Question 1

When Bank A obtains a loan from the Fed,the

Accepted Answer

A)  discount rate is probably higher than the federal funds rate. 
B)  bank's reserves increase. 
C)  simple deposit multiplier decreases. 
D)  b and c 
E)  none of the above 
A)  discount rate is probably higher than the federal funds rate. 
B)  bank's reserves increase. 
C)  simple deposit multiplier decreases. 
D)  b and c 
E)  none of the above B

Question 2

The banking system currently holds $20 billion in required reserves and zero excess reserves.The Fed lowers the required reserve ratio from 15 percent to 12.5 percent.Assuming that there are no cash leakages,the resulting change in checkable deposits (or the money supply)is approximately

Accepted Answer

A)  $2.7 billion. 
B)  $1.5 billion. 
C)  $2.0 billion. 
D)  $12.5 billion. 
E)  $26.6 billion. 
A)  $2.7 billion. 
B)  $1.5 billion. 
C)  $2.0 billion. 
D)  $12.5 billion. 
E)  $26.6 billion. E

Question 3

If the Fed purchases government securities from a commercial bank,which of the following will happen?

Accepted Answer

A)  The Fed will increase the bank's reserves on deposit at the Fed. 
B)  The Fed will decrease the bank's reserves on deposit at the Fed. 
C)  The assets (government securities) of the Fed will decrease. 
D)  The assets (government securities) of the Fed will increase. 
E)  a and d 
A)  The Fed will increase the bank's reserves on deposit at the Fed. 
B)  The Fed will decrease the bank's reserves on deposit at the Fed. 
C)  The assets (government securities) of the Fed will decrease. 
D)  The assets (government securities) of the Fed will increase. 
E)  a and d E

Question 4

The president of the ________________________ holds a permanent seat on the FOMC.

Accepted Answer

A)  United States 
B)  Federal Reserve District Bank of New York 
C)  Federal Reserve District Bank of San Francisco 
D)  U.S. Senate banking committee 
E)  none of the above 
A)  United States 
B)  Federal Reserve District Bank of New York 
C)  Federal Reserve District Bank of San Francisco 
D)  U.S. Senate banking committee 
E)  none of the above

Question 5

The sale of a government security by the Fed

Accepted Answer

A)  decreases the supply of money. 
B)  increases the supply of money. 
C)  decreases the demand for money. 
D)  increases the demand for money. 
A)  decreases the supply of money. 
B)  increases the supply of money. 
C)  decreases the demand for money. 
D)  increases the demand for money.

Question 6

The members of the Board of Governors of the Federal Reserve are

Accepted Answer

A)  elected by a vote of the Federal Reserve District Bank presidents. 
B)  appointed by the President of the United States with approval by the Senate. 
C)  appointed by the Congress with approval by the President of the United States. 
D)  elected by a general election of the citizens of the United States. 
A)  elected by a vote of the Federal Reserve District Bank presidents. 
B)  appointed by the President of the United States with approval by the Senate. 
C)  appointed by the Congress with approval by the President of the United States. 
D)  elected by a general election of the citizens of the United States.

Question 7

Explain the major differences between the Federal Reserve and the U.S.Treasury.

Accepted Answer

Although many people confuse the Treasur

Question 8

Which of the following is not a major responsibility of the Fed?

Accepted Answer

A)  controlling the money supply 
B)  serving as the federal government's banker 
C)  determining tax rates 
D)  acting as a lender of last resort 
A)  controlling the money supply 
B)  serving as the federal government's banker 
C)  determining tax rates 
D)  acting as a lender of last resort

Question 9

Every time the Fed buys or sells on the open market,the __________ changes.

Accepted Answer

A)  budget deficit 
B)  income tax rate 
C)  money supply 
D)  a and b 
E)  a, b, and c 
A)  budget deficit 
B)  income tax rate 
C)  money supply 
D)  a and b 
E)  a, b, and c

Question 10

The supply curve of reserves has two kinks in it: one at the _________________ and the other at the ____________________ rate.

Accepted Answer

A)  interest rate that the Fed pays on reserves; discount 
B)  federal funds rate; discount 
C)  discount rate; prime rate 
D)  federal funds rate; prime rate 
A)  interest rate that the Fed pays on reserves; discount 
B)  federal funds rate; discount 
C)  discount rate; prime rate 
D)  federal funds rate; prime rate

Question 11

If there are no excess reserves in the banking system and the Fed lowers the required reserve ratio,it follows that banks will now have __________,which they can use to extend loans and create new __________.

Accepted Answer

A)  positive excess reserves; checkable deposits 
B)  negative excess reserves; currency 
C)  positive excess reserves; currency 
D)  more vault cash; checkable deposits 
E)  none of the above 
A)  positive excess reserves; checkable deposits 
B)  negative excess reserves; currency 
C)  positive excess reserves; currency 
D)  more vault cash; checkable deposits 
E)  none of the above

Question 12

Which of the following is not a responsibility of the Fed?

Accepted Answer

A)  supervising member banks 
B)  serving as the lender of last resort 
C)  issuing government securities 
D)  providing check-clearing services 
E)  supplying the economy with Federal Reserve Notes 
A)  supervising member banks 
B)  serving as the lender of last resort 
C)  issuing government securities 
D)  providing check-clearing services 
E)  supplying the economy with Federal Reserve Notes

Question 13

A required reserve ratio of 7 percent gives rise to a simple deposit multiplier of

Accepted Answer

A)  14.29. 
B)  83.33. 
C)  1.43. 
D)  93. 
E)  7. 
A)  14.29. 
B)  83.33. 
C)  1.43. 
D)  93. 
E)  7.

