Question 1

Which of the following statements is false?

Accepted Answer

A)  The Fed serves as the lender of last resort for banks. 
B)  The Fed serves as a fiscal agent for the U.S. Treasury. 
C)  A major responsibility of the Fed is to control the nation's money supply. 
D)  The federal government is the Fed's banker. 
A)  The Fed serves as the lender of last resort for banks. 
B)  The Fed serves as a fiscal agent for the U.S. Treasury. 
C)  A major responsibility of the Fed is to control the nation's money supply. 
D)  The federal government is the Fed's banker.

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 equation would be used to determine the total amount of new checkable deposits,blank (G)?

Accepted Answer

A)  simple deposit multiplier x change in reserves resulting from the initial injection of funds 
B)  1/r x change in reserves resulting from the initial injection of funds 
C)  r x change in reserves resulting from the initial injection of funds 
D)  1/r 
E)  a and b 
A)  simple deposit multiplier x change in reserves resulting from the initial injection of funds 
B)  1/r x change in reserves resulting from the initial injection of funds 
C)  r x change in reserves resulting from the initial injection of funds 
D)  1/r 
E)  a and b

Question 3

Explain the difference between the discount rate and the federal funds rate. If the Fed wants to lower one of these rates,which one can the Fed change by issuing an order? Describe in detail how the Fed helps to lower the other rate.

Accepted Answer

The federal funds rate is the interest r

Question 4

List and describe the three major monetary policy tools the Federal Reserve can use to increase the money supply. Be specific in your response regarding which direction the tool would need to change in order for the money supply to grow.

Accepted Answer

Open market operations are when the Fed

Question 5

Suppose that the current federal funds rate is below the federal funds target rate. In order to raise the federal funds rate the Fed will ________________ securities on the open market which will ________________ the supply of reserves in the market for reserves,pushing the rate closer to the target rate.

Accepted Answer

A)  sell; increase 
B)  purchase; increase 
C)  purchase; decrease 
D)  sell; decrease 
A)  sell; increase 
B)  purchase; increase 
C)  purchase; decrease 
D)  sell; decrease

Question 6

The Board of Governors of the Federal Reserve is part of a larger policy-making group called the

Accepted Answer

A)  Senate Banking Committee. 
B)  Federal Deposit Insurance Corporation. 
C)  American Banking Association. 
D)  Federal Open Market Committee. 
A)  Senate Banking Committee. 
B)  Federal Deposit Insurance Corporation. 
C)  American Banking Association. 
D)  Federal Open Market Committee.

Question 7

The Federal Reserve System

Accepted Answer

A)  is the central bank of the United States. 
B)  controls the money supply. 
C)  is the lender of last resort. 
D)  is the fiscal agent for the Treasury. 
E)  all of the above 
A)  is the central bank of the United States. 
B)  controls the money supply. 
C)  is the lender of last resort. 
D)  is the fiscal agent for the Treasury. 
E)  all of the above

Question 8

The Federal Reserve Bank of Minneapolis once chartered a small airplane to deliver money to a commercial bank that was experiencing a "mad run" on the bank.

Accepted Answer

A) True 
 B)False

Question 9

What is the name and make-up of the policymaking group that has the authority to conduct open market operations? Describe how the use of open market operations helps to increase or decrease the money supply.

Accepted Answer

The group responsible for conducting ope

Question 10

If the Fed purchases government securities from commercial banks,the reserves of the banking system will immediately

Accepted Answer

A)  increase by the amount of the purchase. 
B)  increase by more than the amount of the purchase. 
C)  remain constant. 
D)  decrease by the amount of the purchase. 
E)  decrease by more than the amount of the purchase. 
A)  increase by the amount of the purchase. 
B)  increase by more than the amount of the purchase. 
C)  remain constant. 
D)  decrease by the amount of the purchase. 
E)  decrease by more than the amount of the purchase.

Question 11

The corridor is the ________________ section of the ______________________ curve of reserves in the federal funds market.

Accepted Answer

A)  vertical; demand 
B)  horizontal; demand 
C)  horizontal; supply 
D)  vertical; supply 
A)  vertical; demand 
B)  horizontal; demand 
C)  horizontal; supply 
D)  vertical; supply

Question 12

Raising the required reserve ratio __________ the simple deposit multiplier which will __________ the economy's money supply.

