Question 1

Refer to the given market-for-money diagrams. The total demand for money is shown by

Accepted Answer

A)  $D _ { 1 }$ 
B)  $\mathrm { D } _ { 2 }$ 
C)  $D _ { 3 }$ 
D)  S. 
A)  $D _ { 1 }$ 
B)  $\mathrm { D } _ { 2 }$ 
C)  $D _ { 3 }$ 
D)  S.

Question 2

Which of the following is correct? When the Federal Reserve buys government securities from the public, the money supply

Accepted Answer

A)  contracts and commercial bank reserves increase. 
B)  expands and commercial bank reserves decrease. 
C)  contracts and commercial bank reserves decrease. 
D)  expands and commercial bank reserves increase. 
A)  contracts and commercial bank reserves increase. 
B)  expands and commercial bank reserves decrease. 
C)  contracts and commercial bank reserves decrease. 
D)  expands and commercial bank reserves increase.

Question 3

Explain what is meant by a collateralized money loan. Provide an example.

Accepted Answer

A money loan is said to be collateralize

Question 4

Assume that U.S. National Bank has no excess reserves and that the reserve ratio is 20 percent. If U.S. National borrows $5 million from a Federal Reserve Bank through a repo transaction, it can expand its loans by a maximum of

Accepted Answer

A)  $5 million. 
B)  $1 million. 
C)  $25 million. 
D)  $0. 
A)  $5 million. 
B)  $1 million. 
C)  $25 million. 
D)  $0.

Question 5

The interest rate that banks charge one another on overnight loans is called the

Accepted Answer

A)  discount rate. 
B)  prime lending rate. 
C)  overnight lending rate. 
D)  federal funds rate. 
A)  discount rate. 
B)  prime lending rate. 
C)  overnight lending rate. 
D)  federal funds rate.

Question 6

Refer to the given market-for-money diagrams. The asset demand for money is shown by

Accepted Answer

A)  $D _ { 1 }$ 
B)  $D _ { 2 }$ 
C)  $D _ { 3 }$ 
D)  S. 
A)  $D _ { 1 }$ 
B)  $D _ { 2 }$ 
C)  $D _ { 3 }$ 
D)  S.

Question 7

Accepted Answer

A)  increase the interest rate from 3 percent to 9 percent. 
B)  increase the money supply from $100 to $120. 
C)  decrease the money supply from $120 to $100. 
D)  decrease the interest rate from 9 percent to 3 percent. 
A)  increase the interest rate from 3 percent to 9 percent. 
B)  increase the money supply from $100 to $120. 
C)  decrease the money supply from $120 to $100. 
D)  decrease the interest rate from 9 percent to 3 percent.

Question 8

Which of the following tools of monetary policy is ﬂexible and able to affect bank reserves quickly and by relatively speciﬁc amounts?

Accepted Answer

A)  the discount rate 
B)  the reserve ratio 
C)  open-market operations 
D)  the federal funds rate 
A)  the discount rate 
B)  the reserve ratio 
C)  open-market operations 
D)  the federal funds rate

Question 9

Upon which of the following industries is a restrictive monetary policy likely to be most effective?

Accepted Answer

A)  furniture 
B)  clothing 
C)  food processing 
D)  residential construction 
A)  furniture 
B)  clothing 
C)  food processing 
D)  residential construction

Question 10

In traditional monetary policy, if the Fed targeted a lower federal funds rate, then it was pursuing a restrictive monetary policy.

Accepted Answer

A) True 
 B)False

Question 11

The increase in excess reserves that occurred as a result of the mortgage debt crisis

Accepted Answer

A)  was offset by restrictive monetary policy. 
B)  rendered open-market operations ineffective. 
C)  caused the Fed to set a negative nominal interest rate target for the federal funds rate. 
D)  prevented the Fed from taking any further action to increase the money supply. 
A)  was offset by restrictive monetary policy. 
B)  rendered open-market operations ineffective. 
C)  caused the Fed to set a negative nominal interest rate target for the federal funds rate. 
D)  prevented the Fed from taking any further action to increase the money supply.

Question 12

Which of the following would not be a consequence of negative interest rates?

Accepted Answer

A)  People's deposits in banks would have shrinking balances over time. 
B)  Reduced bank reserves that could cause a contraction in the economy. 
C)  People would want to put more money in banks. 
D)  People would rather hold cash than bank deposits. 
A)  People's deposits in banks would have shrinking balances over time. 
B)  Reduced bank reserves that could cause a contraction in the economy. 
C)  People would want to put more money in banks. 
D)  People would rather hold cash than bank deposits.

Question 13

Which of the following actions by the Fed would cause the money supply to increase?

Accepted Answer

A)  purchases of government bonds from banks 
B)  an increase in the reserve requirement 
C)  an increase in the discount rate 
D)  sales of government bonds to the public 
A)  purchases of government bonds from banks 
B)  an increase in the reserve requirement 
C)  an increase in the discount rate 
D)  sales of government bonds to the public

Question 14

$$\begin{array} { | l | c | } 
\hline { \text { Item in Balance Sheet } } & \text { Amount } \
\hline \text { 1) Treasury Deposits } & \$ 7 \
\hline \text { 2) Reserves of Commercial Banks } & 31 \
\hline \text { 3) Federal Reserve Notes } & 275 \
\hline \text { 4) Loans to Commercial Banks } & 1 \
\hline \text { 5) All Other Assets } & 64 \
\hline \text { 6) Securities } & 255 \
\hline \text { 7) All Other Liabilities and Net Worth } & 7 \
\hline
\end{array}$$ The table shows items and ?gures taken from a consolidated balance sheet of the 12 Federal Reserve Banks. All ?gures are in billions of dollars. In this balance sheet, there would be assets of

Accepted Answer

A)  $246 billion. 
B)  $313 billion. 
C)  $320 billion. 
D)  $387 billion. 
A)  $246 billion. 
B)  $313 billion. 
C)  $320 billion. 
D)  $387 billion.

