Question 1

To decrease the money supply, the Federal Reserve could

Accepted Answer

A)  decrease the required reserve ratio 
B)  lower the federal funds rate 
C)  lower the discount rate 
D)  sell securities on the open market 
A)  decrease the required reserve ratio 
B)  lower the federal funds rate 
C)  lower the discount rate 
D)  sell securities on the open market

Question 2

The passage of the Federal Reserve Act was prompted by

Accepted Answer

A)  the beginning of World War I 
B)  the 1929 stock market crash 
C)  the Great Depression of the 1930s 
D)  a banking panic in 1907 
A)  the beginning of World War I 
B)  the 1929 stock market crash 
C)  the Great Depression of the 1930s 
D)  a banking panic in 1907

Question 3

A difference between a commercial bank and the Federal Reserve is that a commercial bank

Accepted Answer

A)  maximizes profits and the Fed does not 
B)  buys securities and the Fed does not 
C)  makes loans and the Fed does not 
D)  issues paper currency and the Fed does not 
A)  maximizes profits and the Fed does not 
B)  buys securities and the Fed does not 
C)  makes loans and the Fed does not 
D)  issues paper currency and the Fed does not

Question 4

To combat inflation, the Federal Reserve would decrease the discount rate, decrease the required reserve ratio, or buy securities on the open market.

Accepted Answer

A) True 
 B)False

Question 5

The Federal System regulates the supply of money primarily by altering the required reserve ratio, thus affecting the ability of banks to make loans.

Accepted Answer

A) True 
 B)False

Question 6

Supporters of the Fed's independence maintain that monetary policy tends to become too ______ if left to policy makers with short-run horizons, thus intensifying ______.

Accepted Answer

A)  contractionary, inflation 
B)  contractionary, recession 
C)  expansionary, inflation 
D)  expansionary, recession 
A)  contractionary, inflation 
B)  contractionary, recession 
C)  expansionary, inflation 
D)  expansionary, recession

Question 7

Compared to the discount rate and required reserve ratio, open market operations are the most flexible tool of monetary policy.

Accepted Answer

A) True 
 B)False

Question 8

The most important function of the Federal Reserve System is to

Accepted Answer

A)  insure the deposits of commercial banks 
B)  control the nation's money supply 
C)  supply check-clearing services to the banking system 
D)  stabilize the exchange value of the dollar 
A)  insure the deposits of commercial banks 
B)  control the nation's money supply 
C)  supply check-clearing services to the banking system 
D)  stabilize the exchange value of the dollar

Question 9

The Federal Reserve would be adopting an expansionary monetary policy if it

Accepted Answer

A)  increased the required reserve ratio 
B)  bought securities on the open market 
C)  increased the discount rate 
D)  decreased personal income taxes 
A)  increased the required reserve ratio 
B)  bought securities on the open market 
C)  increased the discount rate 
D)  decreased personal income taxes

Question 10

The strengths of monetary policy include all of the following except

Accepted Answer

A)  relatively small interference with the freedom of the market 
B)  relative insulation from day-to-day political pressures 
C)  ability to enact policies quickly in response to changing economic conditions 
D)  instantaneous effect on real output, employment, and the price level 
A)  relatively small interference with the freedom of the market 
B)  relative insulation from day-to-day political pressures 
C)  ability to enact policies quickly in response to changing economic conditions 
D)  instantaneous effect on real output, employment, and the price level

Question 11

The actual required reserve ratio set by the Fed in 2003 for bank deposits in excess of $42.1 million is

Accepted Answer

A)  0% 
B)  3% 
C)  10% 
D)  20% 
A)  0% 
B)  3% 
C)  10% 
D)  20%

Question 12

All of the following contribute to the political independence of the Federal Reserve except

