Question 1

The demand for reserves curve in the federal funds market is

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  upward sloping. 
D)  downward sloping. 
A)  horizontal. 
B)  vertical. 
C)  upward sloping. 
D)  downward sloping.

Question 2

A bank is less likely to borrow from the central bank when the __________ falls relative to the __________.

Accepted Answer

A)  discount rate; required reserve ratio 
B)  excess reserve; required reserves 
C)  discount rate; federal funds rate 
D)  federal funds rate; discount rate 
A)  discount rate; required reserve ratio 
B)  excess reserve; required reserves 
C)  discount rate; federal funds rate 
D)  federal funds rate; discount rate

Question 3

When the Fed sells government securities to a bank,the

Accepted Answer

A)  bank's reserves increase. 
B)  bank's reserves decrease. 
C)  bank's reserves do not change. 
D)  securities are an asset for the bank. 
E)  b and d 
A)  bank's reserves increase. 
B)  bank's reserves decrease. 
C)  bank's reserves do not change. 
D)  securities are an asset for the bank. 
E)  b and d

Question 4

In the federal funds market,

Accepted Answer

A)  banks make loans to the Fed. 
B)  banks make loans to other banks. 
C)  the Fed makes short-term loans to banks. 
D)  the Fed makes long-term loans to banks. 
A)  banks make loans to the Fed. 
B)  banks make loans to other banks. 
C)  the Fed makes short-term loans to banks. 
D)  the Fed makes long-term loans to banks.

Question 5

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

Accepted Answer

A)  St. Louis, Missouri 
B)  Richmond, Virginia 
C)  Atlanta, Georgia 
D)  San Francisco, California 
E)  all of the above 
A)  St. Louis, Missouri 
B)  Richmond, Virginia 
C)  Atlanta, Georgia 
D)  San Francisco, California 
E)  all of the above

Question 6

The federal funds rate and the quantity demanded of reserves have a(n)____________ relationship. This is because as the federal funds rate moves down,it becomes _______________ for banks to hold reserves,encouraging banks to hold ____________ in reserves to guard against checkable deposit withdrawals.

Accepted Answer

A)  inverse; more expensive; more 
B)  direct; more expensive; less 
C)  inverse; cheaper; more 
D)  direct; cheaper; more 
A)  inverse; more expensive; more 
B)  direct; more expensive; less 
C)  inverse; cheaper; more 
D)  direct; cheaper; more

Question 7

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

Accepted Answer

A)  supplying the economy with paper money 
B)  providing check-clearing services 
C)  supervising member banks 
D)  serving as fiscal agent for the Treasury 
E)  All of the above are major responsibilities of the Fed. 
A)  supplying the economy with paper money 
B)  providing check-clearing services 
C)  supervising member banks 
D)  serving as fiscal agent for the Treasury 
E)  All of the above are major responsibilities of the Fed.

Question 8

Discuss in detail the three things mentioned in the text that the Federal Reserve did to deal with the 2007-2009 financial crisis.

Accepted Answer

To deal with the financial crisis of 200

Question 9

The chairman of the Board of Governors of the Fed is designated by ____________________ to serve a _______ year term as chairman.

Accepted Answer

A)  the President; four 
B)  Congress; fourteen 
C)  the President; twelve 
D)  Congress; four 
A)  the President; four 
B)  Congress; fourteen 
C)  the President; twelve 
D)  Congress; four

Question 10

A discount loan is a loan the Federal Reserve makes to a commercial bank.

Accepted Answer

A) True 
 B)False

Question 11

The simple deposit multiplier is

Accepted Answer

A)  the reciprocal of the required reserve ratio. 
B)  always 1. 
C)  the same as the required reserve ratio. 
D)  different from bank to bank even if the required reserve ratio is the same for all banks. 
A)  the reciprocal of the required reserve ratio. 
B)  always 1. 
C)  the same as the required reserve ratio. 
D)  different from bank to bank even if the required reserve ratio is the same for all banks.

Question 12

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,and the loan made by bank C ends up in Bank D. What dollar value goes in blanks (E)and (F),respectively?.

Accepted Answer

A)  $729; $81 
B)  $81; $729 
C)  $10; $800 
D)  $700; $110 
A)  $729; $81 
B)  $81; $729 
C)  $10; $800 
D)  $700; $110

Question 13

Suppose that the Fed undertakes an open market purchase of $5 million worth of securities from a bank. If 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)  $4.17 million 
B)  $7.95 million 
C)  $5.68 million 
D)  $41.67 million 
A)  $4.17 million 
B)  $7.95 million 
C)  $5.68 million 
D)  $41.67 million

Question 14

When commercial banks need more Federal Reserve Notes,

Accepted Answer

A)  they call the Bureau of Engraving and Printing, which delivers the requested amount. 
B)  they call the Board of Governors of the Fed, which delivers the requested amount. 
C)  they ask their customers to exchange their Federal Reserve Notes for U.S. Treasury securities. 
D)  they call the Treasury, which delivers the requested amount. 
E)  they call their Federal Reserve District Bank, which delivers the requested amount. 
A)  they call the Bureau of Engraving and Printing, which delivers the requested amount. 
B)  they call the Board of Governors of the Fed, which delivers the requested amount. 
C)  they ask their customers to exchange their Federal Reserve Notes for U.S. Treasury securities. 
D)  they call the Treasury, which delivers the requested amount. 
E)  they call their Federal Reserve District Bank, which delivers the requested amount.

