Question 1

Income is measured as

Accepted Answer

A)  average cash holdings per time period. 
B)  change in cash holdings per time period. 
C)  some amount per time period. 
D)  some amount at a point in time. 
A)  average cash holdings per time period. 
B)  change in cash holdings per time period. 
C)  some amount per time period. 
D)  some amount at a point in time.

Question 2

Open market operations affect the supply of reserves.

Accepted Answer

A) True 
 B)False

Question 3

The money supply contracts when the Fed

Accepted Answer

A)  replaces old worn-out notes and bills. 
B)  borrows from the Treasury. 
C)  sells government securities. 
D)  purchases stocks from corporate businesses. 
A)  replaces old worn-out notes and bills. 
B)  borrows from the Treasury. 
C)  sells government securities. 
D)  purchases stocks from corporate businesses.

Question 4

The Federal Reserve System was established

Accepted Answer

A)  at the request of farmers to keep down interest rates. 
B)  because Americans believe in centralization of authority. 
C)  after four severe bank panics between 1873 and 1907. 
D)  as part of the Treasury Department. 
A)  at the request of farmers to keep down interest rates. 
B)  because Americans believe in centralization of authority. 
C)  after four severe bank panics between 1873 and 1907. 
D)  as part of the Treasury Department.

Question 5

Technically, the Federal Reserve district banks are corporations whose stockholders are the

Accepted Answer

A)  state governments in each district. 
B)  citizens of the United States. 
C)  Departments of Treasury and Commerce. 
D)  member banks. 
A)  state governments in each district. 
B)  citizens of the United States. 
C)  Departments of Treasury and Commerce. 
D)  member banks.

Question 6

Open market operations refer to the purchase and sales of stocks listed on the New York Stock Exchange.

Accepted Answer

A) True 
 B)False

Question 7

The reserves supply schedule has a positive slope because

Accepted Answer

A)  the Fed lowers the discount rate as interest rates rise. 
B)  the Fed makes more money available at higher interest rates. 
C)  as interest rates rise, banks will find loans more profitable. 
D)  as interest rates rise, people will demand more loans. 
A)  the Fed lowers the discount rate as interest rates rise. 
B)  the Fed makes more money available at higher interest rates. 
C)  as interest rates rise, banks will find loans more profitable. 
D)  as interest rates rise, people will demand more loans.

Question 8

Which of the following were not actions taken by the Federal Reserve in order to stimulate the economy during the recession of 2007-2009?

Accepted Answer

A)  decreasing the discount rate 
B)  suspending trading on the major stock exchanges 
C)  massive lending to banks 
D)  open market purchases of assets other than Treasury bills 
A)  decreasing the discount rate 
B)  suspending trading on the major stock exchanges 
C)  massive lending to banks 
D)  open market purchases of assets other than Treasury bills

Question 9

The central bank in the United States is known as the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 10

Members of the Board of Governors of the Federal Reserve System are

Accepted Answer

A)  elected by member banks to serve four-year terms. 
B)  appointed by Congress for 14-year terms. 
C)  appointed by the president for 14-year terms. 
D)  appointed by the Supreme Court for lifetime terms. 
A)  elected by member banks to serve four-year terms. 
B)  appointed by Congress for 14-year terms. 
C)  appointed by the president for 14-year terms. 
D)  appointed by the Supreme Court for lifetime terms.

Question 11

Explain how interest rates and bond prices are related to one another.Why is this important for monetary policy?

Accepted Answer

Interest rates and bond prices are inver

Question 12

The principal difference between income and money is that income is a ____ and money is a ____.

Accepted Answer

A)  schedule, curve 
B)  point, line 
C)  stock, flow 
D)  flow, stock 
A)  schedule, curve 
B)  point, line 
C)  stock, flow 
D)  flow, stock

Question 13

Although a corporation that is owned by its member banks, the Federal Reserve System

Accepted Answer

A)  reports directly to the president in an annual report. 
B)  is quite independent of them, and they receive almost none of the Fed's profits. 
C)  is administered by Congress and all its profits are distributed to the member banks. 
D)  turns all its profits over to the state governments of each district bank. 
A)  reports directly to the president in an annual report. 
B)  is quite independent of them, and they receive almost none of the Fed's profits. 
C)  is administered by Congress and all its profits are distributed to the member banks. 
D)  turns all its profits over to the state governments of each district bank.

Question 14

If the price level rises, what will happen to the demand for reserves?

Accepted Answer

A)  It will shift outward. 
B)  It will shift inward. 
C)  It will remain unchanged. 
D)  It depends on what happens to interest rates. 
A)  It will shift outward. 
B)  It will shift inward. 
C)  It will remain unchanged. 
D)  It depends on what happens to interest rates.

