Question 1

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 2

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.

Question 3

The Fed

Accepted Answer

A) can examine the books of a member bank without warning. 
B) can examine the books of a member bank after giving advance notice. 
C) can examine the books of a member bank with the bank's permission. 
D) is never allowed to see the books of a privately owned bank. 
A) can examine the books of a member bank without warning. 
B) can examine the books of a member bank after giving advance notice. 
C) can examine the books of a member bank with the bank's permission. 
D) is never allowed to see the books of a privately owned bank.

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Each of the governors of the Federal Reserve System is appointed for a term of __________ years. The Board of Governors is comprised of _____________ members and the FOMC is comprised of __________ members.

Accepted Answer

A) 12; 7; 19 
B) 14; 6; 22 
C) 6; 5; 14 
D) 14; 7; 12 
E) 12; 6; 12 
A) 12; 7; 19 
B) 14; 6; 22 
C) 6; 5; 14 
D) 14; 7; 12 
E) 12; 6; 12

Question 6

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

Accepted Answer

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

Question 7

List and describe five of the eight major functions or responsibilities of the Fed.

Accepted Answer

The eight major functions or responsibil

Question 8

Paper money is printed at the _______________________, but it is issued to commercial banks by the ______________________________.

Accepted Answer

A) Bureau of Engraving and Printing; FOMC 
B) U.S.Mint; 12 Federal Reserve District Banks 
C) Federal Reserve building in Washington; D.C., U.S.Treasury 
D) Bureau of Engraving and Printing; 12 Federal Reserve District Banks 
E) none of the above 
A) Bureau of Engraving and Printing; FOMC 
B) U.S.Mint; 12 Federal Reserve District Banks 
C) Federal Reserve building in Washington; D.C., U.S.Treasury 
D) Bureau of Engraving and Printing; 12 Federal Reserve District Banks 
E) none of the above

Question 9

Exhibit 13-2
  
-Refer to Exhibit 13-2. What word (up or down) should go in the place of blank (3) and blank (4), 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 10

Which of the following is not a monetary policy tool of the Fed?

Accepted Answer

A) open market operations 
B) the required reserve ratio 
C) the discount rate 
D) income tax rates 
A) open market operations 
B) the required reserve ratio 
C) the discount rate 
D) income tax rates

Question 11

Suppose that the Fed undertakes an open market sale, selling $1 million worth of securities to a bank. If the required reserve ratio is 8%, 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; $12.5 
B) decline; $8 
C) decline; $12.5 
D) rise; $8 
A) rise; $12.5 
B) decline; $8 
C) decline; $12.5 
D) rise; $8

Question 12

When the Federal Open Market Committee (FOMC) votes on policy, it does so in the following order: the chair votes first, the vice chair votes second, and the remaining FOMC members vote based on their seniority at the Fed.

Accepted Answer

A) True 
 B)False

Question 13

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 14

The Federal Open Market Committee (FOMC) meets on the first Tuesday of each month.

Accepted Answer

A) True 
 B)False

Question 15

If the Fed were to increase the discount rate so that it was much higher than the federal funds rate, eventually

Accepted Answer

A) reserves would decrease and the money supply would decrease. 
B) reserves would increase and the money supply would increase. 
C) reserves would decrease and the money supply would increase. 
D) reserves would increase and the money supply would decrease. 
E) there is no impact on reserves or the money supply. 
A) reserves would decrease and the money supply would decrease. 
B) reserves would increase and the money supply would increase. 
C) reserves would decrease and the money supply would increase. 
D) reserves would increase and the money supply would decrease. 
E) there is no impact on reserves or the money supply.

