Question 1

Which of the following situations is likely to lead to dynamic open market operations?

Accepted Answer

A)  A recession 
B)  An increase in Federal Reserve float 
C)  An increase in Treasury cash holdings 
D)  An increase in currency outstanding 
A)  A recession 
B)  An increase in Federal Reserve float 
C)  An increase in Treasury cash holdings 
D)  An increase in currency outstanding

Question 2

Repurchase agreements are often used to

Accepted Answer

A)  increase bank reserves permanently. 
B)  increase bank reserves temporarily. 
C)  reduce bank reserves permanently. 
D)  reduce bank reserves temporarily. 
A)  increase bank reserves permanently. 
B)  increase bank reserves temporarily. 
C)  reduce bank reserves permanently. 
D)  reduce bank reserves temporarily.

Question 3

Federal Reserve credit is equal to bank borrowing plus U.S. government security holdings plus

Accepted Answer

A)  currency outstanding. 
B)  capital accounts. 
C)  float. 
D)  bank reserves. 
A)  currency outstanding. 
B)  capital accounts. 
C)  float. 
D)  bank reserves.

Question 4

The bank reserve equation is the

Accepted Answer

A)  assets and liabilities of the entire banking system. 
B)  tally sheet for sources and uses of reserves. 
C)  M1 multiplier. 
D)  Federal Reserve's method of determining how many government securities to purchase. 
A)  assets and liabilities of the entire banking system. 
B)  tally sheet for sources and uses of reserves. 
C)  M1 multiplier. 
D)  Federal Reserve's method of determining how many government securities to purchase.

Question 5

When the U.S. Treasury purchases gold from a member of the non-bank public, the immediate effect is that __________ and __________.

Accepted Answer

A)  reserves increase; currency in circulation decreases 
B)  reserves decrease; currency in circulation increases 
C)  reserves increase; Treasury deposits decrease 
D)  reserves decrease; Treasury deposits increase 
A)  reserves increase; currency in circulation decreases 
B)  reserves decrease; currency in circulation increases 
C)  reserves increase; Treasury deposits decrease 
D)  reserves decrease; Treasury deposits increase

Question 6

Reverse repurchase agreements are often used to

Accepted Answer

A)  increase bank reserves permanently. 
B)  increase bank reserves temporarily. 
C)  reduce bank reserves permanently. 
D)  reduce bank reserves temporarily. 
A)  increase bank reserves permanently. 
B)  increase bank reserves temporarily. 
C)  reduce bank reserves permanently. 
D)  reduce bank reserves temporarily.

Question 7

Immediately after being collected, taxes are deposited in

Accepted Answer

A)  tax and loan accounts. 
B)  the Federal Reserve Bank of New York. 
C)  Federal Reserve district banks around the country. 
D)  the Congressional Vault. 
A)  tax and loan accounts. 
B)  the Federal Reserve Bank of New York. 
C)  Federal Reserve district banks around the country. 
D)  the Congressional Vault.

Question 8

Which of the following is a correct statement regarding the balance sheet of the Federal Reserve?

Accepted Answer

A)  Fed assets = Fed liabilities + Federal Reserve notes 
B)  Bank reserves = Fed Assets - (Fed liabilities - bank reserves) + Fed capital accounts 
C)  Fed liabilities = Fed Capital Accounts + bank reserves 
D)  Fed assets = bank reserves + Federal Reserve notes outstanding 
A)  Fed assets = Fed liabilities + Federal Reserve notes 
B)  Bank reserves = Fed Assets - (Fed liabilities - bank reserves) + Fed capital accounts 
C)  Fed liabilities = Fed Capital Accounts + bank reserves 
D)  Fed assets = bank reserves + Federal Reserve notes outstanding

Question 9

The monetary base is equal to

Accepted Answer

A)  Fed liabilities plus currency outstanding. 
B)  Fed liabilities minus loans to commercial banks. 
C)  bank reserves plus currency held by the non-bank public. 
D)  the M1 money supply minus Fed loans to commercial banks. 
A)  Fed liabilities plus currency outstanding. 
B)  Fed liabilities minus loans to commercial banks. 
C)  bank reserves plus currency held by the non-bank public. 
D)  the M1 money supply minus Fed loans to commercial banks.

Question 10

An increase in shipments of currency from the Federal Reserve to commercial banks will

Accepted Answer

A)  increase the money supply. 
B)  increase bank reserves. 
C)  reduce bank reserves. 
D)  have no effect on bank reserves. 
A)  increase the money supply. 
B)  increase bank reserves. 
C)  reduce bank reserves. 
D)  have no effect on bank reserves.

Question 11

Bank reserves are increased by

Accepted Answer

A)  Treasury currency outstanding. 
B)  Treasury cash holdings. 
C)  Federal Reserve capital. 
D)  currency in circulation. 
A)  Treasury currency outstanding. 
B)  Treasury cash holdings. 
C)  Federal Reserve capital. 
D)  currency in circulation.

Question 12

When federal government expenditures exceed tax receipts, the Treasury must

Accepted Answer

A)  expand the money supply. 
B)  raise taxes. 
C)  reduce spending. 
D)  sell bonds. 
A)  expand the money supply. 
B)  raise taxes. 
C)  reduce spending. 
D)  sell bonds.

