserve Notes outstanding + Treasury currency outstanding - banks' vault cash 
B) Federal Reserve Notes outstanding + Treasury currency outstanding + banks' vault cash 
C) Federal Reserve Notes outstanding + banks' vault cash - Treasury currency outstanding 
D) Treasury currency outstanding - (Federal Reserve Notes outstanding + banks' vault cash) 
A) Federal Reserve Notes outstanding + Treasury currency outstanding - banks' vault cash 
B) Federal Reserve Notes outstanding + Treasury currency outstanding + banks' vault cash 
C) Federal Reserve Notes outstanding + banks' vault cash - Treasury currency outstanding 
D) Treasury currency outstanding - (Federal Reserve Notes outstanding + banks' vault cash)

Question 5

The monetary base will increase for all of the following reasons EXCEPT

Accepted Answer

A) increase in discount loans. 
B) increase in Federal Reserve Float. 
C) increase in securities held by Fed. 
D) increase in Treasury deposits at the Fed. 
A) increase in discount loans. 
B) increase in Federal Reserve Float. 
C) increase in securities held by Fed. 
D) increase in Treasury deposits at the Fed.

Question 6

In the early 2000s, it was recognized that Japan had

Accepted Answer

A) a very low money multiplier. 
B) very rapid growth in the monetary base. 
C) very rapid growth in the money supply. 
D) to begin to focus on interest rates instead of the money supply. 
A) a very low money multiplier. 
B) very rapid growth in the monetary base. 
C) very rapid growth in the money supply. 
D) to begin to focus on interest rates instead of the money supply.

Question 7

Treasury currency outstanding

Accepted Answer

A) is a liability of the Fed. 
B) is an asset of the Fed. 
C) is not an item on the Fed's balance sheet. 
D) consists primarily of Federal Reserve notes. 
A) is a liability of the Fed. 
B) is an asset of the Fed. 
C) is not an item on the Fed's balance sheet. 
D) consists primarily of Federal Reserve notes.

Question 8

Which of the following is NOT a Federal Reserve asset?

Accepted Answer

A) The Fed's holdings of foreign exchange 
B) The Federal Reserve building in Washington, D.C. 
C) Shares of stock purchased in the Federal Reserve system by member banks 
D) The computer systems used in the Federal Reserve district banks 
A) The Fed's holdings of foreign exchange 
B) The Federal Reserve building in Washington, D.C. 
C) Shares of stock purchased in the Federal Reserve system by member banks 
D) The computer systems used in the Federal Reserve district banks

Question 9

If Treasury currency outstanding increases, the monetary base will

Accepted Answer

A) increase, provided the increase in currency is held by banks. 
B) increase, provided the increase in currency is held by the public. 
C) increase whether the increase in currency is held by banks or by the public. 
D) decrease. 
A) increase, provided the increase in currency is held by banks. 
B) increase, provided the increase in currency is held by the public. 
C) increase whether the increase in currency is held by banks or by the public. 
D) decrease.

Question 10

The monetary base rises

Accepted Answer

A) whenever the federal government runs a deficit. 
B) whenever the federal government runs a surplus. 
C) whenever the federal government finances a deficit by selling bonds. 
D) whenever the Fed acquires some of the bonds sold by the federal government to finance the deficit. 
A) whenever the federal government runs a deficit. 
B) whenever the federal government runs a surplus. 
C) whenever the federal government finances a deficit by selling bonds. 
D) whenever the Fed acquires some of the bonds sold by the federal government to finance the deficit.

Question 11

When a bank joins the Federal Reserve System,

Accepted Answer

A) the Fed's capital account and the bank's deposits with the Fed increase, but the monetary base falls. 
B) the Fed's capital account increases, but the bank's deposits with the Fed and the monetary base fall. 
C) the Fed's capital account, the bank's deposits with the Fed, and the monetary base all fall. 
D) the Fed's capital account, the bank's deposits with the Fed, and the monetary base all increase. 
A) the Fed's capital account and the bank's deposits with the Fed increase, but the monetary base falls. 
B) the Fed's capital account increases, but the bank's deposits with the Fed and the monetary base fall. 
C) the Fed's capital account, the bank's deposits with the Fed, and the monetary base all fall. 
D) the Fed's capital account, the bank's deposits with the Fed, and the monetary base all increase.

Question 12

When the federal government makes a purchase

Accepted Answer

A) the Fed writes a check for the amount. 
B) the Treasury writes a check drawn on one of its accounts at commercial banks. 
C) the Treasury writes a check drawn on its account at the Fed. 
D) the Office of the Purchaser General writes a check drawn on its account with the Treasury. 
A) the Fed writes a check for the amount. 
B) the Treasury writes a check drawn on one of its accounts at commercial banks. 
C) the Treasury writes a check drawn on its account at the Fed. 
D) the Office of the Purchaser General writes a check drawn on its account with the Treasury.

Question 13

If the Treasury sells $2 million in gold, the Fed's gold and SDR certificate account will

Accepted Answer

A) fall by $2 million, as will the monetary base. 
B) fall by $2 million, whereas the monetary base will rise by $2 million. 
C) rise by $2 million, as will the monetary base. 
D) rise by $2 million, whereas the monetary base will fall by $2 million. 
A) fall by $2 million, as will the monetary base. 
B) fall by $2 million, whereas the monetary base will rise by $2 million. 
C) rise by $2 million, as will the monetary base. 
D) rise by $2 million, whereas the monetary base will fall by $2 million.

