Question 1

When commercial banks need more Federal Reserve Notes,

Accepted Answer

A)  they call the Bureau of Engraving and Printing,which delivers the requested amount. 
B)  they call the Board of Governors of the Fed,which delivers the requested amount. 
C)  they ask their customers to exchange their Federal Reserve Notes for U.S.Treasury securities. 
D)  they call the Treasury,which delivers the requested amount. 
E)  they call their Federal Reserve District Bank,which delivers the requested amount. 
A)  they call the Bureau of Engraving and Printing,which delivers the requested amount. 
B)  they call the Board of Governors of the Fed,which delivers the requested amount. 
C)  they ask their customers to exchange their Federal Reserve Notes for U.S.Treasury securities. 
D)  they call the Treasury,which delivers the requested amount. 
E)  they call their Federal Reserve District Bank,which delivers the requested amount.

Question 2

Suppose that the federal funds rate and the discount rate are equal initially at 3%.If the discount rate is then lowered to 2.5%,to whom will a bank be more likely to go for a loan: the Federal Reserve or another bank? Explain your answer in detail,and be sure to mention the impact that this situation would have on the money supply..

Accepted Answer

When the Fed lowers the discount rate be

Question 3

Which of the following is not a monetary policy tool of the Fed?

Accepted Answer

A)  changing the required reserve ratio 
B)  changing the discount rate 
C)  setting the price level and the market rate of interest 
D)  conducting open market operations 
A)  changing the required reserve ratio 
B)  changing the discount rate 
C)  setting the price level and the market rate of interest 
D)  conducting open market operations

Question 4

If the Fed lowers the discount rate at the same time it conducts an open market sale,it follows that

Accepted Answer

A)  the money supply will fall. 
B)  the money supply will rise. 
C)  the money supply will remain unchanged. 
D)  cash leakages will rise. 
E)  There is not enough information to answer this question. 
A)  the money supply will fall. 
B)  the money supply will rise. 
C)  the money supply will remain unchanged. 
D)  cash leakages will rise. 
E)  There is not enough information to answer this question.

Question 5

Why does the president of the Federal Reserve Bank of New York hold a permanent seat on the FOMC?

Accepted Answer

A)  The New York Fed is responsible for executing open market operations. 
B)  A substantial amount of financial activity takes place in New York City. 
C)  The Fed Board of Governors holds its regularly scheduled meetings in New York City. 
D)  The Federal Reserve Bank of New York is the original Fed district; the other eleven districts were formed later by the Banking Act of 1935 
E)  a and b 
A)  The New York Fed is responsible for executing open market operations. 
B)  A substantial amount of financial activity takes place in New York City. 
C)  The Fed Board of Governors holds its regularly scheduled meetings in New York City. 
D)  The Federal Reserve Bank of New York is the original Fed district; the other eleven districts were formed later by the Banking Act of 1935 
E)  a and b

Question 6

If the Fed were to increase the discount rate so that it was much higher than the federal funds rate,eventually

Accepted Answer

A)  reserves would decrease and the money supply would decrease. 
B)  reserves would increase and the money supply would increase. 
C)  reserves would decrease and the money supply would increase. 
D)  reserves would increase and the money supply would decrease. 
E)  there is no impact on reserves or the money supply. 
A)  reserves would decrease and the money supply would decrease. 
B)  reserves would increase and the money supply would increase. 
C)  reserves would decrease and the money supply would increase. 
D)  reserves would increase and the money supply would decrease. 
E)  there is no impact on reserves or the money supply.

Question 7

When a commercial bank borrows from the Fed,

Accepted Answer

A)  the reserves of the bank fall. 
B)  the bank can make more loans. 
C)  it must be because the bank is not meeting its reserve requirements. 
D)  the money supply falls. 
A)  the reserves of the bank fall. 
B)  the bank can make more loans. 
C)  it must be because the bank is not meeting its reserve requirements. 
D)  the money supply falls.

Question 8

The Federal Reserve Bank of Minneapolis once chartered a small airplane to deliver money to a commercial bank that was experiencing a "mad run" on the bank.

Accepted Answer

A) True 
 B)False

Question 9

The original boundaries for the Federal Reserve districts were determined based on

Accepted Answer

A)  Congressional district boundaries. 
B)  population distributions obtained from the census. 
C)  trade boundaries. 
D)  state lines. 
E)  none of the above 
A)  Congressional district boundaries. 
B)  population distributions obtained from the census. 
C)  trade boundaries. 
D)  state lines. 
E)  none of the above

Question 10

An open market sale by the Fed will

Accepted Answer

A)  increase bank reserves. 
B)  increase currency held by the public or vault cash. 
C)  increase the money supply. 
D)  reduce the money supply. 
A)  increase bank reserves. 
B)  increase currency held by the public or vault cash. 
C)  increase the money supply. 
D)  reduce the money supply.

Question 11

The major policy-making group within the Fed is the __________ Committee.