Accepted Answer

A)  raises; increase 
B)  raises; decrease 
C)  lowers; increase 
D)  lowers; decrease 
A)  raises; increase 
B)  raises; decrease 
C)  lowers; increase 
D)  lowers; decrease

Question 13

Open market purchases of government securities

Accepted Answer

A)  are designed to increase trading on the stock exchange. 
B)  generally decrease the money supply. 
C)  always decrease the money supply. 
D)  cause bank reserves to increase. 
E)  all of the above 
A)  are designed to increase trading on the stock exchange. 
B)  generally decrease the money supply. 
C)  always decrease the money supply. 
D)  cause bank reserves to increase. 
E)  all of the above

Question 14

The required reserve ratio is set by the

Accepted Answer

A)  U.S. Congress. 
B)  President of the United States. 
C)  Secretary of the Treasury. 
D)  Federal Reserve. 
E)  Director of Monetary Affairs. 
A)  U.S. Congress. 
B)  President of the United States. 
C)  Secretary of the Treasury. 
D)  Federal Reserve. 
E)  Director of Monetary Affairs.

Question 15

A required reserve ratio of 12 percent gives rise to a simple deposit multiplier of

Accepted Answer

A)  12. 
B)  83.33. 
C)  6.67. 
D)  8.33. 
A)  12. 
B)  83.33. 
C)  6.67. 
D)  8.33.

Question 16

The discount rate is the interest rate

Accepted Answer

A)  banks pay on certificates of deposit. 
B)  the Fed pays on reserves held by banks. 
C)  the Fed charges when it lends reserves to banks. 
D)  banks charge their loan customers. 
E)  on short-term Treasury securities. 
A)  banks pay on certificates of deposit. 
B)  the Fed pays on reserves held by banks. 
C)  the Fed charges when it lends reserves to banks. 
D)  banks charge their loan customers. 
E)  on short-term Treasury securities.

Question 17

If the Fed wants to increase the money supply through an open market operation,it will

Accepted Answer

A)  purchase government securities. 
B)  sell government securities. 
C)  first purchase, then sell, government securities. 
D)  lend more reserves to commercial banks. 
A)  purchase government securities. 
B)  sell government securities. 
C)  first purchase, then sell, government securities. 
D)  lend more reserves to commercial banks.

Question 18

If the Fed lowers the required reserve ratio,__________ in the banking system will remain unchanged but __________ will rise.This will (likely)lead to an increase in new loans and checkable deposits and a(n)__________ in the money supply.

Accepted Answer

A)  excess reserves; vault cash; increase 
B)  reserves; vault cash; decrease 
C)  reserves; excess reserves; increase 
D)  reserves; required reserves; increase 
E)  none of the above 
A)  excess reserves; vault cash; increase 
B)  reserves; vault cash; decrease 
C)  reserves; excess reserves; increase 
D)  reserves; required reserves; increase 
E)  none of the above

Question 19

In the United States,paper currency is printed at the

Accepted Answer

A)  Bureau of Engraving and Printing. 
B)  Federal Reserve District banks. 
C)  U.S. Mint. 
D)  U.S. Treasury. 
A)  Bureau of Engraving and Printing. 
B)  Federal Reserve District banks. 
C)  U.S. Mint. 
D)  U.S. Treasury.

Question 20

To deal with the financial crisis of 2007-2009,the Fed extended its lender of last resort function to include institutions other than banks.

Accepted Answer

A) True 
 B)False

Exam 13: The Federal Reserve System

Which of the following statements is false?

Explain the difference between the discount rate and the federal funds rate. If the Fed wants to lower one of these rates,which one can the Fed change by issuing an order? Describe in detail how the Fed helps to lower the other rate.

List and describe the three major monetary policy tools the Federal Reserve can use to increase the money supply. Be specific in your response regarding which direction the tool would need to change in order for the money supply to grow.

The Board of Governors of the Federal Reserve is part of a larger policy-making group called the

The Federal Reserve System

The Federal Reserve Bank of Minneapolis once chartered a small airplane to deliver money to a commercial bank that was experiencing a "mad run" on the bank.

What is the name and make-up of the policymaking group that has the authority to conduct open market operations? Describe how the use of open market operations helps to increase or decrease the money supply.

If the Fed purchases government securities from commercial banks,the reserves of the banking system will immediately

The corridor is the ________________ section of the ______________________ curve of reserves in the federal funds market.

Raising the required reserve ratio __________ the simple deposit multiplier which will __________ the economy's money supply.

Open market purchases of government securities

The required reserve ratio is set by the

A required reserve ratio of 12 percent gives rise to a simple deposit multiplier of

The discount rate is the interest rate

If the Fed wants to increase the money supply through an open market operation,it will

If the Fed lowers the required reserve ratio,__________ in the banking system will remain unchanged but __________ will rise.This will (likely)lead to an increase in new loans and checkable deposits and a(n)__________ in the money supply.

In the United States,paper currency is printed at the

To deal with the financial crisis of 2007-2009,the Fed extended its lender of last resort function to include institutions other than banks.

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 corridor is the section of the ______ curve of reserves in the federal funds market.

Raising the required reserve ratio the simple deposit multiplier which will the economy's money supply.

If the Fed lowers the required reserve ratio, in the banking system will remain unchanged but will rise.This will (likely)lead to an increase in new loans and checkable deposits and a(n)__ in the money supply.