Question 1

Which of the following is an advantage of open market operations over other Federal Reserve policy tools?

Accepted Answer

A)  Use of the other tools must be approved by the President. 
B)  Use of the other tools must be approved by Congress. 
C)  Open market operations are more precise. 
D)  Open market operations do not change interest rates. 
E)  The U.S.Treasury and the Fed work together to undertake open market operations. 
A)  Use of the other tools must be approved by the President. 
B)  Use of the other tools must be approved by Congress. 
C)  Open market operations are more precise. 
D)  Open market operations do not change interest rates. 
E)  The U.S.Treasury and the Fed work together to undertake open market operations.

Question 2

If the required reserve ratio is 0.25 and the First National Bank holds $10 million in demand deposits and $2.5 million in reserves,how much more money is the bank capable of creating?

Accepted Answer

A)  $0 
B)  $0.625 million 
C)  $1.875 million 
D)  $2.5 million 
E)  $10 million 
A)  $0 
B)  $0.625 million 
C)  $1.875 million 
D)  $2.5 million 
E)  $10 million

Question 3

The organization responsible for creating and regulating the U.S.money supply is

Accepted Answer

A)  the Department of Commerce 
B)  the Council of Economic Advisers 
C)  the U.S.Mint 
D)  the Federal Reserve System 
E)  the Department of the Treasury 
A)  the Department of Commerce 
B)  the Council of Economic Advisers 
C)  the U.S.Mint 
D)  the Federal Reserve System 
E)  the Department of the Treasury

Question 4

Which of the following is counted as money?

Accepted Answer

A)  Bonds 
B)  Credit card payments 
C)  Credit card limits 
D)  Currency 
E)  Corporate stock 
A)  Bonds 
B)  Credit card payments 
C)  Credit card limits 
D)  Currency 
E)  Corporate stock

Question 5

The frequency of banking panics was greatly reduced when

Accepted Answer

A)  the Federal Reserve was created 
B)  the federal government started insuring banking deposits 
C)  the Federal Reserve increased the required reserve ratio 
D)  the Federal Reserve started using open market operations 
E)  the Federal Reserve decided to take a less active role in controlling the money supply 
A)  the Federal Reserve was created 
B)  the federal government started insuring banking deposits 
C)  the Federal Reserve increased the required reserve ratio 
D)  the Federal Reserve started using open market operations 
E)  the Federal Reserve decided to take a less active role in controlling the money supply

Question 6

After the Fed sells a government bond,which of the following is the impetus for the money supply process that follows?

Accepted Answer

A)  Banks now have excess reserves. 
B)  Banks now have deficient reserves. 
C)  Banks must print money to purchase the bonds. 
D)  Banks now have to hold more required reserves. 
E)  Banks now must be regulated closely. 
A)  Banks now have excess reserves. 
B)  Banks now have deficient reserves. 
C)  Banks must print money to purchase the bonds. 
D)  Banks now have to hold more required reserves. 
E)  Banks now must be regulated closely.

Question 7

Which of the following cities does not have a Federal Reserve Bank?

Accepted Answer

A)  Dallas 
B)  Kansas City 
C)  Los Angeles 
D)  Cleveland 
E)  Miami 
A)  Dallas 
B)  Kansas City 
C)  Los Angeles 
D)  Cleveland 
E)  Miami

Question 8

Which of the following is a reason why a bank may hold excess reserves?

Accepted Answer

A)  It earns more interest on reserves than on loans. 
B)  It is required to do so. 
C)  It may want flexibility to increase its loans if interest rates rise in the near future. 
D)  Banks often expect a drop in the required reserve ratio. 
E)  Banks often expect a rise in the required reserve ratio. 
A)  It earns more interest on reserves than on loans. 
B)  It is required to do so. 
C)  It may want flexibility to increase its loans if interest rates rise in the near future. 
D)  Banks often expect a drop in the required reserve ratio. 
E)  Banks often expect a rise in the required reserve ratio.

Question 9

What is the role of the Federal Deposit Insurance Corporation?

Accepted Answer

A)  To insure bank deposits 
B)  To act as a lender of last resort 
C)  To establish regulations for commercial banks 
D)  To monitor the actions of commercial banks 
E)  To insure the assets of commercial banks 
A)  To insure bank deposits 
B)  To act as a lender of last resort 
C)  To establish regulations for commercial banks 
D)  To monitor the actions of commercial banks 
E)  To insure the assets of commercial banks

Question 10

Credit cards

Accepted Answer

A)  are considered money because they are a means of payment 
B)  are not considered money and thus are not of importance to the monetary authority 
C)  are not considered money but are important because they may affect how much people hold in M1 and M2 
D)  are counted in the money supply as part of M3 
E)  are considered money when held by the public 
A)  are considered money because they are a means of payment 
B)  are not considered money and thus are not of importance to the monetary authority 
C)  are not considered money but are important because they may affect how much people hold in M1 and M2 
D)  are counted in the money supply as part of M3 
E)  are considered money when held by the public

Question 11

One problem with using discount rate changes to influence deposit creation or destruction is that

Accepted Answer

A)  small changes in the rate do not have much impact 
B)  the discount rate changes are covert 
C)  banks like to borrow from the Fed,and they will borrow even more after the changes 
D)  the Fed must change the discount rate each time they meet 
E)  banks do not have enough control over their demand deposits 
A)  small changes in the rate do not have much impact 
B)  the discount rate changes are covert 
C)  banks like to borrow from the Fed,and they will borrow even more after the changes 
D)  the Fed must change the discount rate each time they meet 
E)  banks do not have enough control over their demand deposits

Question 12

The Federal Reserve was originally created to

Accepted Answer

A)  stabilize exchange rates 
B)  keep the unemployment rate at 0% 
C)  create jobs 
D)  issue bonds 
E)  create and regulate the U.S.money supply 
A)  stabilize exchange rates 
B)  keep the unemployment rate at 0% 
C)  create jobs 
D)  issue bonds 
E)  create and regulate the U.S.money supply

Question 13

The Federal Reserve district borders follow exclusively state borders.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not included in the M1 money stock?