Question 16

When the Fed is acting as fiscal agent for the Treasury, it will

Accepted Answer

A) buy securities from the Treasury, thereby providing the Treasury with money to pay the government's bills. 
B) receive and process bids for Treasury securities in preparation for the Treasury's auction of securities. 
C) serve as a lender of last resort. 
D) supply the Treasury with paper money whenever the Treasury does not have enough funds to meet its bills. 
E) supervise the Treasury by examining its books. 
A) buy securities from the Treasury, thereby providing the Treasury with money to pay the government's bills. 
B) receive and process bids for Treasury securities in preparation for the Treasury's auction of securities. 
C) serve as a lender of last resort. 
D) supply the Treasury with paper money whenever the Treasury does not have enough funds to meet its bills. 
E) supervise the Treasury by examining its books.

Question 17

To decrease the money supply, the Fed may

Accepted Answer

A) buy government securities in the open market. 
B) decrease the discount rate. 
C) increase the required reserve ratio. 
D) b and c 
E) all of the above 
A) buy government securities in the open market. 
B) decrease the discount rate. 
C) increase the required reserve ratio. 
D) b and c 
E) all of the above

Question 18

If the federal funds rate falls below the discount rate, banks will decrease their borrowings from __________ and __________ their borrowings from __________. It follows that when one bank borrows from __________, reserves in the banking system __________.

Accepted Answer

A) other banks; increase; the Fed; another bank; remain unchanged 
B) the Fed; decrease; other banks; another bank; remain unchanged 
C) other banks; increase; the U.S.Treasury; the Treasury; increase 
D) the Fed; increase; other banks; another bank; remain unchanged 
E) none of the above 
A) other banks; increase; the Fed; another bank; remain unchanged 
B) the Fed; decrease; other banks; another bank; remain unchanged 
C) other banks; increase; the U.S.Treasury; the Treasury; increase 
D) the Fed; increase; other banks; another bank; remain unchanged 
E) none of the above

Question 19

If reserves increase by $50 billion and the required reserve ratio is 8%, 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) $40 billion 
B) $400 billion 
C) $62.5 billion 
D) $625 billion 
A) $40 billion 
B) $400 billion 
C) $62.5 billion 
D) $625 billion

Question 20

To expand the money supply the Fed could lower the required reserve ratio, lower the discount rate, or purchase government securities.

Accepted Answer

A) True 
 B)False

Exam 13: The Federal Reserve System

The discount rate is the interest rate

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

The Fed

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

Each of the governors of the Federal Reserve System is appointed for a term of __________ years. The Board of Governors is comprised of _____________ members and the FOMC is comprised of __________ members.

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

List and describe five of the eight major functions or responsibilities of the Fed.

Paper money is printed at the _______________________, but it is issued to commercial banks by the ______________________________.

Exhibit 13-2 -Refer to Exhibit 13-2. What word (up or down) should go in the place of blank (3) and blank (4), respectively?

Which of the following is not a monetary policy tool of the Fed?

When the Federal Open Market Committee (FOMC) votes on policy, it does so in the following order: the chair votes first, the vice chair votes second, and the remaining FOMC members vote based on their seniority at the Fed.

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

The Federal Open Market Committee (FOMC) meets on the first Tuesday of each month.

If the Fed were to increase the discount rate so that it was much higher than the federal funds rate, eventually

When the Fed is acting as fiscal agent for the Treasury, it will

To decrease the money supply, the Fed may

If the federal funds rate falls below the discount rate, banks will decrease their borrowings from __________ and __________ their borrowings from __________. It follows that when one bank borrows from __________, reserves in the banking system __________.

If reserves increase by $50 billion and the required reserve ratio is 8%, 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?

To expand the money supply the Fed could lower the required reserve ratio, lower the discount rate, or purchase government securities.

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II 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

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice 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

The Economic Case for and Against Government Five Topics Considered

Stocks Bonds Futures and Options

Filters

Each of the governors of the Federal Reserve System is appointed for a term of ____ years. The Board of Governors is comprised of _ members and the FOMC is comprised of ____ members.

Paper money is printed at the _, but it is issued to commercial banks by the ________.

If the Fed ___________, the money supply will ultimately .

If the federal funds rate falls below the discount rate, banks will decrease their borrowings from and their borrowings from . It follows that when one bank borrows from , reserves in the banking system __.