Question 1

In 2007,the Fed began using an additional monetary policy tool called the term auction facility program.

Accepted Answer

A) True 
 B)False

Question 2

Exhibit 13-1
  
-Refer to Exhibit 13-1. Suppose that the Federal Reserve conducts open market operations by purchasing $1,000 worth of government securities from Bank A. At the end of this process of money creation depicted in the exhibit,what is the total amount of new checkable deposits,blank (G)?

Accepted Answer

A)  $1,000,000 
B)  $1,000 
C)  $10,000 
D)  $100,000 
A)  $1,000,000 
B)  $1,000 
C)  $10,000 
D)  $100,000

Question 3

Suppose the Fed forecasts a reduction in excess reserve holdings by banks.It might offset the effect of this on the money supply by

Accepted Answer

A)  buying government securities. 
B)  lowering the required reserve ratio. 
C)  lowering the discount rate. 
D)  selling government securities. 
E)  a, b, and c 
A)  buying government securities. 
B)  lowering the required reserve ratio. 
C)  lowering the discount rate. 
D)  selling government securities. 
E)  a, b, and c

Question 4

In controlling the nation's money supply,the Fed is obligated to seek the advice of

Accepted Answer

A)  the Congress. 
B)  the President of the United States. 
C)  the Treasury. 
D)  a and b 
E)  none of the above 
A)  the Congress. 
B)  the President of the United States. 
C)  the Treasury. 
D)  a and b 
E)  none of the above

Question 5

Exhibit 13-2
  
-Refer to Exhibit 13-2. What word (up or down)should go in the place of blank (1)and blank (2),respectively?

Accepted Answer

A)  up; up 
B)  up; down 
C)  down; up 
D)  down; down 
A)  up; up 
B)  up; down 
C)  down; up 
D)  down; down

Question 6

If the Fed lowers the discount rate (relative to the federal funds rate),banks will (likely)borrow __________ from the Fed,which will __________ reserves in the banking system,and eventually __________ the money supply.

Accepted Answer

A)  less; decrease; lower 
B)  more; increase; raise 
C)  the same amount; not change; lower 
D)  more; decrease; raise 
E)  none of the above 
A)  less; decrease; lower 
B)  more; increase; raise 
C)  the same amount; not change; lower 
D)  more; decrease; raise 
E)  none of the above

Question 7

The Board of Governors of the Federal Reserve

Accepted Answer

A)  is made up of seven members. 
B)  is a group of advisers reporting to the President. 
C)  is located in New York City. 
D)  members are appointed to four-year terms by the President and confirmed by the Senate. 
E)  all of the above 
A)  is made up of seven members. 
B)  is a group of advisers reporting to the President. 
C)  is located in New York City. 
D)  members are appointed to four-year terms by the President and confirmed by the Senate. 
E)  all of the above

Question 8

A Federal Reserve Bank is located in which of the following cities?

Accepted Answer

A)  Detroit 
B)  Baltimore 
C)  Minneapolis 
D)  Seattle 
E)  Cincinnati 
A)  Detroit 
B)  Baltimore 
C)  Minneapolis 
D)  Seattle 
E)  Cincinnati

Question 9

Suppose that the federal funds rate and the discount rate are equal initially at 3%. If the discount rate is then lowered to 2.5%,to whom will a bank be more likely to go for a loan: the Federal Reserve or another bank? Explain your answer in detail,and be sure to mention the impact that this situation would have on the money supply..

Accepted Answer

When the Fed lowers the discount rate be

Question 10

The president of the Federal Reserve Bank of ________________ holds a permanent seat on the _________________________.

Accepted Answer

A)  New York; Board of Governors of the Federal Reserve System 
B)  Washington D.C.; FOMC 
C)  San Francisco; FOMC 
D)  New York; FOMC 
E)  Washington D.C.; Board of Governors of the Federal Reserve System 
A)  New York; Board of Governors of the Federal Reserve System 
B)  Washington D.C.; FOMC 
C)  San Francisco; FOMC 
D)  New York; FOMC 
E)  Washington D.C.; Board of Governors of the Federal Reserve System

Question 11

Members of the Board of Governors of the Federal Reserve are appointed by the President and approved by the Senate to serve a 14-year term.

Accepted Answer

A) True 
 B)False

Question 12

A commercial bank can receive a loan from another commercial bank in the

Accepted Answer

A)  federal funds market. 
B)  bank loan market. 
C)  Fed market. 
D)  discount market. 
A)  federal funds market. 
B)  bank loan market. 
C)  Fed market. 
D)  discount market.

Question 13

The Federal Open Market Committee (FOMC)is composed of the seven members of the Board of Governors,

Accepted Answer

A)  the president of the New York Federal Reserve District Bank, and four of the remaining 11 Federal Reserve District Bank presidents who rotate on an annual basis. 
B)  and five state governors who rotate on an annual basis. 
C)  four Federal Reserve District Bank presidents who rotate on an annual basis, and the head of the Senate Banking Committee. 
D)  and the Secretary of the Treasury. 
A)  the president of the New York Federal Reserve District Bank, and four of the remaining 11 Federal Reserve District Bank presidents who rotate on an annual basis. 
B)  and five state governors who rotate on an annual basis. 
C)  four Federal Reserve District Bank presidents who rotate on an annual basis, and the head of the Senate Banking Committee. 
D)  and the Secretary of the Treasury.

Question 14

If reserves increase by $7 million and the required reserve ratio is 12%,what is the resulting change in checkable deposits (or the money supply),assuming that there are no cash leakages and that banks hold zero excess reserves?

