Question 1

During the Christmas holiday season, the Fed increases the supply of currency to:

Accepted Answer

A)  ensure that checks are cleared quickly. 
B)  meet the demand for cash withdrawals from banks. 
C)  stabilize the value of the dollar against other currencies. 
D)  decrease the value of bonds. 
E)  control inflation. 
A)  ensure that checks are cleared quickly. 
B)  meet the demand for cash withdrawals from banks. 
C)  stabilize the value of the dollar against other currencies. 
D)  decrease the value of bonds. 
E)  control inflation.

Question 2

For how long is the chairman of the board of governors of the Fed appointed and by whom?

Accepted Answer

A)  Appointed for two years by all the other governors 
B)  Appointed for two years by the governor of the New York district branch 
C)  Appointed for two years by the president of the United States 
D)  Appointed for four years by all the other governors 
E)  Appointed for four years by the president of the United States 
A)  Appointed for two years by all the other governors 
B)  Appointed for two years by the governor of the New York district branch 
C)  Appointed for two years by the president of the United States 
D)  Appointed for four years by all the other governors 
E)  Appointed for four years by the president of the United States

Question 3

Increased demand for U.S. products by foreign residents will lead to a depreciation of the U.S. dollar relative to foreign currencies.

Accepted Answer

A) True 
 B)False

Question 4

What is the current market price of a bond that pays $200 per year indefinitely and has a current yield of 16 percent?

Accepted Answer

A)  $800 
B)  $1250 
C)  $3,200 
D)  $8,000 
E)  $12,500 
A)  $800 
B)  $1250 
C)  $3,200 
D)  $8,000 
E)  $12,500

Question 5

The Board of Governors is the body responsible for setting and implementing monetary policy targets for the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 6

Suppose the U.S. dollar appreciates in value against the Australian dollar, and the Fed intervenes in the foreign exchange market by using U.S. dollars to buy Australian dollars. The Fed could sterilize the expansionary effect of this intervention by:

Accepted Answer

A)  buying U.S. dollars in the foreign exchange market. 
B)  buying U.S. government bonds in the domestic open market. 
C)  selling Australian dollars in the foreign exchange market. 
D)  selling U.S. government bonds in the domestic open market. 
E)  buying Australian dollars in the foreign exchange market. 
A)  buying U.S. dollars in the foreign exchange market. 
B)  buying U.S. government bonds in the domestic open market. 
C)  selling Australian dollars in the foreign exchange market. 
D)  selling U.S. government bonds in the domestic open market. 
E)  buying Australian dollars in the foreign exchange market.

Question 7

Which of the following is an intermediate target of the Fed's policies?

Accepted Answer

A)  Exchange rate 
B)  Unemployment 
C)  Money supply 
D)  Interest rate 
E)  Inflation 
A)  Exchange rate 
B)  Unemployment 
C)  Money supply 
D)  Interest rate 
E)  Inflation

Question 8

The Fed has set a uniform reserve requirement of 3 percent for all deposits in the U.S. banking system.

Accepted Answer

A) True 
 B)False

Question 9

Sterilization occurs when a central bank offsets the effects of expansionary monetary policy through foreign exchange market intervention.

Accepted Answer

A) True 
 B)False

Question 10

The quantity theory of money asserts that:

Accepted Answer

A)  changes in nominal GDP are inversely related to changes in the velocity of money. 
B)  changes in money supply are positively related to changes in the velocity of money. 
C)  changes in the money supply are unrelated to changes in the price level. 
D)  changes in the output level are unrelated to changes in the price level. 
E)  changes in the money supply are directly related to changes in nominal GDP. 
A)  changes in nominal GDP are inversely related to changes in the velocity of money. 
B)  changes in money supply are positively related to changes in the velocity of money. 
C)  changes in the money supply are unrelated to changes in the price level. 
D)  changes in the output level are unrelated to changes in the price level. 
E)  changes in the money supply are directly related to changes in nominal GDP.

Question 11

The Federal Reserve System divides the U.S. into _____ districts.

Accepted Answer

A)  5 
B)  21 
C)  6 
D)  12 
E)  17 
A)  5 
B)  21 
C)  6 
D)  12 
E)  17

Question 12

Which of the following government agencies oversees monetary policy in the U.S.?

