Question 1

Which of the following describes a change that the Federal Reserve made in response to the financial crisis of 2007-2009?

Accepted Answer

A)  The Fed extended the lender of last resort function to institutions other than banks. 
B)  The Fed narrowed the scope of its open market operations, choosing to limit it to only buying Treasury securities from banks. 
C)  The Fed discontinued its term auction facility (TAF) program. 
D)  all of the above 
A)  The Fed extended the lender of last resort function to institutions other than banks. 
B)  The Fed narrowed the scope of its open market operations, choosing to limit it to only buying Treasury securities from banks. 
C)  The Fed discontinued its term auction facility (TAF) program. 
D)  all of the above

Question 2

When a check is written on an account at Bank A and deposited in Bank B,the reserve account of __________ will rise and reserves of the entire banking system will __________.

Accepted Answer

A)  Bank A; rise 
B)  Bank A; remain constant 
C)  Bank B; rise 
D)  Bank B; remain constant 
A)  Bank A; rise 
B)  Bank A; remain constant 
C)  Bank B; rise 
D)  Bank B; remain constant

Question 3

The larger the simple deposit multiplier,

Accepted Answer

A)  the higher the required reserve ratio. 
B)  the higher the discount rate. 
C)  the larger the change in the money supply for a given change in deposits. 
D)  the less likely the Fed will be to use its monetary policy tools. 
A)  the higher the required reserve ratio. 
B)  the higher the discount rate. 
C)  the larger the change in the money supply for a given change in deposits. 
D)  the less likely the Fed will be to use its monetary policy tools.

Question 4

Which of the following is not a function of the Federal Reserve System?

Accepted Answer

A)  to clear checks 
B)  to supervise member banks 
C)  to serve as the lender of last resort 
D)  to serve as a fiscal agent for the U.S. Treasury 
E)  to serve as the government's tax collector 
A)  to clear checks 
B)  to supervise member banks 
C)  to serve as the lender of last resort 
D)  to serve as a fiscal agent for the U.S. Treasury 
E)  to serve as the government's tax collector

Question 5

Although the Fed can destroy money,it is impossible for the Fed to create money out of thin air.

Accepted Answer

A) True 
 B)False

Question 6

The Board of Governors of the Federal Reserve serves on a larger policy-making group called the House Banking Committee.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A)  to serve as a fiscal agent for the U.S. Treasury 
B)  to hold depository institutions' reserves 
C)  to serve as the government's banker 
D)  to serve as borrower of last resort 
E)  none of the above 
A)  to serve as a fiscal agent for the U.S. Treasury 
B)  to hold depository institutions' reserves 
C)  to serve as the government's banker 
D)  to serve as borrower of last resort 
E)  none of the above

Question 8

Suppose that the Fed undertakes an open market sale,selling $3 million worth of securities to a bank. If the required reserve ratio is 11%,checkable deposits (or the money supply),would _______________ by ________________ million,assuming that there are no cash leakages and that banks hold zero excess reserves.

Accepted Answer

A)  rise; $27 
B)  decline; $33 
C)  decline; $27 
D)  rise; $33 
A)  rise; $27 
B)  decline; $33 
C)  decline; $27 
D)  rise; $33

Question 9

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. As a result,Bank A finds itself with $1,000 in excess reserves that it lends out and those funds end up in Bank B.The loan made by Bank B ends up in Bank C. What dollar value goes in blanks (C)and (D),respectively?.

Accepted Answer

A)  $900; $810 
B)  $90; $810 
C)  $110; $700 
D)  $700; $110 
A)  $900; $810 
B)  $90; $810 
C)  $110; $700 
D)  $700; $110

Question 10

Lowering 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 11

When the Fed increases the required reserve ratio,a bank's

Accepted Answer

A)  required reserves are unaffected. 
B)  required reserves are increased. 
C)  required reserves are decreased. 
D)  excess reserves are decreased. 
E)  b and d 
A)  required reserves are unaffected. 
B)  required reserves are increased. 
C)  required reserves are decreased. 
D)  excess reserves are decreased. 
E)  b and d

Question 12

Federal Reserve Notes held by the Fed are considered part of the

Accepted Answer

A)  money supply. 
B)  bank reserves. 
C)  both of the above 
D)  none of the above 
A)  money supply. 
B)  bank reserves. 
C)  both of the above 
D)  none of the above

Question 13

The Fed is one of the largest departments within the U.S.Treasury.

Accepted Answer

A) True 
 B)False

Question 14

When a commercial bank borrows from the Fed,

Accepted Answer

A)  the reserves of the bank fall. 
B)  the bank can make more loans. 
C)  it must be because the bank is not meeting its reserve requirements. 
D)  the money supply falls. 
A)  the reserves of the bank fall. 
B)  the bank can make more loans. 
C)  it must be because the bank is not meeting its reserve requirements. 
D)  the money supply falls.

