Exam 13: Monetary Policy

The "secondary credit" of the discount rate is usually lower than the "primary credit," because it is intended for banks in good financial condition.

If M = quantity of money, V = velocity of money, P = price level, and Q = the quantity of output, then the equation of exchange will be defined as:

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

The figure given below depicts the equilibrium in the foreign exchange market.?Figure 13.1 -Refer to Figure 13.1. Which of the following is most likely to cause equilibrium to change from point A to point D?

If the U.S. dollar depreciates against the yen below the targeted exchange rate, the U.S. Federal Reserve has to intervene in the foreign exchange market such that:

The bank rate is the interest rate charged by the commercial banks to its borrowers.

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

The desire to keep assets in cash to take advantage of favorable changes in the value of non-cash assets is called the:

For a bank to have lending power, its required reserves must:

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

Which of the following statements is incorrect?

The table given below shows the assets and liabilities of the National Bank. Assume that this is the only bank in the economy.? -Refer to Table 13.2 and calculate the legal reserves of the bank.

Other things equal, when the Fed raises the reserve requirement, the banking system's excess reserves will fall, the deposit expansion multiplier will decline, and the money supply will decrease.

The Fed can enhance liquidity in the U.S. economy by increasing the federal funds rate.

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

-Refer to Table 13.1. Assume a reserve requirement of 8 percent. What is the maximum potential increase in the money supply from the Fed's purchase of $400 worth of government securities?

The velocity of money is:

All members of the Federal Board of Governors are appointed by the president and confirmed by the Senate.

Assume that a bank holds legal reserves of $800, the required reserves are $400 and total deposit is $4,000. If the government purchases bonds worth $200, excess reserves will increase by _____.

A change in the interest rate does not affect the quantity of money supplied. This means that: