Exam 13: The Federal Reserve System

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.

Under a free banking arrangement, when people increase the demand for money a process would begin which would end with a(n) _________________ in the supply of money, ______________ government intervention.

The lower the discount rate relative to the federal funds rate, the more likely a commercial bank will borrow from

An open market __________ by the Fed increases the money supply; a(n) __________ in the required reserve ratio increases the money supply.

Why does the president of the Federal Reserve Bank of New York hold a permanent seat on the FOMC?

The funds the Fed receives from selling government securities

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

If there are no excess reserves in the banking system and the Fed lowers the required reserve ratio, it follows that banks will now have __________, which they can use to extend loans and create new __________.

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

The larger the simple deposit multiplier,

Summarize the history of how the Federal Reserve came to have twelve districts.

The Board of Governors of the Federal Reserve

When a bank obtains a loan from the Fed, it follows that the

The smaller the required reserve ratio, the larger the simple deposit multiplier.

There are __________ Federal Reserve Districts.

An open market purchase by the Fed

If reserves increase by $29 million and the required reserve ratio is 11%, 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 United States is divided into __________ Federal Reserve districts, each with a district bank.

Suppose the Fed forecasts a reduction in cash leakages. It might offset the effect of this on the money supply by

The boundaries of the Federal Reserve districts were determined based on trade patterns between cities.