Question 1

The Federal Reserve can decrease bank reserves by

Accepted Answer

A) selling bonds to the public 
B) lowering the reserve requirements 
C) lowering the discount rate (the primary credit rate) 
D) buying foreign exchange 
E) making open market purchases 
A) selling bonds to the public 
B) lowering the reserve requirements 
C) lowering the discount rate (the primary credit rate) 
D) buying foreign exchange 
E) making open market purchases

Question 2

Other things remaining the same, the smaller the currency-deposit ratio,

Accepted Answer

A) the larger the reserve-deposit ratio 
B) the smaller the reserve-deposit ratio 
C) the larger the money multiplier 
D) the smaller the money multiplier 
E) the larger the monetary base 
A) the larger the reserve-deposit ratio 
B) the smaller the reserve-deposit ratio 
C) the larger the money multiplier 
D) the smaller the money multiplier 
E) the larger the monetary base

Question 3

If the Federal Reserve wanted to reduce inflation, the most effective policies would be to

Accepted Answer

A) sell government securities and raise reserve requirements 
B)  sell government securities and lower reserve requirements 
C)  buy government securities and lower reserve requirements 
D) buy government securities and raise reserve requirements 
E) buy government securities and keep reserve requirements the same 
A) sell government securities and raise reserve requirements 
B)  sell government securities and lower reserve requirements 
C)  buy government securities and lower reserve requirements 
D) buy government securities and raise reserve requirements 
E) buy government securities and keep reserve requirements the same

Question 4

The stock of high-powered money is increased when the Fed

Accepted Answer

A) sells securities in the open market 
B) increases the reserve requirement 
C) sells foreign exchange (francs, yen, etc.) 
D) makes loans to banks 
E) none of the above 
A) sells securities in the open market 
B) increases the reserve requirement 
C) sells foreign exchange (francs, yen, etc.) 
D) makes loans to banks 
E) none of the above

Question 5

The formula for the money multiplier (mm) is

Accepted Answer

A) mm = (1 + re)/(cu + re) 
B) mm = (1 + cu)/(cu + re) 
C) mm = (1 - cu)/(cu + re) 
D) mm = (cu + re)/(1 - cu) 
E) mm =1/(cu + re ) 
A) mm = (1 + re)/(cu + re) 
B) mm = (1 + cu)/(cu + re) 
C) mm = (1 - cu)/(cu + re) 
D) mm = (cu + re)/(1 - cu) 
E) mm =1/(cu + re )

Question 6

The federal funds rate

Accepted Answer

A) is not affected by open market operations 
B) is also known as the primary credit rate 
C) is the rate that banks have to pay if they borrow from the Fed 
D) is the rate a bank has to pay if it borrows funds temporarily from another bank 
E) none of the above 
A) is not affected by open market operations 
B) is also known as the primary credit rate 
C) is the rate that banks have to pay if they borrow from the Fed 
D) is the rate a bank has to pay if it borrows funds temporarily from another bank 
E) none of the above

Question 7

Assume many more stores agree to accept credit and debit cards.Which of the following will be a likely outcome?

Accepted Answer

A) the money multiplier will decrease 
B) the money multiplier will increase 
C) money supply will decrease, given a fixed monetary base 
D) the currency-deposit ratio will increase 
E) the reserve-deposit ratio will decrease 
A) the money multiplier will decrease 
B) the money multiplier will increase 
C) money supply will decrease, given a fixed monetary base 
D) the currency-deposit ratio will increase 
E) the reserve-deposit ratio will decrease

Question 8

While the Fed can influence the money stock, the ratio of currency to deposits in the country at any given time is determined

Accepted Answer

A) by banks 
B) jointly by the Treasury and the Fed 
C) only by lending institutions which provide banking services 
D) only by the actions of the Treasury Department 
E) by the public, as households and businesses hold money in the form they prefer 
A) by banks 
B) jointly by the Treasury and the Fed 
C) only by lending institutions which provide banking services 
D) only by the actions of the Treasury Department 
E) by the public, as households and businesses hold money in the form they prefer

Question 9

Assume that the Fed's goal is to stabilize national income.Under what conditions would a money supply target be more desirable than an interest rate target?

Accepted Answer

A) when money demand is very interest inelastic and investment is very interest elastic 
B) when money demand is very interest elastic and investment is very interest inelastic 
C) when consumer spending is very predictable 
D) when uncertainties and fluctuations are coming mainly from the expenditure sector 
E) when uncertainties and fluctuations are coming mainly from changes in money demand 
A) when money demand is very interest inelastic and investment is very interest elastic 
B) when money demand is very interest elastic and investment is very interest inelastic 
C) when consumer spending is very predictable 
D) when uncertainties and fluctuations are coming mainly from the expenditure sector 
E) when uncertainties and fluctuations are coming mainly from changes in money demand

Question 10

The assumption that banks hold less excess reserves and consumers hold less currency when market interest rates increase implies that

Accepted Answer

A) the size of the money multiplier decreases as interest rates rise 
B) the Fed has total control over the supply of money 
C) changes in money supply occur as economic conditions change 
D) monetary policy is totally ineffective 
E) none of the above 
A) the size of the money multiplier decreases as interest rates rise 
B) the Fed has total control over the supply of money 
C) changes in money supply occur as economic conditions change 
D) monetary policy is totally ineffective 
E) none of the above

The Federal Reserve can decrease bank reserves by

Other things remaining the same, the smaller the currency-deposit ratio,

If the Federal Reserve wanted to reduce inflation, the most effective policies would be to

The stock of high-powered money is increased when the Fed

The formula for the money multiplier (mm) is

The federal funds rate

Assume many more stores agree to accept credit and debit cards.Which of the following will be a likely outcome?

While the Fed can influence the money stock, the ratio of currency to deposits in the country at any given time is determined

Assume that the Fed's goal is to stabilize national income.Under what conditions would a money supply target be more desirable than an interest rate target?

The assumption that banks hold less excess reserves and consumers hold less currency when market interest rates increase implies that

Introduction

National income accounting

Growth and accumulation

Growth and policy

Aggregate supply and demand

Aggregate supply and the phillips curve

Unemployment

Inflation

Policy preview

Income and spending

Money, interest, and income

Monetary and fiscal policy

International linkages

Consumption and saving

Investment spending

The demand for money

Policy

Financial markets and asset prices

The national debt

Recession and depression

Inflation and hyperinflation

International adjustment and interdependence

Advanced topics

Filters

Exam 17: The fed, money, and credit

The Federal Reserve can decrease bank reserves by

Other things remaining the same, the smaller the currency-deposit ratio,

If the Federal Reserve wanted to reduce inflation, the most effective policies would be to

The stock of high-powered money is increased when the Fed

The formula for the money multiplier (mm) is

The federal funds rate

Assume many more stores agree to accept credit and debit cards.Which of the following will be a likely outcome?

While the Fed can influence the money stock, the ratio of currency to deposits in the country at any given time is determined

Assume that the Fed's goal is to stabilize national income.Under what conditions would a money supply target be more desirable than an interest rate target?

The assumption that banks hold less excess reserves and consumers hold less currency when market interest rates increase implies that

Introduction

National income accounting

Growth and accumulation

Growth and policy

Aggregate supply and demand

Aggregate supply and the phillips curve

Unemployment

Inflation

Policy preview

Income and spending

Money, interest, and income

Monetary and fiscal policy

International linkages

Consumption and saving

Investment spending

The demand for money

Policy

Financial markets and asset prices

The national debt

Recession and depression

Inflation and hyperinflation

International adjustment and interdependence

Advanced topics

Filters