Accepted Answer

A)  The Federal Reserve System 
B)  Congress 
C)  The Treasury Department 
D)  The Federal Trade Commission 
E)  The Department of Commerce 
A)  The Federal Reserve System 
B)  Congress 
C)  The Treasury Department 
D)  The Federal Trade Commission 
E)  The Department of Commerce

Question 13

Which of the following statements is incorrect?

Accepted Answer

A)  The Federal Reserve Open Market Committee determines fiscal policy actions for the Congress. 
B)  The Board of Governors of the Federal Reserve is appointed, not elected. 
C)  The Federal Reserve System was designed to be independent of the executive branch of the government. 
D)  The chairman of the Board of Governors serves a four-year term. 
E)  The Federal Reserve districts are distributed geographically to serve the particular interests of each region. 
A)  The Federal Reserve Open Market Committee determines fiscal policy actions for the Congress. 
B)  The Board of Governors of the Federal Reserve is appointed, not elected. 
C)  The Federal Reserve System was designed to be independent of the executive branch of the government. 
D)  The chairman of the Board of Governors serves a four-year term. 
E)  The Federal Reserve districts are distributed geographically to serve the particular interests of each region.

Question 14

When the FOMC sets a monetary policy, it first identifies its intermediate target and then works accordingly to achieve its ultimate goal.

Accepted Answer

A) True 
 B)False

Question 15

The Fed controls the money supply in the U.S. economy largely through its ability to influence bank reserves and the money creating power of commercial banks.

Accepted Answer

A) True 
 B)False

Question 16

The table given below shows the assets and liabilities of the National Bank. Assume that this is the only bank in the economy.
Table 13.2
 $\begin{array}{c}
\text {  Balance Sheet of National Bank }\
\quad\quad\quad\text { Assets } \quad\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }\
\begin{array}{|c|c|c|c|}
\hline\text { Vault Cash } & \$ 1,725 & \text { Deposits } & \$ 5,450 \
\text { Deposit in Fed } & \$ 425 & & \
\text { Loans } & \$ 3,300 & & \
\hline \text { Total Assets } & \$ 5,450 & \text { Total Liabilities } & \$ 5,450\
\hline
\end{array}\end{array}$

-Refer to Table 13.2. If the Fed increased the reserve requirement from 10 percent to 25 percent, the money supply in the whole banking system could now potentially:

Accepted Answer

A)  decrease by $12,900. 
B)  decrease by $1,272.50. 
C)  increase by $7,875. 
D)  decrease by $7,875. 
E)  increase by $3,150. 
A)  decrease by $12,900. 
B)  decrease by $1,272.50. 
C)  increase by $7,875. 
D)  decrease by $7,875. 
E)  increase by $3,150.

Question 17

When the Federal Open Market Committee buys government securities:

Accepted Answer

A)  the reserve requirement of banks decreases. 
B)  the reserve deposits of banks decrease. 
C)  the excess reserves of banks increase. 
D)  the federal funds rate increases. 
E)  the legal reserves of banks decrease. 
A)  the reserve requirement of banks decreases. 
B)  the reserve deposits of banks decrease. 
C)  the excess reserves of banks increase. 
D)  the federal funds rate increases. 
E)  the legal reserves of banks decrease.

Question 18

The table given below shows the assets and liabilities of the National Bank. Assume that this is the only bank in the economy.
Table 13.2
 $\begin{array}{c}
\text {  Balance Sheet of National Bank }\
\quad\quad\quad\text { Assets } \quad\quad\quad\quad\quad\quad\quad\quad \text { Liabilities }\
\begin{array}{|c|c|c|c|}
\hline\text { Vault Cash } & \$ 1,725 & \text { Deposits } & \$ 5,450 \
\text { Deposit in Fed } & \$ 425 & & \
\text { Loans } & \$ 3,300 & & \
\hline \text { Total Assets } & \$ 5,450 & \text { Total Liabilities } & \$ 5,450\
\hline
\end{array}\end{array}$

-Refer to Table 13.2. If the reserve requirement is 10 percent, calculate the maximum amount of loanable funds available with the bank.