Accepted Answer

A)  the Fed is responsible to the President and Congress rather than itself 
B)  members of the Fed's Board of Governors have 14-year terms 
C)  the Fed finances its operations from internally-generated income 
D)  the Fed is owned by member banks rather than the federal government 
A)  the Fed is responsible to the President and Congress rather than itself 
B)  members of the Fed's Board of Governors have 14-year terms 
C)  the Fed finances its operations from internally-generated income 
D)  the Fed is owned by member banks rather than the federal government

Question 13

The actual required reserve ratio set by the Fed in 2003 for savings deposits is

Accepted Answer

A)  0% 
B)  3% 
C)  10% 
D)  20% 
A)  0% 
B)  3% 
C)  10% 
D)  20%

Question 14

To combat a recession, the Federal Reserve would

Accepted Answer

A)  increase the money supply and shift the aggregate demand curve rightward 
B)  increase the money supply and shift the aggregate demand curve leftward 
C)  decrease the money supply and shift the aggregate demand curve rightward 
D)  decrease the money supply and shift the aggregate demand curve leftward 
A)  increase the money supply and shift the aggregate demand curve rightward 
B)  increase the money supply and shift the aggregate demand curve leftward 
C)  decrease the money supply and shift the aggregate demand curve rightward 
D)  decrease the money supply and shift the aggregate demand curve leftward

Question 15

The advantages of monetary policy include all of the following except

Accepted Answer

A)  it lets the market dictate the form of spending changes 
B)  it is flexible 
C)  it is based on economic, rather than political, considerations 
D)  it can result in policy lags 
A)  it lets the market dictate the form of spending changes 
B)  it is flexible 
C)  it is based on economic, rather than political, considerations 
D)  it can result in policy lags

Question 16

The Federal Open Market Committee always includes the president of the Federal Reserve Bank of New York as one of its members, while the other Federal Reserve Bank presidents serve on a rotating basis.

Accepted Answer

A) True 
 B)False

Question 17

During the stock market crash of 1987, the Fed reversed the crisis psychology by selling securities to banks and corporations.

Accepted Answer

A) True 
 B)False

Question 18

A decrease in the required reserve ratio would

Accepted Answer

A)  decrease the money supply 
B)  significantly affect savings and time deposits 
C)  be a frequent tool used by the Fed 
D)  have a large effect on banks' reserves 
A)  decrease the money supply 
B)  significantly affect savings and time deposits 
C)  be a frequent tool used by the Fed 
D)  have a large effect on banks' reserves

Question 19

Figure 15.1 Aggregate Supply and Aggregate Demand
  
-Refer to Figure 15.1. The Fed will enact a monetary policy to shift AD0 to AD1 when

Accepted Answer

A)  its members want to be re-elected by the voting public 
B)  the economy had been experiencing demand-pull inflation 
C)  the economy had been experiencing a recession 
D)  interest rates are too low 
A)  its members want to be re-elected by the voting public 
B)  the economy had been experiencing demand-pull inflation 
C)  the economy had been experiencing a recession 
D)  interest rates are too low

Question 20

A typical federal funds transaction takes place over an extended period of time.

Accepted Answer

A) True 
 B)False

To decrease the money supply, the Federal Reserve could

The passage of the Federal Reserve Act was prompted by

A difference between a commercial bank and the Federal Reserve is that a commercial bank

To combat inflation, the Federal Reserve would decrease the discount rate, decrease the required reserve ratio, or buy securities on the open market.

The Federal System regulates the supply of money primarily by altering the required reserve ratio, thus affecting the ability of banks to make loans.

Supporters of the Fed's independence maintain that monetary policy tends to become too if left to policy makers with short-run horizons, thus intensifying .

Compared to the discount rate and required reserve ratio, open market operations are the most flexible tool of monetary policy.