Question 13

Which of these government financing methods is generally the least inflationary?

Accepted Answer

A)  Printing currency 
B)  Borrowing from the banking system 
C)  Borrowing from the central bank 
D)  Borrowing from the non-bank public 
A)  Printing currency 
B)  Borrowing from the banking system 
C)  Borrowing from the central bank 
D)  Borrowing from the non-bank public

Question 14

In open market operations, when the Fed __________ securities, bank reserves __________.

Accepted Answer

A)  buys; contract 
B)  buys; expand 
C)  sells; expand 
D)  None of the above. 
A)  buys; contract 
B)  buys; expand 
C)  sells; expand 
D)  None of the above.

Question 15

If the government collects taxes and makes expenditures of a smaller amount, bank reserves

Accepted Answer

A)  are unaffected. 
B)  may rise or fall. 
C)  rise. 
D)  fall. 
A)  are unaffected. 
B)  may rise or fall. 
C)  rise. 
D)  fall.

Question 16

The Federal Reserve uses dynamic open market operations to

Accepted Answer

A)  alter the money multiplier. 
B)  alter the growth path of bank reserves. 
C)  inject reserves temporarily into the system. 
D)  take reserves temporarily from the system. 
A)  alter the money multiplier. 
B)  alter the growth path of bank reserves. 
C)  inject reserves temporarily into the system. 
D)  take reserves temporarily from the system.

Question 17

Open market operations that represent an attempt to offset short-term fluctuations in bank reserves are known as

Accepted Answer

A)  defensive open market operations. 
B)  dynamic open market operations. 
C)  temporary open market operations. 
D)  equilibrating open market operations. 
A)  defensive open market operations. 
B)  dynamic open market operations. 
C)  temporary open market operations. 
D)  equilibrating open market operations.

Question 18

Federal Reserve liabilities are equal to

Accepted Answer

A)  gold certificates + other Fed liabilities. 
B)  bank reserves + other Fed liabilities. 
C)  Federal Reserve notes. 
D)  cash + loans + U.S. Treasury deposits. 
A)  gold certificates + other Fed liabilities. 
B)  bank reserves + other Fed liabilities. 
C)  Federal Reserve notes. 
D)  cash + loans + U.S. Treasury deposits.

Question 19

When the Federal Reserve float __________, bank reserves __________.

Accepted Answer

A)  rises; fall 
B)  rises; rise 
C)  rise; are unchanged 
D)  rise; change unpredictably 
A)  rises; fall 
B)  rises; rise 
C)  rise; are unchanged 
D)  rise; change unpredictably

Question 20

When a commercial bank borrows from the Federal Reserve,

Accepted Answer

A)  Treasury liabilities rise. 
B)  Treasury assets rise. 
C)  Federal Reserve assets rise. 
D)  bank reserves fall. 
A)  Treasury liabilities rise. 
B)  Treasury assets rise. 
C)  Federal Reserve assets rise. 
D)  bank reserves fall.

Exam 20: Understanding Movements in Bank Reserves

Which of the following situations is likely to lead to dynamic open market operations?

Repurchase agreements are often used to

Federal Reserve credit is equal to bank borrowing plus U.S. government security holdings plus

The bank reserve equation is the

When the U.S. Treasury purchases gold from a member of the non-bank public, the immediate effect is that __________ and __________.

Reverse repurchase agreements are often used to

Immediately after being collected, taxes are deposited in

Which of the following is a correct statement regarding the balance sheet of the Federal Reserve?

The monetary base is equal to

An increase in shipments of currency from the Federal Reserve to commercial banks will

Bank reserves are increased by

When federal government expenditures exceed tax receipts, the Treasury must

Which of these government financing methods is generally the least inflationary?

In open market operations, when the Fed __________ securities, bank reserves __________.

If the government collects taxes and makes expenditures of a smaller amount, bank reserves

The Federal Reserve uses dynamic open market operations to

Open market operations that represent an attempt to offset short-term fluctuations in bank reserves are known as

Federal Reserve liabilities are equal to

When the Federal Reserve float __________, bank reserves __________.

When a commercial bank borrows from the Federal Reserve,

Introducing Money, Banking, and Financial Markets

The Role of Money in the Macroeconomy

Financial Instruments, Markets, and Institutions

Interest Rate Measurement and Behavior

The Term and Risk Structure of Interest Rates

The Structure and Performance of Securities Markets

The Pricing of Risky Financial Assets

Money and Capital Markets

Demystifying Derivatives

Understanding Foreign Exchange

The Nature of Financial Intermediation

Depository Financial Institutions

Nondepository Financial Institutions

Understanding Financial Contracts

The Regulation of Markets and Institutions

Financial System Design

Who's in Charge Here?

Bank Reserves and the Money Supply

The Instruments of Central Bankin

Monetary Policy Strategy

The Classical Foundations

The Keynesian Framework

The ISLM World

Money and Economic Stability in the ISLM World

An Aggregate Supply and Demand Perspective on Money and Economic Stability

Rational Expectations: Theory and Policy Implications

Empirical Evidence on the Effectiveness of Monetary Policy

Tying It All Together

Filters

When the U.S. Treasury purchases gold from a member of the non-bank public, the immediate effect is that and .

In open market operations, when the Fed securities, bank reserves .

When the Federal Reserve float , bank reserves .