Exam 13: The Federal Reserve System

When the Fed was created, its governing body was called the Federal Reserve Board, but it was later officially renamed the Board of Governors of the Federal Reserve System.

Suppose that the Fed undertakes an open market purchase of $25 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?

When a bank repays a _________________ loan, the Fed _____________________ the bank's reserve account.

Exhibit 13-1 ​ Assume that the required reserve ratio is 10%, that there are no cash leakages, and that banks hold zero excess reserves. -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, what is the total amount of new checkable deposits?

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

Which of the following statements is false?

One of the Fed's functions is to be the government's banker. This function means that the

There is an inverse relationship between the required reserve ratio and the money supply.

Exhibit 13-2 -Refer to Exhibit 13-2. What word (up or down) should go in the place of blank (5) and blank (6), respectively?

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.

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

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

Suppose that the Fed undertakes an open market purchase of $15 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?

The most important responsibility of the Fed is to

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

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

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

Which of the following will increase the money supply?

Which of the following statements is false?

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