Question 15

When the federal government incurs a budget deficit,it will

Accepted Answer

A)  mint more coins and spend them. 
B)  create money out of thin air. 
C)  impose a special tax on all income earners. 
D)  borrow money from the Federal Reserve System by issuing securities. 
E)  borrow money from the public by issuing government securities. 
A)  mint more coins and spend them. 
B)  create money out of thin air. 
C)  impose a special tax on all income earners. 
D)  borrow money from the Federal Reserve System by issuing securities. 
E)  borrow money from the public by issuing government securities.

Question 16

Which of the following is false?

Accepted Answer

A)  Under free banking, banks would not be subject to any special regulations beyond those which are required of other businesses. 
B)  Under free banking, banks would be allowed to issue their own currency. 
C)  The government would largely control the actions of banks under free banking. 
D)  The market forces would raise or lower the money supply under free banking. 
A)  Under free banking, banks would not be subject to any special regulations beyond those which are required of other businesses. 
B)  Under free banking, banks would be allowed to issue their own currency. 
C)  The government would largely control the actions of banks under free banking. 
D)  The market forces would raise or lower the money supply under free banking.

Question 17

If the Fed lowers the discount rate at the same time it conducts an open market sale,it follows that

Accepted Answer

A)  the money supply will fall. 
B)  the money supply will rise. 
C)  the money supply will remain unchanged. 
D)  cash leakages will rise. 
E)  There is not enough information to answer this question. 
A)  the money supply will fall. 
B)  the money supply will rise. 
C)  the money supply will remain unchanged. 
D)  cash leakages will rise. 
E)  There is not enough information to answer this question.

Question 18

If the Fed purchases government securities from Bank A,__________ in the banking system __________ and the money supply __________.

Accepted Answer

A)  reserves; fall; falls 
B)  reserves; rise; falls 
C)  reserves; rise; rises 
D)  excess reserves; fall; rises 
E)  excess reserves; rise; falls 
A)  reserves; fall; falls 
B)  reserves; rise; falls 
C)  reserves; rise; rises 
D)  excess reserves; fall; rises 
E)  excess reserves; rise; falls

Question 19

When we speak of the Fed's responsibility to supervise member banks,we are saying that the

Accepted Answer

A)  Fed's advisory board will help member banks manage their assets and liabilities. 
B)  Fed's Open Market Committee will advise member banks regarding the purchase and sale of government securities. 
C)  Fed's Board of Governors will advise member banks regarding the appropriate interest rates to be charged on various loans. 
D)  Fed will advise member banks regarding the nature of loans and compliance with regulations. 
E)  Fed will advise member banks about the proper control of each individual bank's money supply. 
A)  Fed's advisory board will help member banks manage their assets and liabilities. 
B)  Fed's Open Market Committee will advise member banks regarding the purchase and sale of government securities. 
C)  Fed's Board of Governors will advise member banks regarding the appropriate interest rates to be charged on various loans. 
D)  Fed will advise member banks regarding the nature of loans and compliance with regulations. 
E)  Fed will advise member banks about the proper control of each individual bank's money supply.

Question 20

The Board of Governors of the Federal Reserve is comprised of

Accepted Answer

A)  seven persons, each appointed to a seven-year term. 
B)  seven persons, each appointed to a fourteen-year term. 
C)  fourteen persons, each appointed to a seven-year term. 
D)  twelve persons, each appointed to a seven-year term. 
E)  twelve persons, each appointed to a fourteen-year term. 
A)  seven persons, each appointed to a seven-year term. 
B)  seven persons, each appointed to a fourteen-year term. 
C)  fourteen persons, each appointed to a seven-year term. 
D)  twelve persons, each appointed to a seven-year term. 
E)  twelve persons, each appointed to a fourteen-year term.

Exam 13: The Federal Reserve System

The demand for reserves curve in the federal funds market is

A bank is less likely to borrow from the central bank when the __________ falls relative to the __________.

When the Fed sells government securities to a bank,the

In the federal funds market,

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

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

Discuss in detail the three things mentioned in the text that the Federal Reserve did to deal with the 2007-2009 financial crisis.

The chairman of the Board of Governors of the Fed is designated by ____________________ to serve a _______ year term as chairman.

A discount loan is a loan the Federal Reserve makes to a commercial bank.

The simple deposit multiplier is

Suppose that the Fed undertakes an open market purchase of $5 million worth of securities from a bank. If 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 commercial banks need more Federal Reserve Notes,

When the federal government incurs a budget deficit,it will

Which of the following is false?

If the Fed lowers the discount rate at the same time it conducts an open market sale,it follows that

If the Fed purchases government securities from Bank A,__________ in the banking system __________ and the money supply __________.

When we speak of the Fed's responsibility to supervise member banks,we are saying that the

The Board of Governors of the Federal Reserve is comprised of

What Economics Is About

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Macroeconomic Measurements: Prices and Unemployment

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Filters

A bank is less likely to borrow from the central bank when the falls relative to the .

The chairman of the Board of Governors of the Fed is designated by ______________ to serve a _ year term as chairman.

If the Fed purchases government securities from Bank A, in the banking system and the money supply __.