Question 1

If the Fed wants to increase bank reserves,it can:

Accepted Answer

A)  Buy bonds. 
B)  Raise the discount rate. 
C)  Raise the reserve requirement. 
D)  Sell bonds. 
A)  Buy bonds. 
B)  Raise the discount rate. 
C)  Raise the reserve requirement. 
D)  Sell bonds.

Question 2

Expansionary monetary policy will:

Accepted Answer

A)  Reduce the lending capacity for banks. 
B)  Raise interest rates. 
C)  Encourage people to borrow more money. 
D)  Reduce the equilibrium price level. 
A)  Reduce the lending capacity for banks. 
B)  Raise interest rates. 
C)  Encourage people to borrow more money. 
D)  Reduce the equilibrium price level.

Question 3

The twelve regional Federal Reserve banks are responsible for:

Accepted Answer

A)  Accepting deposits from nonbank businesses. 
B)  Providing currency to other countries. 
C)  Lending money to individuals. 
D)  Lending reserves to private banks. 
A)  Accepting deposits from nonbank businesses. 
B)  Providing currency to other countries. 
C)  Lending money to individuals. 
D)  Lending reserves to private banks.

Question 4

The interest rate private banks charge each other for lending reserves is called the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 5

Answer the indicated question on the basis of the information in Table 14.1.Each question is based on the original balance sheet.
  
-Based on the information in Table 14.1,the money multiplier is equal to:

Accepted Answer

A)  1.5. 
B)  7.5. 
C)  10.0. 
D)  11.6 
A)  1.5. 
B)  7.5. 
C)  10.0. 
D)  11.6

Question 6

Answer the indicated question on the basis of the information in Table 14.2.Each question is based on the original balance sheet.
  
-Using the reserve requirement in Table 14.2,if the Fed buys $20 billion worth of bonds in the open market,the lending capacity of the banking system will _______ by approximately ______.

Accepted Answer

A)  Rise;$20 billion 
B)  Rise;$133 billion 
C)  Fall;$20 billion 
D)  Fall;$133 billion 
A)  Rise;$20 billion 
B)  Rise;$133 billion 
C)  Fall;$20 billion 
D)  Fall;$133 billion

Question 7

The 12 regional Fed banks do all of the following except:

Accepted Answer

A)  Clear checks between private banks. 
B)  Lend money to individuals. 
C)  Provide currency to banks. 
D)  Hold bank reserves. 
A)  Clear checks between private banks. 
B)  Lend money to individuals. 
C)  Provide currency to banks. 
D)  Hold bank reserves.

Question 8

According to the monetarist view,the aggregate supply curve is:

Accepted Answer

A)  Upward sloping to the right. 
B)  Perfectly vertical at the natural rate of unemployment. 
C)  Flat or horizontal until full employment is reached. 
D)  Flat or horizontal at all levels of output. 
A)  Upward sloping to the right. 
B)  Perfectly vertical at the natural rate of unemployment. 
C)  Flat or horizontal until full employment is reached. 
D)  Flat or horizontal at all levels of output.

Question 9

Which of the following best describes the eclectic aggregate supply curve?

Accepted Answer

A)  Horizontal until full employment is reached,and then it becomes vertical. 
B)  Vertical at all output levels. 
C)  First horizontal,then upward sloping,and finally vertical. 
D)  Downward sloping. 
A)  Horizontal until full employment is reached,and then it becomes vertical. 
B)  Vertical at all output levels. 
C)  First horizontal,then upward sloping,and finally vertical. 
D)  Downward sloping.

Question 10

Answer the indicated question on the basis of the information in Table 14.1.Each question is based on the original balance sheet.
  
-In Table 14.1,the level of total reserves is equal to:

Accepted Answer

A)  $1 trillion. 
B)  $920 billion. 
C)  $880 billion. 
D)  $80 billion. 
A)  $1 trillion. 
B)  $920 billion. 
C)  $880 billion. 
D)  $80 billion.

Question 11

The rate of interest banks charge each other for lending reserves is the:

Accepted Answer

A)  Federal funds rate. 
B)  Discount rate. 
C)  Money multiplier. 
D)  Excess reserve rate. 
A)  Federal funds rate. 
B)  Discount rate. 
C)  Money multiplier. 
D)  Excess reserve rate.

Question 12

By raising or lowering the ______,the Fed changes the cost of money for banks,which impacts the incentive to borrow reserves.

Accepted Answer

A)  Reserve ratio 
B)  Discount rate 
C)  Money multiplier 
D)  Yield 
A)  Reserve ratio 
B)  Discount rate 
C)  Money multiplier 
D)  Yield

Question 13

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

Accepted Answer

A)  Deposit insurance 
B)  The reserve requirement 
C)  The discount rate 
D)  The sale and purchase of Treasury bonds 
A)  Deposit insurance 
B)  The reserve requirement 
C)  The discount rate 
D)  The sale and purchase of Treasury bonds

Question 14

Answer the indicated question on the basis of the information in Table 14.2.Each question is based on the original balance sheet.
  
