Question 1

The term of office for a member of the Federal Reserve Board is

Accepted Answer

A)  two years. 
B)  four years. 
C)  seven years. 
D)  14 years. 
E)  life. 
A)  two years. 
B)  four years. 
C)  seven years. 
D)  14 years. 
E)  life.

Question 2

The next question is based on this table.
  
-The information in the table suggests that the Fed was pursuing a more restrictive monetary policy during the period from

Accepted Answer

A)  1990 to 1996. 
B)  1990 to 1993. 
C)  1993 to 1995. 
D)  1995 to 1996. 
E)  January to December 1993. 
A)  1990 to 1996. 
B)  1990 to 1993. 
C)  1993 to 1995. 
D)  1995 to 1996. 
E)  January to December 1993.

Question 3

A decrease in the money supply

Accepted Answer

A)  shifts the aggregate demand curve to the left. 
B) shifts the aggregate demand curve to the right. 
C)  shifts the aggregate supply curve to the left 
D)  shifts the aggregate supply curve to the right. 
E)  affects neither the aggregate demand nor the aggregate supply curve, only interest rates. 
A)  shifts the aggregate demand curve to the left. 
B) shifts the aggregate demand curve to the right. 
C)  shifts the aggregate supply curve to the left 
D)  shifts the aggregate supply curve to the right. 
E)  affects neither the aggregate demand nor the aggregate supply curve, only interest rates.

Question 4

It has been estimated that the full economic effects of monetary policy are

Accepted Answer

A)  realized almost immediately. 
B)  realized in slightly over one year. 
C)  realized in about one to three months. 
D)  unnoticed because money policy has little overall economic effect. 
E)  imperceptible because of the relatively minor nature of these policies. 
A)  realized almost immediately. 
B)  realized in slightly over one year. 
C)  realized in about one to three months. 
D)  unnoticed because money policy has little overall economic effect. 
E)  imperceptible because of the relatively minor nature of these policies.

Question 5

The main reason for the length of the term of office on the Federal Reserve Board is that

Accepted Answer

A)  this time period corresponds closely to the lag time between actions by the Fed and their impact on the economy. 
B)  this term gives the individual governors the same job security as their peers in private commercial banks. 
C)  many years of in-service education are required before board members can make substantive contributions. 
D)  given the stringent requirements for membership, it has proven difficult to fill positions any more frequently. 
E)  long appointments limit opportunities for political influence over the board. 
A)  this time period corresponds closely to the lag time between actions by the Fed and their impact on the economy. 
B)  this term gives the individual governors the same job security as their peers in private commercial banks. 
C)  many years of in-service education are required before board members can make substantive contributions. 
D)  given the stringent requirements for membership, it has proven difficult to fill positions any more frequently. 
E)  long appointments limit opportunities for political influence over the board.

Question 6

Changes in the legal reserve requirements

Accepted Answer

A)  change the amount of Federal Deposit Insurance Corporation insurance. 
B)  must be approved by Congress. 
C)  change the amount of demand deposits the banking system can support. 
D)  change the discount rate. 
E)  usually have no effect on the money supply. 
A)  change the amount of Federal Deposit Insurance Corporation insurance. 
B)  must be approved by Congress. 
C)  change the amount of demand deposits the banking system can support. 
D)  change the discount rate. 
E)  usually have no effect on the money supply.

Question 7

Which of the following policy tools will have the greatest effect on bank reserves?

Accepted Answer

A)  maintaining the existing legal reserve ratio 
B)  advising Congress on budget policy 
C)  decreasing the discount rate 
D)  encouraging banks to be more cautious 
E)  buying U.S. government securities 
A)  maintaining the existing legal reserve ratio 
B)  advising Congress on budget policy 
C)  decreasing the discount rate 
D)  encouraging banks to be more cautious 
E)  buying U.S. government securities

Question 8

The Fed seldom exercises its power to change the legal reserve requirements because

Accepted Answer

A)  it lacks the authority to do so without prior congressional approval. 
B)  such changes are limited to no more than one per year. 
C)  this policy tool has a minimal effect on bank reserves because the limits are quite low. 
D)  most commercial banks manage their reserves responsibly without the Fed's intervention. 
E)  it is a drastic way to change bank reserves compared to open market operations. 
A)  it lacks the authority to do so without prior congressional approval. 
B)  such changes are limited to no more than one per year. 
C)  this policy tool has a minimal effect on bank reserves because the limits are quite low. 
D)  most commercial banks manage their reserves responsibly without the Fed's intervention. 
E)  it is a drastic way to change bank reserves compared to open market operations.