Question 15

Table 13-1
EFFECTS OF AN OPEN MARKET TRANSACTION ON THE BALANCE SHEETS OF BANKS AND THE FED (In millions of dollars)
 $\begin{array}{cccc}
\text { BANKS }&&\text { FEDERAL RESERVE SYSTEM }\
\text { ASSETS } & \text { LIAB. } & \text { ASSETS } & \text { LIAB. } \
\text { Reserves }+\$ 10 && \text { U.S. Gov't } & \text { Bank Reserves } \
\text { U.S. Gov't } && \text { Sec. }+\$ 10 & +\$ 10\
\text { Securities - \$10 }
\end{array}$
-In Table 13-1, the Federal Reserve System has

Accepted Answer

A)  sold $10 million in government securities to banks, taking payment in cash. 
B)  sold $10 million in government securities to banks, taking payment from the bank's reserves. 
C)  purchased $10 million in government securities from banks, paying for them with increases in banks' reserves. 
D)  purchased $10 million in government securities from banks, paying for them with new Federal Reserve notes. 
A)  sold $10 million in government securities to banks, taking payment in cash. 
B)  sold $10 million in government securities to banks, taking payment from the bank's reserves. 
C)  purchased $10 million in government securities from banks, paying for them with increases in banks' reserves. 
D)  purchased $10 million in government securities from banks, paying for them with new Federal Reserve notes.

Question 16

Each Federal Reserve district bank is a corporation owned by

Accepted Answer

A)  the member banks in the district. 
B)  the people of the United States. 
C)  the U.S.Department of the Treasury. 
D)  federal securities owners. 
A)  the member banks in the district. 
B)  the people of the United States. 
C)  the U.S.Department of the Treasury. 
D)  federal securities owners.

Question 17

If the Fed buys a T-bill from a commercial bank, how will it pay for the T-bill?

Accepted Answer

A)  It will give the bank new reserves. 
B)  It will write the bank a check. 
C)  It will transfer cash to the bank's vault. 
D)  It will take reserves from another bank. 
A)  It will give the bank new reserves. 
B)  It will write the bank a check. 
C)  It will transfer cash to the bank's vault. 
D)  It will take reserves from another bank.

Question 18

Discount rate policy is most often

Accepted Answer

A)  lowered when market rates rise. 
B)  used to actively control the money supply. 
C)  the Fed's primary tool of monetary control. 
D)  passively changed by the Fed to follow market rates. 
A)  lowered when market rates rise. 
B)  used to actively control the money supply. 
C)  the Fed's primary tool of monetary control. 
D)  passively changed by the Fed to follow market rates.

Question 19

When you use the word income, you mean a value that must be qualified by a length of time.

Accepted Answer

A) True 
 B)False

Question 20

If the Fed buys a U.S.Treasury bill from a member of the public, the banking system has

Accepted Answer

A)  less reserves and the money supply tends to fall. 
B)  more reserves and the money supply tends to fall. 
C)  less reserves and the money supply tends to grow. 
D)  more reserves and the money supply tends to grow. 
A)  less reserves and the money supply tends to fall. 
B)  more reserves and the money supply tends to fall. 
C)  less reserves and the money supply tends to grow. 
D)  more reserves and the money supply tends to grow.

Exam 30: Monetary Policy: Conventional and Unconventional

Income is measured as

Open market operations affect the supply of reserves.

The money supply contracts when the Fed

The Federal Reserve System was established

Technically, the Federal Reserve district banks are corporations whose stockholders are the

Open market operations refer to the purchase and sales of stocks listed on the New York Stock Exchange.

The reserves supply schedule has a positive slope because

Which of the following were not actions taken by the Federal Reserve in order to stimulate the economy during the recession of 2007-2009?

The central bank in the United States is known as the Federal Reserve System.

Members of the Board of Governors of the Federal Reserve System are

Explain how interest rates and bond prices are related to one another.Why is this important for monetary policy?

The principal difference between income and money is that income is a ____ and money is a ____.

Although a corporation that is owned by its member banks, the Federal Reserve System

If the price level rises, what will happen to the demand for reserves?

Each Federal Reserve district bank is a corporation owned by

If the Fed buys a T-bill from a commercial bank, how will it pay for the T-bill?

Discount rate policy is most often

When you use the word income, you mean a value that must be qualified by a length of time.

If the Fed buys a U.S.Treasury bill from a member of the public, the banking system has

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

Filters

The principal difference between income and money is that income is a and money is a .