-Based on the information in Table 14.2,the required reserve ratio is:

Accepted Answer

A)  30 percent. 
B)  20 percent. 
C)  15 percent. 
D)  10 percent. 
A)  30 percent. 
B)  20 percent. 
C)  15 percent. 
D)  10 percent.

Question 15

Briefly explain the theory of advocates of "discretionary: monetary policy and the theory of the advocates of "fixed rules" policy".

Accepted Answer

Advocates of discretionary monetary poli

Question 16

Answer the indicated question on the basis of the information in Table 14.1.Each question is based on the original balance sheet.
  
-Using the reserve requirement in Table 14.1,if the Fed buys $25 billion worth of bonds in the open market,the lending capacity of the banking system will _______ by approximately ______.

Accepted Answer

A)  Rise;$25 billion 
B)  Rise;$250 billion 
C)  Fall;$25 billion 
D)  Fall;$250 billion 
A)  Rise;$25 billion 
B)  Rise;$250 billion 
C)  Fall;$25 billion 
D)  Fall;$250 billion

Question 17

For a given amount of total reserves,a decrease in required reserves causes an increase in excess reserves.

Accepted Answer

A) True 
 B)False

Question 18

If the Fed wishes to decrease the money supply it can:

Accepted Answer

A)  Raise the discount rate. 
B)  Buy bonds on the open market. 
C)  Decrease the required reserve ratio. 
D)  Decrease the federal funds rate. 
A)  Raise the discount rate. 
B)  Buy bonds on the open market. 
C)  Decrease the required reserve ratio. 
D)  Decrease the federal funds rate.

Question 19

Monetary policy involves the use of money and credit controls to:

Accepted Answer

A)  Move the economy along the aggregate demand curve. 
B)  Move the economy along the aggregate supply curve. 
C)  Shift the aggregate demand curve. 
D)  Shift the aggregate supply curve. 
A)  Move the economy along the aggregate demand curve. 
B)  Move the economy along the aggregate supply curve. 
C)  Shift the aggregate demand curve. 
D)  Shift the aggregate supply curve.

Question 20

Ceteris paribus,the amount of required reserves decreases when the dollar volume of transactions accounts increases.

Accepted Answer

A) True 
 B)False

If the Fed wants to increase bank reserves,it can:

Expansionary monetary policy will:

The twelve regional Federal Reserve banks are responsible for:

The interest rate private banks charge each other for lending reserves is called the federal funds rate.

Answer the indicated question on the basis of the information in Table 14.1.Each question is based on the original balance sheet. -Based on the information in Table 14.1,the money multiplier is equal to:

The 12 regional Fed banks do all of the following except:

According to the monetarist view,the aggregate supply curve is:

Which of the following best describes the eclectic aggregate supply curve?

Answer the indicated question on the basis of the information in Table 14.1.Each question is based on the original balance sheet. -In Table 14.1,the level of total reserves is equal to:

The rate of interest banks charge each other for lending reserves is the:

By raising or lowering the ______,the Fed changes the cost of money for banks,which impacts the incentive to borrow reserves.

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

Answer the indicated question on the basis of the information in Table 14.2.Each question is based on the original balance sheet. -Based on the information in Table 14.2,the required reserve ratio is:

Briefly explain the theory of advocates of "discretionary: monetary policy and the theory of the advocates of "fixed rules" policy".

For a given amount of total reserves,a decrease in required reserves causes an increase in excess reserves.

If the Fed wishes to decrease the money supply it can:

Monetary policy involves the use of money and credit controls to:

Ceteris paribus,the amount of required reserves decreases when the dollar volume of transactions accounts increases.

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Money and Banks

Economic Growth

Theory and Reality

International Trade

Filters

Exam 14: Monetary Policy

If the Fed wants to increase bank reserves,it can:

Expansionary monetary policy will:

The twelve regional Federal Reserve banks are responsible for:

The interest rate private banks charge each other for lending reserves is called the federal funds rate.

Answer the indicated question on the basis of the information in Table 14.1.Each question is based on the original balance sheet. -Based on the information in Table 14.1,the money multiplier is equal to:

The 12 regional Fed banks do all of the following except:

According to the monetarist view,the aggregate supply curve is:

Which of the following best describes the eclectic aggregate supply curve?

Answer the indicated question on the basis of the information in Table 14.1.Each question is based on the original balance sheet. -In Table 14.1,the level of total reserves is equal to:

The rate of interest banks charge each other for lending reserves is the:

By raising or lowering the ______,the Fed changes the cost of money for banks,which impacts the incentive to borrow reserves.

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

Answer the indicated question on the basis of the information in Table 14.2.Each question is based on the original balance sheet. -Based on the information in Table 14.2,the required reserve ratio is:

Briefly explain the theory of advocates of "discretionary: monetary policy and the theory of the advocates of "fixed rules" policy".

For a given amount of total reserves,a decrease in required reserves causes an increase in excess reserves.

If the Fed wishes to decrease the money supply it can:

Monetary policy involves the use of money and credit controls to:

Ceteris paribus,the amount of required reserves decreases when the dollar volume of transactions accounts increases.

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Competition

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Money and Banks

Economic Growth

Theory and Reality

International Trade

Filters