Question 14

Which of the following will cause the money supply to decline?

Accepted Answer

A)  lowering the discount rate 
B)  raising the required reserve ratio 
C)  an open market purchase 
D)  an open market sale 
E)  b and d 
A)  lowering the discount rate 
B)  raising the required reserve ratio 
C)  an open market purchase 
D)  an open market sale 
E)  b and d

Question 15

If the Fed wants to increase the money supply,it can __________ the required reserve ratio,conduct an open market __________,or __________the discount rate.

Accepted Answer

A)  lower; sale; raise 
B)  lower; purchase; raise 
C)  lower; purchase; lower 
D)  raise; sale; lower 
E)  raise; purchase; raise 
A)  lower; sale; raise 
B)  lower; purchase; raise 
C)  lower; purchase; lower 
D)  raise; sale; lower 
E)  raise; purchase; raise

Question 16

Which of the following Fed actions will increase the money supply?

Accepted Answer

A)  open market purchases of Treasury notes 
B)  an increase in the required reserve ratio 
C)  an increase in the discount rate 
D)  all of the above 
E)  none of the above 
A)  open market purchases of Treasury notes 
B)  an increase in the required reserve ratio 
C)  an increase in the discount rate 
D)  all of the above 
E)  none of the above

Question 17

Suppose the Fed forecasts a reduction in cash leakages.It might offset the effect of this on the money supply by

Accepted Answer

A)  buying government securities. 
B)  selling government securities. 
C)  lowering the required reserve ratio. 
D)  lowering the discount rate. 
A)  buying government securities. 
B)  selling government securities. 
C)  lowering the required reserve ratio. 
D)  lowering the discount rate.

Question 18

The major policy-making group within the Fed is the __________ Committee.

Accepted Answer

A)  Federal Reserve Tax 
B)  Federal Reserve Banking 
C)  Federal Open Market 
D)  Federal Reserve Decision-Making 
E)  Regional Bank 
A)  Federal Reserve Tax 
B)  Federal Reserve Banking 
C)  Federal Open Market 
D)  Federal Reserve Decision-Making 
E)  Regional Bank

Question 19

When the Federal Reserve system was being created,some people thought that there should be as few district banks as possible to enhance efficiency and for ease of operation.

Accepted Answer

A) True 
 B)False

Question 20

Each of the governors of the Federal Reserve System is appointed for a term of __________ years.The Board of Governors is comprised of _____________ members and the FOMC is comprised of __________ members.

Accepted Answer

A)  12; 7; 19 
B)  14; 6; 22 
C)  6; 5; 14 
D)  14; 7; 12 
E)  12; 6; 12 
A)  12; 7; 19 
B)  14; 6; 22 
C)  6; 5; 14 
D)  14; 7; 12 
E)  12; 6; 12

Exam 13: The Federal Reserve System

When Bank A obtains a loan from the Fed,the

The banking system currently holds $20 billion in required reserves and zero excess reserves.The Fed lowers the required reserve ratio from 15 percent to 12.5 percent.Assuming that there are no cash leakages,the resulting change in checkable deposits (or the money supply)is approximately

If the Fed purchases government securities from a commercial bank,which of the following will happen?

The president of the ________________________ holds a permanent seat on the FOMC.

The sale of a government security by the Fed

The members of the Board of Governors of the Federal Reserve are

Explain the major differences between the Federal Reserve and the U.S.Treasury.

Which of the following is not a major responsibility of the Fed?

Every time the Fed buys or sells on the open market,the __________ changes.

The supply curve of reserves has two kinks in it: one at the _________________ and the other at the ____________________ rate.

If there are no excess reserves in the banking system and the Fed lowers the required reserve ratio,it follows that banks will now have __________,which they can use to extend loans and create new __________.

Which of the following is not a responsibility of the Fed?

A required reserve ratio of 7 percent gives rise to a simple deposit multiplier of

Which of the following will cause the money supply to decline?

If the Fed wants to increase the money supply,it can __________ the required reserve ratio,conduct an open market __________,or __________the discount rate.

Which of the following Fed actions will increase the money supply?

Suppose the Fed forecasts a reduction in cash leakages.It might offset the effect of this on the money supply by

The major policy-making group within the Fed is the __________ Committee.

When the Federal Reserve system was being created,some people thought that there should be as few district banks as possible to enhance efficiency and for ease of operation.

Each of the governors of the Federal Reserve System is appointed for a term of __________ years.The Board of Governors is comprised of _____________ members and the FOMC is comprised of __________ members.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

The supply curve of reserves has two kinks in it: one at the _ and the other at the ____ rate.

If there are no excess reserves in the banking system and the Fed lowers the required reserve ratio,it follows that banks will now have ,which they can use to extend loans and create new .

If the Fed wants to increase the money supply,it can the required reserve ratio,conduct an open market ,or __the discount rate.

Each of the governors of the Federal Reserve System is appointed for a term of ____ years.The Board of Governors is comprised of _ members and the FOMC is comprised of ____ members.