The most important function of the Federal Reserve System is to

The Federal Reserve would be adopting an expansionary monetary policy if it

The strengths of monetary policy include all of the following except

The actual required reserve ratio set by the Fed in 2003 for bank deposits in excess of $42.1 million is

All of the following contribute to the political independence of the Federal Reserve except

The actual required reserve ratio set by the Fed in 2003 for savings deposits is

To combat a recession, the Federal Reserve would

The advantages of monetary policy include all of the following except

The Federal Open Market Committee always includes the president of the Federal Reserve Bank of New York as one of its members, while the other Federal Reserve Bank presidents serve on a rotating basis.

During the stock market crash of 1987, the Fed reversed the crisis psychology by selling securities to banks and corporations.

A decrease in the required reserve ratio would

Figure 15.1 Aggregate Supply and Aggregate Demand -Refer to Figure 15.1. The Fed will enact a monetary policy to shift AD₀ to AD₁ when

A typical federal funds transaction takes place over an extended period of time.

Scarcity and Choice

Market Transactions: Demand and Supply Analysis

Demand and Supply Applications

Production and the Costs of Production

Competition and Monopoly: Virtues and Vices

Imperfect Competition

Labor Markets

Government and Markets

The Mixed Economy of the United States

Gross Domestic Product and Economic Growth

The Business Cycle, Unemployment, and Inflation

Macroeconomic Instability: Aggregate Demand and Aggregate Supply

Fiscal Policy and the Federal Budget

Money and the Banking System

The United States and the Global Economy

International Finance

Economic Systems and Developing Countries

Filters

Exam 15: The Federal Reserve and Monetary Policy

To decrease the money supply, the Federal Reserve could

The passage of the Federal Reserve Act was prompted by

A difference between a commercial bank and the Federal Reserve is that a commercial bank

To combat inflation, the Federal Reserve would decrease the discount rate, decrease the required reserve ratio, or buy securities on the open market.

The Federal System regulates the supply of money primarily by altering the required reserve ratio, thus affecting the ability of banks to make loans.

Supporters of the Fed's independence maintain that monetary policy tends to become too ______ if left to policy makers with short-run horizons, thus intensifying ______.

Compared to the discount rate and required reserve ratio, open market operations are the most flexible tool of monetary policy.

The most important function of the Federal Reserve System is to

The Federal Reserve would be adopting an expansionary monetary policy if it

The strengths of monetary policy include all of the following except

The actual required reserve ratio set by the Fed in 2003 for bank deposits in excess of $42.1 million is

All of the following contribute to the political independence of the Federal Reserve except

The actual required reserve ratio set by the Fed in 2003 for savings deposits is

To combat a recession, the Federal Reserve would

The advantages of monetary policy include all of the following except

The Federal Open Market Committee always includes the president of the Federal Reserve Bank of New York as one of its members, while the other Federal Reserve Bank presidents serve on a rotating basis.

During the stock market crash of 1987, the Fed reversed the crisis psychology by selling securities to banks and corporations.

A decrease in the required reserve ratio would

Figure 15.1 Aggregate Supply and Aggregate Demand -Refer to Figure 15.1. The Fed will enact a monetary policy to shift AD0 to AD1 when

A typical federal funds transaction takes place over an extended period of time.

Scarcity and Choice

Market Transactions: Demand and Supply Analysis

Demand and Supply Applications

Production and the Costs of Production

Competition and Monopoly: Virtues and Vices

Imperfect Competition

Labor Markets

Government and Markets

The Mixed Economy of the United States

Gross Domestic Product and Economic Growth

The Business Cycle, Unemployment, and Inflation

Macroeconomic Instability: Aggregate Demand and Aggregate Supply

Fiscal Policy and the Federal Budget

Money and the Banking System

The United States and the Global Economy

International Finance

Economic Systems and Developing Countries

Filters

Supporters of the Fed's independence maintain that monetary policy tends to become too if left to policy makers with short-run horizons, thus intensifying .

Figure 15.1 Aggregate Supply and Aggregate Demand -Refer to Figure 15.1. The Fed will enact a monetary policy to shift AD₀ to AD₁ when