Question 15

The Federal Reserve System is the

Accepted Answer

A)  federal government agency that collects taxes and spends these receipts on tanks, bridges, government employees' salaries, etc. 
B)  company that delivers packages to your front door. 
C)  central bank of the United States. 
D)  federal government agency that collects and disseminates all the economic data that economists are interested in. 
A)  federal government agency that collects taxes and spends these receipts on tanks, bridges, government employees' salaries, etc. 
B)  company that delivers packages to your front door. 
C)  central bank of the United States. 
D)  federal government agency that collects and disseminates all the economic data that economists are interested in.

Question 16

Which of the following will not increase the money supply in the United States?

Accepted Answer

A)  lowering the required reserve ratio 
B)  Fed purchases of government securities on the open market 
C)  lowering the discount rate relative to the federal funds rate 
D)  Fed sales of government securities on the open market 
E)  none of the above 
A)  lowering the required reserve ratio 
B)  Fed purchases of government securities on the open market 
C)  lowering the discount rate relative to the federal funds rate 
D)  Fed sales of government securities on the open market 
E)  none of the above

Question 17

If banks are currently holding zero excess reserves and the Fed lowers the required reserve ratio,which of the following will happen?

Accepted Answer

A)  Banks will have a reserve deficiency. 
B)  Banks will have positive excess reserves. 
C)  Banks will extend fewer loans. 
D)  Banks will call in some of their loans to meet the reserve deficiency. 
A)  Banks will have a reserve deficiency. 
B)  Banks will have positive excess reserves. 
C)  Banks will extend fewer loans. 
D)  Banks will call in some of their loans to meet the reserve deficiency.

Question 18

The funds the Fed receives from selling government securities

Accepted Answer

A)  are deposited in a commercial bank. 
B)  disappear into thin air. 
C)  are turned over to the Office of Management and Budget in Washington, D.C. 
D)  are deposited in the U.S. Treasury. 
A)  are deposited in a commercial bank. 
B)  disappear into thin air. 
C)  are turned over to the Office of Management and Budget in Washington, D.C. 
D)  are deposited in the U.S. Treasury.

Question 19

If the Fed _____________________,the money supply will ultimately __________.

Accepted Answer

A)  raises the discount rate relative to the federal funds rate; decrease 
B)  lowers the discount rate relative to the federal funds rate; increase 
C)  lowers the discount rate relative to the federal funds rate; decrease 
D)  raises the discount rate relative to the federal funds rate; increase 
E)  a and b 
A)  raises the discount rate relative to the federal funds rate; decrease 
B)  lowers the discount rate relative to the federal funds rate; increase 
C)  lowers the discount rate relative to the federal funds rate; decrease 
D)  raises the discount rate relative to the federal funds rate; increase 
E)  a and b

Question 20

When the Federal Open Market Committee (FOMC)votes on policy,they do so

Accepted Answer

A)  in the following order: the chair, the vice chair, the remaining FOMC members in alphabetical order. 
B)  in order based on seniority at the Fed. 
C)  in the following order: the chair, the vice chair, the remaining FOMC members by seniority at the Fed. 
D)  in alphabetical order. 
A)  in the following order: the chair, the vice chair, the remaining FOMC members in alphabetical order. 
B)  in order based on seniority at the Fed. 
C)  in the following order: the chair, the vice chair, the remaining FOMC members by seniority at the Fed. 
D)  in alphabetical order.

Exam 13: The Federal Reserve System

Which of the following describes a change that the Federal Reserve made in response to the financial crisis of 2007-2009?

When a check is written on an account at Bank A and deposited in Bank B,the reserve account of __________ will rise and reserves of the entire banking system will __________.

The larger the simple deposit multiplier,

Which of the following is not a function of the Federal Reserve System?

Although the Fed can destroy money,it is impossible for the Fed to create money out of thin air.

The Board of Governors of the Federal Reserve serves on a larger policy-making group called the House Banking Committee.

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

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

When the Fed increases the required reserve ratio,a bank's

Federal Reserve Notes held by the Fed are considered part of the

The Fed is one of the largest departments within the U.S.Treasury.

When a commercial bank borrows from the Fed,

The Federal Reserve System is the

Which of the following will not increase the money supply in the United States?

If banks are currently holding zero excess reserves and the Fed lowers the required reserve ratio,which of the following will happen?

The funds the Fed receives from selling government securities

If the Fed _____________________,the money supply will ultimately __________.

When the Federal Open Market Committee (FOMC)votes on policy,they do so

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

When a check is written on an account at Bank A and deposited in Bank B,the reserve account of will rise and reserves of the entire banking system will .

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

If the Fed ___________,the money supply will ultimately .