Question 15

When the reserve requirement is increased,

Accepted Answer

A)  required reserves are changed into excess reserves. 
B)  the excess reserves of banks are increased. 
C)  a single commercial bank can no longer lend dollar-for-dollar with its excess reserves. 
D)  the excess reserves of banks are reduced. 
A)  required reserves are changed into excess reserves. 
B)  the excess reserves of banks are increased. 
C)  a single commercial bank can no longer lend dollar-for-dollar with its excess reserves. 
D)  the excess reserves of banks are reduced.

Question 16

The major purpose of the Federal Reserve buying government securities in open-market operations is to

Accepted Answer

A)  increase interest rates. 
B)  raise money for government spending. 
C)  reduce the excess reserves of banks. 
D)  allow banks to increase their lending. 
A)  increase interest rates. 
B)  raise money for government spending. 
C)  reduce the excess reserves of banks. 
D)  allow banks to increase their lending.

Question 17

Monetary policy actions by the Fed are

Accepted Answer

A)  more effective in a restrictive direction than they are in an expansionary direction. 
B)  more effective in an expansionary direction than they are in a restrictive direction. 
C)  equally effective in both expansionary and restrictive directions. 
D)  only effective when coupled with ﬁscal policy actions. 
A)  more effective in a restrictive direction than they are in an expansionary direction. 
B)  more effective in an expansionary direction than they are in a restrictive direction. 
C)  equally effective in both expansionary and restrictive directions. 
D)  only effective when coupled with ﬁscal policy actions.

Question 18

Open-market operations include

Accepted Answer

A)  changes in the reserve ratio. 
B)  repos and reverse repos. 
C)  paying interest on excess reserves held at Federal Reserve Banks. 
D)  changes in the discount rate. 
A)  changes in the reserve ratio. 
B)  repos and reverse repos. 
C)  paying interest on excess reserves held at Federal Reserve Banks. 
D)  changes in the discount rate.

Question 19

When commercial banks borrow from the Federal Reserve Banks, they decrease their excess reserves and their money-creating
potential.

Accepted Answer

A) True 
 B)False

Question 20

Accepted Answer

A)  an increase in the discount rate 
B)  purchases of U.S. securities by the Fed in the open market 
C)  sales of U.S. securities by the Fed in the open market 
D)  an increase in the reserve ratio 
A)  an increase in the discount rate 
B)  purchases of U.S. securities by the Fed in the open market 
C)  sales of U.S. securities by the Fed in the open market 
D)  an increase in the reserve ratio

Refer to the given market-for-money diagrams. The total demand for money is shown by

Which of the following is correct? When the Federal Reserve buys government securities from the public, the money supply

Explain what is meant by a collateralized money loan. Provide an example.

Assume that U.S. National Bank has no excess reserves and that the reserve ratio is 20 percent. If U.S. National borrows $5 million from a Federal Reserve Bank through a repo transaction, it can expand its loans by a maximum of

The interest rate that banks charge one another on overnight loans is called the

Refer to the given market-for-money diagrams. The asset demand for money is shown by

Which of the following tools of monetary policy is ﬂexible and able to affect bank reserves quickly and by relatively speciﬁc amounts?

Upon which of the following industries is a restrictive monetary policy likely to be most effective?

In traditional monetary policy, if the Fed targeted a lower federal funds rate, then it was pursuing a restrictive monetary policy.

The increase in excess reserves that occurred as a result of the mortgage debt crisis

Which of the following would not be a consequence of negative interest rates?

Which of the following actions by the Fed would cause the money supply to increase?

When the reserve requirement is increased,

The major purpose of the Federal Reserve buying government securities in open-market operations is to

Monetary policy actions by the Fed are

Open-market operations include

When commercial banks borrow from the Federal Reserve Banks, they decrease their excess reserves and their money-creating potential.

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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Exam 16: Interest Rates and Monetary Policy

Refer to the given market-for-money diagrams. The total demand for money is shown by

Which of the following is correct? When the Federal Reserve buys government securities from the public, the money supply

Explain what is meant by a collateralized money loan. Provide an example.

Assume that U.S. National Bank has no excess reserves and that the reserve ratio is 20 percent. If U.S. National borrows $5 million from a Federal Reserve Bank through a repo transaction, it can expand its loans by a maximum of

The interest rate that banks charge one another on overnight loans is called the

Refer to the given market-for-money diagrams. The asset demand for money is shown by

Which of the following tools of monetary policy is ﬂexible and able to affect bank reserves quickly and by relatively speciﬁc amounts?

Upon which of the following industries is a restrictive monetary policy likely to be most effective?

In traditional monetary policy, if the Fed targeted a lower federal funds rate, then it was pursuing a restrictive monetary policy.

The increase in excess reserves that occurred as a result of the mortgage debt crisis

Which of the following would not be a consequence of negative interest rates?

Which of the following actions by the Fed would cause the money supply to increase?

When the reserve requirement is increased,

The major purpose of the Federal Reserve buying government securities in open-market operations is to

Monetary policy actions by the Fed are

Open-market operations include

When commercial banks borrow from the Federal Reserve Banks, they decrease their excess reserves and their money-creating potential.

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters