Question 1

One factor that decreases the volume of bank reserves is a decrease in:

Accepted Answer

A) bank holdings of loans and securities 
B) time and savings deposits 
C) life insurance company reserves 
D) the level of cash holdings 
E) none of the above 
A) bank holdings of loans and securities 
B) time and savings deposits 
C) life insurance company reserves 
D) the level of cash holdings 
E) none of the above

Question 2

If the Fed wishes to stimulate the economy,it may:

Accepted Answer

A) lower the discount rate 
B) raise reserve requirements 
C) sell securities through open market operations 
D) raise both the discount rate and the reserve requirements 
A) lower the discount rate 
B) raise reserve requirements 
C) sell securities through open market operations 
D) raise both the discount rate and the reserve requirements

Question 3

Currently,the backing for Federal Reserves notes is primarily in the form of:

Accepted Answer

A) gold certificates 
B) gold bullion 
C) eligible paper (business notes and drafts) 
D) all of the above 
E) none of the above 
A) gold certificates 
B) gold bullion 
C) eligible paper (business notes and drafts) 
D) all of the above 
E) none of the above

Question 4

One of the reasons open market operations are conducted virtually every business day is to implement changes in the money supply called for by the Federal Open Market Committee.

Accepted Answer

A) True 
 B)False

Question 5

The U.S.Treasury has primary responsibility for management of the federal debt.

Accepted Answer

A) True 
 B)False

Question 6

Under required reserves of 20%,the maximum to which the money supply could be expanded by the banking system is:

Accepted Answer

A) four times a new primary deposit 
B) five times a new primary deposit 
C) six times a new primary deposit 
D) until all of a new primary deposit has been converted to required reserves 
A) four times a new primary deposit 
B) five times a new primary deposit 
C) six times a new primary deposit 
D) until all of a new primary deposit has been converted to required reserves

Question 7

Assume that a banking system must keep reserves of 20% against deposits.The bank receives a primary deposit of $20,000.What would be the maximum amount of loan that could be made by the system?

Accepted Answer

A) $16,000 
B) $40,000 
C) $80,000 
D) $100,000 
A) $16,000 
B) $40,000 
C) $80,000 
D) $100,000

Question 8

Assume that a bank must keep reserves of 20% against deposits.The bank receives a primary deposit of $50,000.What amount of excess reserves can the bank safely lend?

Accepted Answer

A) $10,000 
B) $20,000 
C) $40,000 
D) $50,000 
E) none of the above 
A) $10,000 
B) $20,000 
C) $40,000 
D) $50,000 
E) none of the above

Question 9

The government body primarily responsible for monetary policy is Congress.

Accepted Answer

A) True 
 B)False

Question 10

Various programs of the federal government help stabilize disposable income,and in turn,economic activity in general.In so doing:

Accepted Answer

A) income tax rates may be lowered during periods of prosperity and increased during slack economic periods 
B) these programs waste valuable resources 
C) the timing of sale of U.S.savings bonds is instrumental in accomplishing this objective 
D) these programs seldom attain their goals 
E) none of the above 
A) income tax rates may be lowered during periods of prosperity and increased during slack economic periods 
B) these programs waste valuable resources 
C) the timing of sale of U.S.savings bonds is instrumental in accomplishing this objective 
D) these programs seldom attain their goals 
E) none of the above

Question 11

Price inflation:

Accepted Answer

A) is relatively unimportant to individuals 
B) is considered to be acceptable in the nation's quest for high levels of employment 
C) causes inequities and discourages investment by increasing the uncertainty about future returns 
D) is almost always due to financing wars 
A) is relatively unimportant to individuals 
B) is considered to be acceptable in the nation's quest for high levels of employment 
C) causes inequities and discourages investment by increasing the uncertainty about future returns 
D) is almost always due to financing wars

Question 12

Primary groups of policy makers that are actively involved in achieving a nation's economic policy objectives include all of the following EXCEPT:

Accepted Answer

A) the Supreme Court 
B) Senate staffers 
C) lobbyists 
D) the joint chiefs 
E) none of the above are involved 
A) the Supreme Court 
B) Senate staffers 
C) lobbyists 
D) the joint chiefs 
E) none of the above are involved

Question 13

If a check is written for the full amount of a derivative deposit created by a bank loan and then is sent to a bank in another city for deposit:

Accepted Answer

A) the lending bank would lose all of its excess reserves 
B) the lending bank would still have reserves to lend 
C) the full amount would be added to the receiving bank's excess reserves 
D) both a and c 
A) the lending bank would lose all of its excess reserves 
B) the lending bank would still have reserves to lend 
C) the full amount would be added to the receiving bank's excess reserves 
D) both a and c

Question 14

Almost all Treasury disbursements are made by:

Accepted Answer

A) checks drawn directly on the U.S.Treasury 
B) check drawn against deposits at commercial banks in large cities 
C) drafts drawn on member banks 
D) checks drawn against deposits at Federal Reserve Banks 
A) checks drawn directly on the U.S.Treasury 
B) check drawn against deposits at commercial banks in large cities 
C) drafts drawn on member banks 
D) checks drawn against deposits at Federal Reserve Banks

Question 15

Assume that a bank receives a primary deposit of $1,000.If the reserve requirement is 25%,what will be the amount of excess reserves available for lending purposes?

Accepted Answer

A) zero 
B) $250 
C) $750 
D) $1,000 
E) none of the above 
A) zero 
B) $250 
C) $750 
D) $1,000 
E) none of the above

Question 16

In the fractional reserve system,banks must hold,with the Fed,reserves equal to a certain percentage of their deposits.

Accepted Answer

A) True 
 B)False

Question 17

If the Fed wishes to stimulate the economy,it may:

Accepted Answer

A) raise the discount rate 
B) raise reserve requirements 
C) sell securities through open market operations 
D) raise both the discount rate and the reserve requirements 
E) none of the above 
A) raise the discount rate 
B) raise reserve requirements 
C) sell securities through open market operations 
D) raise both the discount rate and the reserve requirements 
E) none of the above

Question 18

Federal Reserve open market operations,setting reserve requirement,and lending to depositories are:

Accepted Answer

A) usually conducted simultaneously 
B) designed to improve the federal deficit 
C) of equal importance in their effort 
D) functions shared with the U.S.Treasury 
E) none of the above 
A) usually conducted simultaneously 
B) designed to improve the federal deficit 
C) of equal importance in their effort 
D) functions shared with the U.S.Treasury 
E) none of the above

Question 19

The U.S.Treasury is responsible for refinancing the outstanding debt of the government.

Accepted Answer

A) True 
 B)False

Question 20

Total reserves in the banking system consist of:

Accepted Answer

A) vault cash held at commercial banks and other depository institutions 
B) reserve deposits held at Federal Reserve banks 
C) currency in circulation 
D) both a and b 
A) vault cash held at commercial banks and other depository institutions 
B) reserve deposits held at Federal Reserve banks 
C) currency in circulation 
D) both a and b

One factor that decreases the volume of bank reserves is a decrease in:

If the Fed wishes to stimulate the economy,it may:

Currently,the backing for Federal Reserves notes is primarily in the form of:

One of the reasons open market operations are conducted virtually every business day is to implement changes in the money supply called for by the Federal Open Market Committee.

The U.S.Treasury has primary responsibility for management of the federal debt.

Under required reserves of 20%,the maximum to which the money supply could be expanded by the banking system is:

Assume that a banking system must keep reserves of 20% against deposits.The bank receives a primary deposit of $20,000.What would be the maximum amount of loan that could be made by the system?

Assume that a bank must keep reserves of 20% against deposits.The bank receives a primary deposit of $50,000.What amount of excess reserves can the bank safely lend?

The government body primarily responsible for monetary policy is Congress.

Various programs of the federal government help stabilize disposable income,and in turn,economic activity in general.In so doing:

Price inflation:

Primary groups of policy makers that are actively involved in achieving a nation's economic policy objectives include all of the following EXCEPT:

If a check is written for the full amount of a derivative deposit created by a bank loan and then is sent to a bank in another city for deposit:

Almost all Treasury disbursements are made by:

Assume that a bank receives a primary deposit of $1,000.If the reserve requirement is 25%,what will be the amount of excess reserves available for lending purposes?

In the fractional reserve system,banks must hold,with the Fed,reserves equal to a certain percentage of their deposits.

If the Fed wishes to stimulate the economy,it may:

Federal Reserve open market operations,setting reserve requirement,and lending to depositories are:

The U.S.Treasury is responsible for refinancing the outstanding debt of the government.

Total reserves in the banking system consist of:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters

Exam 5: Policy Makers and the Money Supply

One factor that decreases the volume of bank reserves is a decrease in:

If the Fed wishes to stimulate the economy,it may:

Currently,the backing for Federal Reserves notes is primarily in the form of:

One of the reasons open market operations are conducted virtually every business day is to implement changes in the money supply called for by the Federal Open Market Committee.

The U.S.Treasury has primary responsibility for management of the federal debt.

Under required reserves of 20%,the maximum to which the money supply could be expanded by the banking system is:

Assume that a banking system must keep reserves of 20% against deposits.The bank receives a primary deposit of $20,000.What would be the maximum amount of loan that could be made by the system?

Assume that a bank must keep reserves of 20% against deposits.The bank receives a primary deposit of $50,000.What amount of excess reserves can the bank safely lend?

The government body primarily responsible for monetary policy is Congress.

Various programs of the federal government help stabilize disposable income,and in turn,economic activity in general.In so doing:

Price inflation:

Primary groups of policy makers that are actively involved in achieving a nation's economic policy objectives include all of the following EXCEPT:

If a check is written for the full amount of a derivative deposit created by a bank loan and then is sent to a bank in another city for deposit:

Almost all Treasury disbursements are made by:

Assume that a bank receives a primary deposit of $1,000.If the reserve requirement is 25%,what will be the amount of excess reserves available for lending purposes?

In the fractional reserve system,banks must hold,with the Fed,reserves equal to a certain percentage of their deposits.

If the Fed wishes to stimulate the economy,it may:

Federal Reserve open market operations,setting reserve requirement,and lending to depositories are:

The U.S.Treasury is responsible for refinancing the outstanding debt of the government.

Total reserves in the banking system consist of:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuation

Securities Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Budgeting Analysis

Capital Structure and the Cost of Capital

Filters