Accepted Answer

A)  $1,605 
B)  $1,180 
C)  $545 
D)  $5,450 
E)  $2,150 
A)  $1,605 
B)  $1,180 
C)  $545 
D)  $5,450 
E)  $2,150

Question 19

Identify the correct statement.

Accepted Answer

A)  District banks of the Fed hold reserves in the form of deposits at the Fed. 
B)  Commercial banks in each district make loans to the Fed. 
C)  The Fed sells U.S. government securities for the U.S. Treasury. 
D)  The district banks of the Fed print money and supply currency to the Fed. 
E)  The Fed holds the reserves of the commercial banks but it does not issues checks. 
A)  District banks of the Fed hold reserves in the form of deposits at the Fed. 
B)  Commercial banks in each district make loans to the Fed. 
C)  The Fed sells U.S. government securities for the U.S. Treasury. 
D)  The district banks of the Fed print money and supply currency to the Fed. 
E)  The Fed holds the reserves of the commercial banks but it does not issues checks.

Question 20

The Fed usually sets a higher reserve requirement for savings accounts than for checking accounts.

Accepted Answer

A) True 
 B)False

During the Christmas holiday season, the Fed increases the supply of currency to:

For how long is the chairman of the board of governors of the Fed appointed and by whom?

Increased demand for U.S. products by foreign residents will lead to a depreciation of the U.S. dollar relative to foreign currencies.

What is the current market price of a bond that pays $200 per year indefinitely and has a current yield of 16 percent?

The Board of Governors is the body responsible for setting and implementing monetary policy targets for the Federal Reserve System.

Suppose the U.S. dollar appreciates in value against the Australian dollar, and the Fed intervenes in the foreign exchange market by using U.S. dollars to buy Australian dollars. The Fed could sterilize the expansionary effect of this intervention by:

Which of the following is an intermediate target of the Fed's policies?

The Fed has set a uniform reserve requirement of 3 percent for all deposits in the U.S. banking system.

Sterilization occurs when a central bank offsets the effects of expansionary monetary policy through foreign exchange market intervention.

The quantity theory of money asserts that:

The Federal Reserve System divides the U.S. into _____ districts.

Which of the following government agencies oversees monetary policy in the U.S.?

Which of the following statements is incorrect?

When the FOMC sets a monetary policy, it first identifies its intermediate target and then works accordingly to achieve its ultimate goal.

The Fed controls the money supply in the U.S. economy largely through its ability to influence bank reserves and the money creating power of commercial banks.

When the Federal Open Market Committee buys government securities:

Identify the correct statement.

The Fed usually sets a higher reserve requirement for savings accounts than for checking accounts.

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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Exam 13: Monetary Policy

During the Christmas holiday season, the Fed increases the supply of currency to:

For how long is the chairman of the board of governors of the Fed appointed and by whom?

Increased demand for U.S. products by foreign residents will lead to a depreciation of the U.S. dollar relative to foreign currencies.

What is the current market price of a bond that pays $200 per year indefinitely and has a current yield of 16 percent?

The Board of Governors is the body responsible for setting and implementing monetary policy targets for the Federal Reserve System.

Suppose the U.S. dollar appreciates in value against the Australian dollar, and the Fed intervenes in the foreign exchange market by using U.S. dollars to buy Australian dollars. The Fed could sterilize the expansionary effect of this intervention by:

Which of the following is an intermediate target of the Fed's policies?

The Fed has set a uniform reserve requirement of 3 percent for all deposits in the U.S. banking system.

Sterilization occurs when a central bank offsets the effects of expansionary monetary policy through foreign exchange market intervention.

The quantity theory of money asserts that:

The Federal Reserve System divides the U.S. into _____ districts.

Which of the following government agencies oversees monetary policy in the U.S.?

Which of the following statements is incorrect?

When the FOMC sets a monetary policy, it first identifies its intermediate target and then works accordingly to achieve its ultimate goal.

The Fed controls the money supply in the U.S. economy largely through its ability to influence bank reserves and the money creating power of commercial banks.

When the Federal Open Market Committee buys government securities:

Identify the correct statement.

The Fed usually sets a higher reserve requirement for savings accounts than for checking accounts.

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters