Question 1

The number of Federal Reserve banks is

Accepted Answer

A)  one. 
B)  seven. 
C)  12. 
D)  50. 
E)  6,000. 
A)  one. 
B)  seven. 
C)  12. 
D)  50. 
E)  6,000. C

Question 2

Each Federal Reserve Bank is a corporation owned by

Accepted Answer

A)  the Board of Governors. 
B)  state governments. 
C)  the U.S. Treasury. 
D)  central banks. 
E)  commercial banks. 
A)  the Board of Governors. 
B)  state governments. 
C)  the U.S. Treasury. 
D)  central banks. 
E)  commercial banks. E

Question 3

The paper currency we use in the United States is

Accepted Answer

A)  issued and controlled by the Treasury Department. 
B)  backed by gold certificates. 
C)  issued by commercial banks. 
D)  composed almost entirely of silver certificates. 
E)  a debt of the Federal Reserve System. 
A)  issued and controlled by the Treasury Department. 
B)  backed by gold certificates. 
C)  issued by commercial banks. 
D)  composed almost entirely of silver certificates. 
E)  a debt of the Federal Reserve System. E

Question 4

The Federal Reserve System

Accepted Answer

A)  is an outgrowth of the Bank of the United States. 
B)  is directly controlled by Congress. 
C)  was established by Congress in 1913 after a severe financial panic six years earlier. 
D)  controls the minting of coins. 
E)  includes by law all of this country's financial institutions. 
A)  is an outgrowth of the Bank of the United States. 
B)  is directly controlled by Congress. 
C)  was established by Congress in 1913 after a severe financial panic six years earlier. 
D)  controls the minting of coins. 
E)  includes by law all of this country's financial institutions.

Question 5

The Federal Reserve influences the money supply by managing

Accepted Answer

A)  personal and corporate tax rates. 
B)  government spending programs. 
C)  the foreign trade balance. 
D)  the reserves of the banking system. 
E)  the number of financial intermediaries. 
A)  personal and corporate tax rates. 
B)  government spending programs. 
C)  the foreign trade balance. 
D)  the reserves of the banking system. 
E)  the number of financial intermediaries.

Question 6

The Fed's freedom to control the supply of money and interest rates unhampered by constraints of the U.S.Treasury was the principle result of the

Accepted Answer

A)  Federal Reserve Act of 1913. 
B)  Full Employment Act of 1946. 
C)  Taft-Hartley Act of 1947. 
D)  Accord of 1951. 
E)  Humphrey-Hawkins Act of 1978. 
A)  Federal Reserve Act of 1913. 
B)  Full Employment Act of 1946. 
C)  Taft-Hartley Act of 1947. 
D)  Accord of 1951. 
E)  Humphrey-Hawkins Act of 1978.

Question 7

Monetary policy is carried out primarily through actions taken by the

Accepted Answer

A)  president of the United States. 
B)  large member banks of the Federal Reserve System. 
C)  Treasury Department on advice from the Board of Governors of the Federal Reserve System. 
D)  Federal Reserve Board and Federal Open Market Committee. 
E)  chairperson of the Board of Governors of the Federal Reserve System. 
A)  president of the United States. 
B)  large member banks of the Federal Reserve System. 
C)  Treasury Department on advice from the Board of Governors of the Federal Reserve System. 
D)  Federal Reserve Board and Federal Open Market Committee. 
E)  chairperson of the Board of Governors of the Federal Reserve System.

Question 8

An important characteristic of the discount rate is that it

Accepted Answer

A)  has a powerful effect on the money supply. 
B)  has a direct impact on bank reserves without changing the money supply. 
C)  can be changed frequently and substantially. 
D)  structurally alters bank credit creation. 
E)  has no effect on financial markets. 
A)  has a powerful effect on the money supply. 
B)  has a direct impact on bank reserves without changing the money supply. 
C)  can be changed frequently and substantially. 
D)  structurally alters bank credit creation. 
E)  has no effect on financial markets.

