Exam 13: The Federal Reserve System

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. The loan made by Bank B ends up in Bank C. What dollar value goes in blanks (C) and (D), respectively?.

Which of the following will increase the money supply?

The lower the required reserve ratio,

When the Fed purchases securities from a bank, it __________ reserves and ____________ the money supply.

The Banking Act of 1935 changed the name of the _______________ to the Board of Governors of the Federal Reserve System.

Open market operations are the

The __________ rate is the interest rate one bank pays another bank for a loan.

Controlling the nation's money supply is the most important duty of the Federal Reserve.

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

When one commercial bank borrows from another commercial bank, it pays the __________ rate.

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

A decrease in the required reserve ratio __________ the money supply; an open market purchase __________ the money supply.

Which of the following Fed actions will increase the money supply?

Which of the following is not a function of the Federal Reserve System?

Open market purchases of government securities

The Federal Open Market Committee (FOMC)

Here is how an open market purchase works: The Fed __________ government securities to (from) a commercial bank, which raises the bank's deposits at the __________ and increases the bank's __________.

Which of the following actions is most likely to lead to an increase in the money supply?

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

The major policy-making group within the Fed is the __________ Committee.