Accepted Answer

A)  $0.84 million 
B)  $7.95 million 
C)  $5.83 million 
D)  $58.33 million 
A)  $0.84 million 
B)  $7.95 million 
C)  $5.83 million 
D)  $58.33 million

Question 15

When the Fed sells government securities to a bank,the securities will be

Accepted Answer

A)  an asset for the bank. 
B)  a liability for the bank. 
C)  both an asset and a liability for the bank. 
D)  neither an asset nor a liability for the bank. 
A)  an asset for the bank. 
B)  a liability for the bank. 
C)  both an asset and a liability for the bank. 
D)  neither an asset nor a liability for the bank.

Question 16

The interest rate that the Fed pays on reserves acts as a ceiling on the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 17

Suppose that the Fed undertakes an open market purchase of $1 million worth of securities from a bank. If the required reserve ratio is 9%,what is the resulting change in checkable deposits (or the money supply),assuming that there are no cash leakages and that banks hold zero excess reserves?

Accepted Answer

A)  $11.11 million 
B)  $9 million 
C)  $1.09 million 
D)  $90 million 
A)  $11.11 million 
B)  $9 million 
C)  $1.09 million 
D)  $90 million

Question 18

The three members of the commission that originally drew up the boundaries of the Federal Reserve Districts and the locations of the district banks were the

Accepted Answer

A)  Comptroller of the Currency, the Secretary of the Treasury, and the Secretary of Agriculture. 
B)  Secretary of State, the Secretary of the Treasury, and the Speaker of the House of Representatives. 
C)  Secretary of State, the Secretary of Commerce, and the Vice President. 
D)  Secretary of the Treasury, the Secretary of Commerce, and the Vice President. 
A)  Comptroller of the Currency, the Secretary of the Treasury, and the Secretary of Agriculture. 
B)  Secretary of State, the Secretary of the Treasury, and the Speaker of the House of Representatives. 
C)  Secretary of State, the Secretary of Commerce, and the Vice President. 
D)  Secretary of the Treasury, the Secretary of Commerce, and the Vice President.

Question 19

Which of the following will increase the money supply?

Accepted Answer

A)  an increase in the discount rate (relative to the federal funds rate) 
B)  a decrease in the required reserve ratio 
C)  an open market sale by the Fed 
D)  a and c 
E)  b and c 
A)  an increase in the discount rate (relative to the federal funds rate) 
B)  a decrease in the required reserve ratio 
C)  an open market sale by the Fed 
D)  a and c 
E)  b and c

Question 20

Here is how an open market purchase works: The Fed __________ government securities to (from)a commercial bank,which raises the bank's deposits at the __________ and increases the bank's __________.

Accepted Answer

A)  sells; Fed; reserves 
B)  buys; Fed; reserves 
C)  buys; Treasury; discount loans 
D)  sells; Treasury; required reserve ratio 
E)  buys; Fed; liabilities 
A)  sells; Fed; reserves 
B)  buys; Fed; reserves 
C)  buys; Treasury; discount loans 
D)  sells; Treasury; required reserve ratio 
E)  buys; Fed; liabilities

Exam 13: The Federal Reserve System

In 2007,the Fed began using an additional monetary policy tool called the term auction facility program.

Exhibit 13-1 -Refer to Exhibit 13-1. Suppose that the Federal Reserve conducts open market operations by purchasing $1,000 worth of government securities from Bank A. At the end of this process of money creation depicted in the exhibit,what is the total amount of new checkable deposits,blank (G)?

Suppose the Fed forecasts a reduction in excess reserve holdings by banks.It might offset the effect of this on the money supply by

In controlling the nation's money supply,the Fed is obligated to seek the advice of

Exhibit 13-2 -Refer to Exhibit 13-2. What word (up or down)should go in the place of blank (1)and blank (2),respectively?

If the Fed lowers the discount rate (relative to the federal funds rate),banks will (likely)borrow __________ from the Fed,which will __________ reserves in the banking system,and eventually __________ the money supply.

The Board of Governors of the Federal Reserve

A Federal Reserve Bank is located in which of the following cities?

The president of the Federal Reserve Bank of ________________ holds a permanent seat on the _________________________.

Members of the Board of Governors of the Federal Reserve are appointed by the President and approved by the Senate to serve a 14-year term.

A commercial bank can receive a loan from another commercial bank in the

The Federal Open Market Committee (FOMC)is composed of the seven members of the Board of Governors,

If reserves increase by $7 million and the required reserve ratio is 12%,what is the resulting change in checkable deposits (or the money supply),assuming that there are no cash leakages and that banks hold zero excess reserves?

When the Fed sells government securities to a bank,the securities will be

The interest rate that the Fed pays on reserves acts as a ceiling on the federal funds rate.

Suppose that the Fed undertakes an open market purchase of $1 million worth of securities from a bank. If the required reserve ratio is 9%,what is the resulting change in checkable deposits (or the money supply),assuming that there are no cash leakages and that banks hold zero excess reserves?

The three members of the commission that originally drew up the boundaries of the Federal Reserve Districts and the locations of the district banks were the

Which of the following will increase the money supply?

Here is how an open market purchase works: The Fed __________ government securities to (from)a commercial bank,which raises the bank's deposits at the __________ and increases the bank's __________.

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

If the Fed lowers the discount rate (relative to the federal funds rate),banks will (likely)borrow from the Fed,which will reserves in the banking system,and eventually __ the money supply.

The president of the Federal Reserve Bank of holds a permanent seat on the _________.

Here is how an open market purchase works: The Fed government securities to (from)a commercial bank,which raises the bank's deposits at the and increases the bank's __.