Accepted Answer

A)  Federal Reserve Tax 
B)  Federal Reserve Banking 
C)  Federal Open Market 
D)  Federal Reserve Decision-Making 
E)  Regional Bank 
A)  Federal Reserve Tax 
B)  Federal Reserve Banking 
C)  Federal Open Market 
D)  Federal Reserve Decision-Making 
E)  Regional Bank

Question 12

A Federal Reserve Bank is located in which of the following cities?

Accepted Answer

A)  Detroit 
B)  Baltimore 
C)  Minneapolis 
D)  Seattle 
E)  Cincinnati 
A)  Detroit 
B)  Baltimore 
C)  Minneapolis 
D)  Seattle 
E)  Cincinnati

Question 13

Which of the following is not a major responsibility of the Fed?

Accepted Answer

A)  supplying the economy with paper money 
B)  providing check-clearing services 
C)  supervising member banks 
D)  serving as fiscal agent for the Treasury 
E)  All of the above are major responsibilities of the Fed. 
A)  supplying the economy with paper money 
B)  providing check-clearing services 
C)  supervising member banks 
D)  serving as fiscal agent for the Treasury 
E)  All of the above are major responsibilities of the Fed.

Question 14

The interest rate that the Fed pays on reserves acts as a ceiling on the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 15

Refer to Exhibit 13-2.What word (up or down)should go in the place of blank (3)and blank (4),respectively?

Accepted Answer

A)  up; up 
B)  up; down 
C)  down; up 
D)  down; down 
A)  up; up 
B)  up; down 
C)  down; up 
D)  down; down

Question 16

The smaller the required reserve ratio,the larger the simple deposit multiplier.

Accepted Answer

A) True 
 B)False

Question 17

Refer to Exhibit 13-1.Suppose that the Federal Reserve conducts open market operations by purchasing $1,000 worth of government securities from Bank A.As a result,Bank A finds itself with $1,000 in excess reserves that it lends out and those funds end up in Bank B.The loan made by Bank B ends up in Bank C.What dollar value goes in blanks (C)and (D),respectively?.

Accepted Answer

A)  $900; $810 
B)  $90; $810 
C)  $110; $700 
D)  $700; $110 
A)  $900; $810 
B)  $90; $810 
C)  $110; $700 
D)  $700; $110

Question 18

The chairman of the Board of Governors of the Fed is designated by ____________________ to serve a _______ year term as chairman.

Accepted Answer

A)  the President; four 
B)  Congress; fourteen 
C)  the President; twelve 
D)  Congress; four 
A)  the President; four 
B)  Congress; fourteen 
C)  the President; twelve 
D)  Congress; four

Question 19

The supply curve of reserves has two kinks in it: one at the _________________ and the other at the ____________________ rate.

Accepted Answer

A)  interest rate that the Fed pays on reserves; discount 
B)  federal funds rate; discount 
C)  prime rate; discount 
D)  discount rate; federal funds rate 
A)  interest rate that the Fed pays on reserves; discount 
B)  federal funds rate; discount 
C)  prime rate; discount 
D)  discount rate; federal funds rate

Question 20

Open market operations are the

Accepted Answer

A)  buying and selling of Federal Reserve Notes in the open market. 
B)  means by which the Fed supplies the economy with currency. 
C)  means by which the Fed acts as the government's banker. 
D)  buying and selling of government securities by the Fed. 
E)  buying and selling of government securities by the Treasury. 
A)  buying and selling of Federal Reserve Notes in the open market. 
B)  means by which the Fed supplies the economy with currency. 
C)  means by which the Fed acts as the government's banker. 
D)  buying and selling of government securities by the Fed. 
E)  buying and selling of government securities by the Treasury.

Exam 13: Factor Markets: With Emphasis on the Labor Market

When commercial banks need more Federal Reserve Notes,

Which of the following is not a monetary policy tool of the Fed?

If the Fed lowers the discount rate at the same time it conducts an open market sale,it follows that

Why does the president of the Federal Reserve Bank of New York hold a permanent seat on the FOMC?

If the Fed were to increase the discount rate so that it was much higher than the federal funds rate,eventually

When a commercial bank borrows from the Fed,

The Federal Reserve Bank of Minneapolis once chartered a small airplane to deliver money to a commercial bank that was experiencing a "mad run" on the bank.

The original boundaries for the Federal Reserve districts were determined based on

An open market sale by the Fed will

The major policy-making group within the Fed is the __________ Committee.

A Federal Reserve Bank is located in which of the following cities?

Which of the following is not a major responsibility of the Fed?

The interest rate that the Fed pays on reserves acts as a ceiling on the federal funds rate.

Refer to Exhibit 13-2.What word (up or down)should go in the place of blank (3)and blank (4),respectively?

The smaller the required reserve ratio,the larger the simple deposit multiplier.

The chairman of the Board of Governors of the Fed is designated by ____________________ to serve a _______ year term as chairman.

The supply curve of reserves has two kinks in it: one at the _________________ and the other at the ____________________ rate.

Open market operations are the

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The chairman of the Board of Governors of the Fed is designated by ______________ to serve a _ year term as chairman.

The supply curve of reserves has two kinks in it: one at the _ and the other at the ____ rate.