Accepted Answer

A)  money market funds 
B)  demand deposits 
C)  checking account deposits 
D)  travelers' checks 
E)  cash in the hands of the public 
A)  money market funds 
B)  demand deposits 
C)  checking account deposits 
D)  travelers' checks 
E)  cash in the hands of the public

Question 15

The Fed typically increases the money supply by

Accepted Answer

A)  selling government bonds 
B)  buying government loans 
C)  selling government loans 
D)  printing more currency 
E)  buying government bonds 
A)  selling government bonds 
B)  buying government loans 
C)  selling government loans 
D)  printing more currency 
E)  buying government bonds

Question 16

The Federal Reserve is

Accepted Answer

A)  part of the executive branch of the government 
B)  not part of any branch of the government 
C)  part of the judicial branch of the government 
D)  part of both the legislative and the judicial branch of the government 
E)  part of both the executive and the legislative branch of the government 
A)  part of the executive branch of the government 
B)  not part of any branch of the government 
C)  part of the judicial branch of the government 
D)  part of both the legislative and the judicial branch of the government 
E)  part of both the executive and the legislative branch of the government

Question 17

The formula for the demand deposit multiplier is

Accepted Answer

A)  1 divided by excess reserves 
B)  1 divided by the required reserve ratio 
C)  1 minus the required reserve ratio 
D)  the required reserve ratio minus 1 
E)  the required reserve ratio times the level of demand deposits 
A)  1 divided by excess reserves 
B)  1 divided by the required reserve ratio 
C)  1 minus the required reserve ratio 
D)  the required reserve ratio minus 1 
E)  the required reserve ratio times the level of demand deposits

Question 18

A monetary system is what allows us to

Accepted Answer

A)  earn a wage 
B)  compare the costs of different goods and services 
C)  invest in productive assets 
D)  be productive 
E)  consume today,rather than tomorrow 
A)  earn a wage 
B)  compare the costs of different goods and services 
C)  invest in productive assets 
D)  be productive 
E)  consume today,rather than tomorrow

Question 19

The Federal Reserve banks make loans to member banks at a special interest rate called the discount rate.

Accepted Answer

A) True 
 B)False

Question 20

The demand deposit multiplier is always less than 10.

Accepted Answer

A) True 
 B)False

Which of the following is an advantage of open market operations over other Federal Reserve policy tools?

If the required reserve ratio is 0.25 and the First National Bank holds $10 million in demand deposits and $2.5 million in reserves,how much more money is the bank capable of creating?

The organization responsible for creating and regulating the U.S.money supply is

Which of the following is counted as money?

The frequency of banking panics was greatly reduced when

After the Fed sells a government bond,which of the following is the impetus for the money supply process that follows?

Which of the following cities does not have a Federal Reserve Bank?

Which of the following is a reason why a bank may hold excess reserves?

What is the role of the Federal Deposit Insurance Corporation?

Credit cards

One problem with using discount rate changes to influence deposit creation or destruction is that

The Federal Reserve was originally created to

The Federal Reserve district borders follow exclusively state borders.

Which of the following is not included in the M1 money stock?

The Fed typically increases the money supply by

The Federal Reserve is

The formula for the demand deposit multiplier is

A monetary system is what allows us to

The Federal Reserve banks make loans to member banks at a special interest rate called the discount rate.

The demand deposit multiplier is always less than 10.

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters

Exam 13: Money, Banks, and the Federal Reserve

Which of the following is an advantage of open market operations over other Federal Reserve policy tools?

If the required reserve ratio is 0.25 and the First National Bank holds $10 million in demand deposits and $2.5 million in reserves,how much more money is the bank capable of creating?

The organization responsible for creating and regulating the U.S.money supply is

Which of the following is counted as money?

The frequency of banking panics was greatly reduced when

After the Fed sells a government bond,which of the following is the impetus for the money supply process that follows?

Which of the following cities does not have a Federal Reserve Bank?

Which of the following is a reason why a bank may hold excess reserves?

What is the role of the Federal Deposit Insurance Corporation?

Credit cards

One problem with using discount rate changes to influence deposit creation or destruction is that

The Federal Reserve was originally created to

The Federal Reserve district borders follow exclusively state borders.

Which of the following is not included in the M1 money stock?

The Fed typically increases the money supply by

The Federal Reserve is

The formula for the demand deposit multiplier is

A monetary system is what allows us to

The Federal Reserve banks make loans to member banks at a special interest rate called the discount rate.

The demand deposit multiplier is always less than 10.

What is Economics?

Scarcity, Choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

What Macroeconomics Tries to Explain

Production, Income, and Employment

The Price Level and Inflation

The Classical Long run Model

Economic Growth and Rising Living Standards

Economic Fluctuations

The Short-run Macro Model

Fiscal Policy

The Money Market and Monetary Policy

Aggregate Demand and Aggregate Supply

Inflation and Monetary Policy

Exchange Rates and Macroeconomic Policy

Filters