Question 9

The power to decide on the amount of government securities the Fed should buy or sell at any given time rests with the

Accepted Answer

A)  Federal Open Market Committee. 
B)  president of the United States. 
C)  chairperson of the Federal Reserve Board. 
D)  secretary of the Treasury. 
E)  Council of Economic Advisers. 
A)  Federal Open Market Committee. 
B)  president of the United States. 
C)  chairperson of the Federal Reserve Board. 
D)  secretary of the Treasury. 
E)  Council of Economic Advisers.

Question 10

Which of the following is an example of a government security?

Accepted Answer

A)  treasury bills 
B)  Federal Reserve notes 
C)  gold certificates 
D)  treasury deposits 
E)  member bank reserves 
A)  treasury bills 
B)  Federal Reserve notes 
C)  gold certificates 
D)  treasury deposits 
E)  member bank reserves

Question 11

Gold certificates held by the Federal Reserve are

Accepted Answer

A)  legal tender. 
B)  warehouse receipts issued by the Treasury for gold bullion. 
C)  the assets for backing our paper money. 
D)  deposits used by the Treasury to pay its bills. 
E)  I.O.U.s that reflect the gold we owe those countries that export more to us than we export to them. 
A)  legal tender. 
B)  warehouse receipts issued by the Treasury for gold bullion. 
C)  the assets for backing our paper money. 
D)  deposits used by the Treasury to pay its bills. 
E)  I.O.U.s that reflect the gold we owe those countries that export more to us than we export to them.

Question 12

Government management of the banking system's reserves is known as ________ policy.

Accepted Answer

A)  fiscal 
B)  incomes 
C)  trade 
D)  commercial 
E)  monetary 
A)  fiscal 
B)  incomes 
C)  trade 
D)  commercial 
E)  monetary

Question 13

The 12 Federal Reserve banks

Accepted Answer

A)  hold the deposits of member banks and make loans to them. 
B)  are all located in Washington, DC, but serve different districts throughout the country. 
C)  are all headed by members of the Federal Open Market Committee. 
D)  carry out policies dictated by the Treasury Department. 
E)  hold about 73 percent of the nation's demand deposits. 
A)  hold the deposits of member banks and make loans to them. 
B)  are all located in Washington, DC, but serve different districts throughout the country. 
C)  are all headed by members of the Federal Open Market Committee. 
D)  carry out policies dictated by the Treasury Department. 
E)  hold about 73 percent of the nation's demand deposits.

Question 14

If monetary authorities ease credit or money,________ will rise.

Accepted Answer

A)  interest rates 
B)  unemployment 
C)  tax rates 
D)  the money supply 
E)  the gold supply 
A)  interest rates 
B)  unemployment 
C)  tax rates 
D)  the money supply 
E)  the gold supply

Question 15

Reducing bank reserves would be an appropriate measure

Accepted Answer

A)  during a recession. 
B)  to balance the government budget. 
C)  to contain strong inflationary pressures. 
D)  to promote an increased level of business borrowing. 
E)  to increase the M1 money supply. 
A)  during a recession. 
B)  to balance the government budget. 
C)  to contain strong inflationary pressures. 
D)  to promote an increased level of business borrowing. 
E)  to increase the M1 money supply.

Question 16

The interest rate charged by the Fed for loans to commercial banks is called the

Accepted Answer

A)  prime rate. 
B)  required reserve ratio. 
C)  discount rate. 
D)  Q rate. 
E)  T-bill rate. 
A)  prime rate. 
B)  required reserve ratio. 
C)  discount rate. 
D)  Q rate. 
E)  T-bill rate.

Question 17

If one pictures the Federal Reserve System as a pyramid,the bottom of the pyramid represents

Accepted Answer

A)  the 12 Regional Reserve banks. 
B)  the U.S. consumers. 
C)  the Federal Advisory Council and other economic advisers. 
D)  commercial banks. 
E)  Congress. 
A)  the 12 Regional Reserve banks. 
B)  the U.S. consumers. 
C)  the Federal Advisory Council and other economic advisers. 
D)  commercial banks. 
E)  Congress.

