Question 1

To minimize the impact of its transactions on the monetary base, the Treasury

Accepted Answer

A) times its payments from its account at the Fed to match its withdrawals from local banks. 
B) makes purchases only on a few days per year. 
C) times most of its purchases for mid-April, when it receives most of its tax receipts. 
D) attempts to make roughly the same dollar value of purchases each business day. 
A) times its payments from its account at the Fed to match its withdrawals from local banks. 
B) makes purchases only on a few days per year. 
C) times most of its purchases for mid-April, when it receives most of its tax receipts. 
D) attempts to make roughly the same dollar value of purchases each business day.

Question 2

Financing government spending by selling bonds to the nonbank public

Accepted Answer

A) will increase the monetary base. 
B) will decrease the monetary base. 
C) will leave the monetary base unaffected. 
D) will increase the monetary base if the bonds are paid for in currency, but will decrease it if they are paid for by check. 
A) will increase the monetary base. 
B) will decrease the monetary base. 
C) will leave the monetary base unaffected. 
D) will increase the monetary base if the bonds are paid for in currency, but will decrease it if they are paid for by check.

Question 3

What was the source of controversy between the Treasury and the Fed during the years immediately after World War II?

Accepted Answer

A) The Fed wanted the Secretary of the Treasury removed from his position on the Fed's Board of Governors. 
B) The Fed wanted out of the agreement that it would peg the interest rate on short-term Treasury securities. 
C) The Fed wanted the Treasury to increase its contribution to the Fed's operating expenses. 
D) The Fed wanted the Treasury to begin paying interest on the Fed's holdings of Treasury securities. 
A) The Fed wanted the Secretary of the Treasury removed from his position on the Fed's Board of Governors. 
B) The Fed wanted out of the agreement that it would peg the interest rate on short-term Treasury securities. 
C) The Fed wanted the Treasury to increase its contribution to the Fed's operating expenses. 
D) The Fed wanted the Treasury to begin paying interest on the Fed's holdings of Treasury securities.

Question 4

If Treasury currency outstanding decreases, the monetary base will

Accepted Answer

A) be unaffected. 
B) increase. 
C) decrease. 
D) decrease, provided that the decline in currency represents a net decrease in the public's holdings. 
A) be unaffected. 
B) increase. 
C) decrease. 
D) decrease, provided that the decline in currency represents a net decrease in the public's holdings.

Question 5

Which of the following is true of the Fed's balance sheet?

Accepted Answer

A) The sum of Federal Reserve Notes and Reserve deposits by depository institutions equals the total of Fed assets. 
B) The sum of Federal Reserve Notes and Reserve deposits by depository institutions equals the total of Fed liabilities. 
C) The sum of Federal Reserve Notes and Reserve deposits by depository institutions equals the total of Fed assets plus the total of other Fed liabilities. 
D) The sum of Federal Reserve Notes and Reserve deposits by depository institutions equals the total of Fed assets minus the total of other Fed liabilities. 
A) The sum of Federal Reserve Notes and Reserve deposits by depository institutions equals the total of Fed assets. 
B) The sum of Federal Reserve Notes and Reserve deposits by depository institutions equals the total of Fed liabilities. 
C) The sum of Federal Reserve Notes and Reserve deposits by depository institutions equals the total of Fed assets plus the total of other Fed liabilities. 
D) The sum of Federal Reserve Notes and Reserve deposits by depository institutions equals the total of Fed assets minus the total of other Fed liabilities.

Question 6

Monetizing the debt refers to

Accepted Answer

A) the Treasury selling securities for currency. 
B) the Treasury paying its bills by printing currency. 
C) the Fed purchasing Treasury securities to finance budget deficits. 
D) the federal government foregoing an interest payment on the national debt. 
A) the Treasury selling securities for currency. 
B) the Treasury paying its bills by printing currency. 
C) the Fed purchasing Treasury securities to finance budget deficits. 
D) the federal government foregoing an interest payment on the national debt.

Question 7

If the Fed purchases a new computer system for $50 million, the monetary base will

Accepted Answer

A) rise by $50 million. 
B) fall by $50 million. 
C) be unchanged. 
D) either rise or fall depending upon whether the Fed purchases the computer system by writing a check or by paying cash. 
A) rise by $50 million. 
B) fall by $50 million. 
C) be unchanged. 
D) either rise or fall depending upon whether the Fed purchases the computer system by writing a check or by paying cash.

Question 8

Which of the following is the correct statement of the government budget constraint?

Accepted Answer

A) Federal budget deficit = change in Treasury securities held by public + increase in monetary base 
B) Federal budget deficit = change in Treasury securities held by public - increase in monetary base 
C) Federal budget deficit = increase in monetary base - change in Treasury securities held by public 
D) Federal budget deficit = change in reserves of banking system + change in currency outstanding 
A) Federal budget deficit = change in Treasury securities held by public + increase in monetary base 
B) Federal budget deficit = change in Treasury securities held by public - increase in monetary base 
C) Federal budget deficit = increase in monetary base - change in Treasury securities held by public 
D) Federal budget deficit = change in reserves of banking system + change in currency outstanding

To minimize the impact of its transactions on the monetary base, the Treasury

Financing government spending by selling bonds to the nonbank public

What was the source of controversy between the Treasury and the Fed during the years immediately after World War II?

If Treasury currency outstanding decreases, the monetary base will

Which of the following is true of the Fed's balance sheet?

Monetizing the debt refers to

If the Fed purchases a new computer system for $50 million, the monetary base will

Which of the following is the correct statement of the government budget constraint?

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

Exam 18: Changes in the Monetary Base

To minimize the impact of its transactions on the monetary base, the Treasury

Financing government spending by selling bonds to the nonbank public

What was the source of controversy between the Treasury and the Fed during the years immediately after World War II?

If Treasury currency outstanding decreases, the monetary base will

Which of the following is true of the Fed's balance sheet?

Monetizing the debt refers to

If the Fed purchases a new computer system for $50 million, the monetary base will

Which of the following is the correct statement of the government budget constraint?

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