Question 14

Which of the following statements is correct?

Accepted Answer

A) Whenever the federal government runs a budget deficit, the monetary base increases. 
B) Whenever the U.S. Treasury sells securities, the monetary base increases. 
C) Whenever the Fed sells securities, the monetary base increases. 
D) When the Fed helps finance a federal budget deficit, the monetary base increases. 
A) Whenever the federal government runs a budget deficit, the monetary base increases. 
B) Whenever the U.S. Treasury sells securities, the monetary base increases. 
C) Whenever the Fed sells securities, the monetary base increases. 
D) When the Fed helps finance a federal budget deficit, the monetary base increases.

Question 15

Items in the process of collection are generated by

Accepted Answer

A) open market operations. 
B) discount loans. 
C) the Fed's check-clearing role. 
D) spending by the Treasury from its Fed accounts. 
A) open market operations. 
B) discount loans. 
C) the Fed's check-clearing role. 
D) spending by the Treasury from its Fed accounts.

Question 16

Which of the following statements is correct?

Accepted Answer

A) The Fed completely controls the volume of discount loans. 
B) Although the Fed does not completely control the volume of discount loans, it influences the amount by setting the discount rate. 
C) Although the Fed does not completely control the volume of discount loans, it influences the amount through open market operations. 
D) The volume of discount loans the Fed makes each year is a constant amount fixed under terms of the Federal Reserve Act. 
A) The Fed completely controls the volume of discount loans. 
B) Although the Fed does not completely control the volume of discount loans, it influences the amount by setting the discount rate. 
C) Although the Fed does not completely control the volume of discount loans, it influences the amount through open market operations. 
D) The volume of discount loans the Fed makes each year is a constant amount fixed under terms of the Federal Reserve Act.

Question 17

If the Fed credits the payee bank on a check for $10,000 before it debits the payor bank,

Accepted Answer

A) the reserves of the payee bank will have risen by $10,000, but the monetary base will have been unaffected. 
B) the reserves of the payor bank will have risen by $10,000, but the monetary base will have been unaffected. 
C) the monetary base will have fallen by $10,000. 
D) the reserves of the payee bank and the monetary base will each have risen by $10,000. 
A) the reserves of the payee bank will have risen by $10,000, but the monetary base will have been unaffected. 
B) the reserves of the payor bank will have risen by $10,000, but the monetary base will have been unaffected. 
C) the monetary base will have fallen by $10,000. 
D) the reserves of the payee bank and the monetary base will each have risen by $10,000.

Question 18

If the Fed purchases $10 billion of U.S. Treasury bills, the monetary base will increase by

Accepted Answer

A) $10 billion. 
B) $10 billion times the money multiplier. 
C) an amount that depends on the ratio of excess reserves to checkable deposits. 
D) an amount that depends on the ratios of excess reserves to checkable deposits and currency to checkable deposits. 
A) $10 billion. 
B) $10 billion times the money multiplier. 
C) an amount that depends on the ratio of excess reserves to checkable deposits. 
D) an amount that depends on the ratios of excess reserves to checkable deposits and currency to checkable deposits.

Question 19

The Treasury typically

Accepted Answer

A) deposits receipts from taxes in its accounts in commercial banks. 
B) deposits receipts from taxes in its account at the Fed. 
C) pays for its expenditures from its accounts at commercial banks. 
D) borrows from the Fed to finance its expenditures. 
A) deposits receipts from taxes in its accounts in commercial banks. 
B) deposits receipts from taxes in its account at the Fed. 
C) pays for its expenditures from its accounts at commercial banks. 
D) borrows from the Fed to finance its expenditures.

Question 20

Research has indicated that countries in which the central bank has the most independence experience

Accepted Answer

A) slower growth rates of the money supply. 
B) faster growth rates of the money supply. 
C) no difference in the growth rate of the money supply. 
D) higher budget deficits. 
A) slower growth rates of the money supply. 
B) faster growth rates of the money supply. 
C) no difference in the growth rate of the money supply. 
D) higher budget deficits.

Exam 18: Changes in the Monetary Base

Most reserves tned to consist of

About what percentage of the federal budget deficits of the 1980s and early 1990s did the Fed monetize?

In the United States, budget deficits are financed by

Which is the correct expression for currency in circulation?

The monetary base will increase for all of the following reasons EXCEPT

In the early 2000s, it was recognized that Japan had

Treasury currency outstanding

Which of the following is NOT a Federal Reserve asset?

If Treasury currency outstanding increases, the monetary base will

The monetary base rises

When a bank joins the Federal Reserve System,

When the federal government makes a purchase

If the Treasury sells $2 million in gold, the Fed's gold and SDR certificate account will

Which of the following statements is correct?

Items in the process of collection are generated by

Which of the following statements is correct?

If the Fed credits the payee bank on a check for $10,000 before it debits the payor bank,

If the Fed purchases $10 billion of U.S. Treasury bills, the monetary base will increase by

The Treasury typically

Research has indicated that countries in which the central bank has the most independence experience

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

Organization of Central Banks

Monetary Policy Tools

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