Question 18

The major asset of the Federal Reserve System is

Accepted Answer

A)  gold certificates. 
B)  government securities. 
C)  loans to commercial banks. 
D)  Federal Reserve notes. 
E)  treasury deposits. 
A)  gold certificates. 
B)  government securities. 
C)  loans to commercial banks. 
D)  Federal Reserve notes. 
E)  treasury deposits.

Question 19

The results of the Fed's efforts to help member banks in 1931 illustrate the general principle that

Accepted Answer

A)  any action the Fed takes with regard to commercial banks causes an inevitable reaction in the economy as a whole. 
B)  any action taken by the Fed to help member banks has a negative impact on the economy as a whole. 
C)  actions taken by the Fed have far less impact on the overall economy than was once believed. 
D)  keeping member banks solvent is, in the long run, the single best way to stimulate a sluggish economy. 
E)  the nation's monetary system should be tied to the gold standard. 
A)  any action the Fed takes with regard to commercial banks causes an inevitable reaction in the economy as a whole. 
B)  any action taken by the Fed to help member banks has a negative impact on the economy as a whole. 
C)  actions taken by the Fed have far less impact on the overall economy than was once believed. 
D)  keeping member banks solvent is, in the long run, the single best way to stimulate a sluggish economy. 
E)  the nation's monetary system should be tied to the gold standard.

Question 20

If this same bank has its legal reserve requirement raised to 18 percent,it

Accepted Answer

A)  need not do anything since it still has sufficient legal reserves to meet this new requirement. 
B)  must take steps to increase its demand deposits by making new loans from its reserves. 
C)  should discourage new demand deposit accounts until its legal reserves are increased. 
D)  must either sell securities or not renew loans as they come due. 
E)  should buy government securities to increase the money supply. 
A)  need not do anything since it still has sufficient legal reserves to meet this new requirement. 
B)  must take steps to increase its demand deposits by making new loans from its reserves. 
C)  should discourage new demand deposit accounts until its legal reserves are increased. 
D)  must either sell securities or not renew loans as they come due. 
E)  should buy government securities to increase the money supply.

Exam 21: The Federal Reserve and Monetary Policy

The number of Federal Reserve banks is

Each Federal Reserve Bank is a corporation owned by

The paper currency we use in the United States is

The Federal Reserve System

The Federal Reserve influences the money supply by managing

The Fed's freedom to control the supply of money and interest rates unhampered by constraints of the U.S.Treasury was the principle result of the

Monetary policy is carried out primarily through actions taken by the

An important characteristic of the discount rate is that it

The power to decide on the amount of government securities the Fed should buy or sell at any given time rests with the

Which of the following is an example of a government security?

Gold certificates held by the Federal Reserve are

Government management of the banking system's reserves is known as ________ policy.

The 12 Federal Reserve banks

If monetary authorities ease credit or money,________ will rise.

Reducing bank reserves would be an appropriate measure

The interest rate charged by the Fed for loans to commercial banks is called the

If one pictures the Federal Reserve System as a pyramid,the bottom of the pyramid represents

The major asset of the Federal Reserve System is

The results of the Fed's efforts to help member banks in 1931 illustrate the general principle that

If this same bank has its legal reserve requirement raised to 18 percent,it

What is Economics

Markets and Prices

The Business Firm: Organization,motivation,and Optimal Input Decisions

Getting Behind the Demand and Supply Curves

Market Demand and Price Elasticity

Economic Efficiency,market Supply,and Perfect Competition

Monopoly and Its Regulation

Monopolistic Competition,oligopoly,and Antitrust Policy

Pollution and the Environment

The Supply and Demand for Labor

Interest,rent,and Profit

Poverty,income Inequality,and Discrimination

Economic Growth

Public Goods and the Role of the Government

National Income and Product

Business Fluctuations and Unemployment

The Determination of National Output and the Keynesian Multiplier

Fiscal Policy and National Output

Inflation

Money and the Banking System

Supply Shocks and Inflation

Productivity,growth,and Technology Policy

Surpluses,deficits,public Debt,and the Federal Budget

Monetary Policy,interest Rates,and Economic Activity

Controversies Over Stabilization Policy

International Trade

Exchange Rates and the Balance of Payments

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