Question 9

In general,the discount rate is kept close to short-term market interest rates to

Accepted Answer

A)  enable commercial banks to operate profitably. 
B)  reduce the government cost to borrow money. 
C)  discourage commercial banks from excessive use of the borrowing privilege. 
D)  avoid the possibility that monetary actions affect financial market expectations. 
E)  keep interest rates stable over long periods of time. 
A)  enable commercial banks to operate profitably. 
B)  reduce the government cost to borrow money. 
C)  discourage commercial banks from excessive use of the borrowing privilege. 
D)  avoid the possibility that monetary actions affect financial market expectations. 
E)  keep interest rates stable over long periods of time.

Question 10

In its reaction to financial crises in October 1987 and August 1998,the Fed

Accepted Answer

A)  did nothing, allowing natural market forces to correct the conditions. 
B)  decreased the money supply while promoting an increase in demand to strengthen prices. 
C)  created and expanded the duties of the Long-Term Capital Management Corporation to oversee foreign lending. 
D)  ensured that adequate liquidity was available to minimize the real impact of these shocks. 
E)  raised interest rates to encourage more people to save rather than speculate with their money. 
A)  did nothing, allowing natural market forces to correct the conditions. 
B)  decreased the money supply while promoting an increase in demand to strengthen prices. 
C)  created and expanded the duties of the Long-Term Capital Management Corporation to oversee foreign lending. 
D)  ensured that adequate liquidity was available to minimize the real impact of these shocks. 
E)  raised interest rates to encourage more people to save rather than speculate with their money.

Question 11

Federal Reserve Bank holdings of securities consist mainly of

Accepted Answer

A)  foreign currencies. 
B)  corporate stocks and bonds. 
C)  securities representing U.S. loans to foreign nations. 
D)  funds the Federal Reserve has borrowed from the Treasury. 
E)  U.S. government bonds, notes, and bills. 
A)  foreign currencies. 
B)  corporate stocks and bonds. 
C)  securities representing U.S. loans to foreign nations. 
D)  funds the Federal Reserve has borrowed from the Treasury. 
E)  U.S. government bonds, notes, and bills.

The term of office for a member of the Federal Reserve Board is

The next question is based on this table. -The information in the table suggests that the Fed was pursuing a more restrictive monetary policy during the period from

A decrease in the money supply

It has been estimated that the full economic effects of monetary policy are

The main reason for the length of the term of office on the Federal Reserve Board is that

Changes in the legal reserve requirements

Which of the following policy tools will have the greatest effect on bank reserves?

The Fed seldom exercises its power to change the legal reserve requirements because

In general,the discount rate is kept close to short-term market interest rates to

In its reaction to financial crises in October 1987 and August 1998,the Fed

Federal Reserve Bank holdings of securities consist mainly of

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

Filters

Exam 21: The Federal Reserve and Monetary Policy

The term of office for a member of the Federal Reserve Board is

The next question is based on this table. -The information in the table suggests that the Fed was pursuing a more restrictive monetary policy during the period from

A decrease in the money supply

It has been estimated that the full economic effects of monetary policy are

The main reason for the length of the term of office on the Federal Reserve Board is that

Changes in the legal reserve requirements

Which of the following policy tools will have the greatest effect on bank reserves?

The Fed seldom exercises its power to change the legal reserve requirements because

In general,the discount rate is kept close to short-term market interest rates to

In its reaction to financial crises in October 1987 and August 1998,the Fed

Federal Reserve Bank holdings of securities consist mainly of

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

Filters