Question 1

A commercial bank can receive a loan from another commercial bank in the

Accepted Answer

A) federal funds market. 
B) bank loan market. 
C) Fed market. 
D) discount market. 
A) federal funds market. 
B) bank loan market. 
C) Fed market. 
D) discount market.

Question 2

Exhibit 13-2
  
-Refer to Exhibit 13-2. What word (up or down) should go in the place of blank (1) and blank (2), 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 3

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 4

If the Fed purchases government securities from commercial banks, the reserves of the banking system will immediately

Accepted Answer

A) increase by the amount of the purchase. 
B) increase by more than the amount of the purchase. 
C) remain constant. 
D) decrease by the amount of the purchase. 
E) decrease by more than the amount of the purchase. 
A) increase by the amount of the purchase. 
B) increase by more than the amount of the purchase. 
C) remain constant. 
D) decrease by the amount of the purchase. 
E) decrease by more than the amount of the purchase.

Question 5

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 6

The supply curve of reserves has two kinks in it: one at the _________________ and the other at the ____________________ rate.

Accepted Answer

A) interest rate that the Fed pays on reserves; discount 
B) federal funds rate; discount 
C) prime rate; discount 
D) discount rate; federal funds rate 
A) interest rate that the Fed pays on reserves; discount 
B) federal funds rate; discount 
C) prime rate; discount 
D) discount rate; federal funds rate

Question 7

When the Fed sells government securities to a bank, the securities will be

Accepted Answer

A) an asset for the bank. 
B) a liability for the bank. 
C) both an asset and a liability for the bank. 
D) neither an asset nor a liability for the bank. 
A) an asset for the bank. 
B) a liability for the bank. 
C) both an asset and a liability for the bank. 
D) neither an asset nor a liability for the bank.

Question 8

The interest rate that a commercial bank pays when it borrows from the Fed is the __________ rate.

Accepted Answer

A) discount 
B) exchange 
C) federal 
D) bank 
A) discount 
B) exchange 
C) federal 
D) bank

Question 9

Explain the major differences between the Federal Reserve and the U.S. Treasury.

Accepted Answer

Although many people confuse the Treasur

Question 10

To deal with the financial crisis of 2007-2009, the Fed extended its lender of last resort function to include institutions other than banks.

Accepted Answer

A) True 
 B)False

Question 11

If a bank has zero excess reserves and one of its creditworthy customers applies for a loan, the bank may be able to grant the loan if it can

Accepted Answer

A) apply some of its loan repayments to obtain the funds for the new loan. 
B) obtain extra funds in the federal funds market. 
C) obtain extra funds by borrowing from the Fed. 
D) any of the above 
E) b or c 
A) apply some of its loan repayments to obtain the funds for the new loan. 
B) obtain extra funds in the federal funds market. 
C) obtain extra funds by borrowing from the Fed. 
D) any of the above 
E) b or c

Question 12

Assuming no cash leakages and no excess reserves held by banks, a required reserve ratio of 0 percent would mean that the simple deposit multiplier is

Accepted Answer

A) 0. 
B) 1. 
C) 10. 
D) 100. 
E) infinity. 
A) 0. 
B) 1. 
C) 10. 
D) 100. 
E) infinity.

Question 13

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.

Question 14

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. 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. What dollar value goes in blanks (A) and (B), respectively?.

Accepted Answer

A) $100; $90 
B) $10; $90 
C) $10; $990 
D) $100; $900 
A) $100; $90 
B) $10; $90 
C) $10; $990 
D) $100; $900

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

If the Fed raises the discount rate at the same time it conducts an open market sale, it follows that the money supply will

Accepted Answer

A) fall. 
B) rise. 
C) remain unchanged. 
D) There is not enough information to answer the question. 
A) fall. 
B) rise. 
C) remain unchanged. 
D) There is not enough information to answer the question.

Question 17

The Fed

Accepted Answer

A) clears checks. 
B) holds depository institutions' reserves. 
C) is the government's banker. 
D) supplies Federal Reserve Notes. 
E) all of the above 
A) clears checks. 
B) holds depository institutions' reserves. 
C) is the government's banker. 
D) supplies Federal Reserve Notes. 
E) all of the above

Question 18

Suppose the Fed sells a $50,000 U.S. Treasury security to Martha, a member of the public. If Martha writes a check to the Fed in order to buy this security, the money in her checking account will be transferred to

Accepted Answer

A) the Fed, and now the Fed will have $50,000 more in reserves than it had before. 
B) her bank, and now her bank will have $50,000 more in reserves than it had before. 
C) the Fed, and now it is as if the money doesn't exist. 
D) the Treasury, and now the Treasury will have $50,000 more in reserves than it had before. 
A) the Fed, and now the Fed will have $50,000 more in reserves than it had before. 
B) her bank, and now her bank will have $50,000 more in reserves than it had before. 
C) the Fed, and now it is as if the money doesn't exist. 
D) the Treasury, and now the Treasury will have $50,000 more in reserves than it had before.

Question 19

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 20

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

Exam 13: The Federal Reserve System

A commercial bank can receive a loan from another commercial bank in the

Exhibit 13-2 -Refer to Exhibit 13-2. What word (up or down) should go in the place of blank (1) and blank (2), respectively?

Which of the following is false?

If the Fed purchases government securities from commercial banks, the reserves of the banking system will immediately

The Federal Reserve System is the

The supply curve of reserves has two kinks in it: one at the _________________ and the other at the ____________________ rate.

When the Fed sells government securities to a bank, the securities will be

The interest rate that a commercial bank pays when it borrows from the Fed is the __________ rate.

Explain the major differences between the Federal Reserve and the U.S. Treasury.

To deal with the financial crisis of 2007-2009, the Fed extended its lender of last resort function to include institutions other than banks.

If a bank has zero excess reserves and one of its creditworthy customers applies for a loan, the bank may be able to grant the loan if it can

Assuming no cash leakages and no excess reserves held by banks, a required reserve ratio of 0 percent would mean that the simple deposit multiplier is

The Board of Governors of the Federal Reserve is comprised of

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

If the Fed raises the discount rate at the same time it conducts an open market sale, it follows that the money supply will

The Fed

Suppose the Fed sells a $50,000 U.S. Treasury security to Martha, a member of the public. If Martha writes a check to the Fed in order to buy this security, the money in her checking account will be transferred to

In the federal funds market,

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

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

The supply curve of reserves has two kinks in it: one at the _ and the other at the ____ rate.

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