Question 1

If the Fed wants to decrease the money supply,it can:

Accepted Answer

A)  Increase the money multiplier. 
B)  Decrease the discount rate. 
C)  Sell government bonds. 
D)  Decrease the minimum reserve ratio. 
A)  Increase the money multiplier. 
B)  Decrease the discount rate. 
C)  Sell government bonds. 
D)  Decrease the minimum reserve ratio.

Question 2

The key decision maker for U.S.monetary policy is:

Accepted Answer

A)  Congress. 
B)  The president. 
C)  The president's cabinet. 
D)  The Board of Governors. 
A)  Congress. 
B)  The president. 
C)  The president's cabinet. 
D)  The Board of Governors.

Question 3

Suppose the banks in the Federal Reserve System have $1 billion in transactions accounts and the reserve requirement is 0.10.Ceteris paribus,if the reserve requirement is increased to 0.20,then excess reserves will:

Accepted Answer

A)  Increase by $100 million. 
B)  Increase by $200 million. 
C)  Decrease by $100 million. 
D)  Decrease by $200 million. 
A)  Increase by $100 million. 
B)  Increase by $200 million. 
C)  Decrease by $100 million. 
D)  Decrease by $200 million.

Question 4

The Federal Reserve banks accept deposits from individuals and banks.

Accepted Answer

A) True 
 B)False

Question 5

The policy lever most commonly used by the Fed is:

Accepted Answer

A)  Changes in the discount rate. 
B)  Buying and selling bonds. 
C)  Changes in the reserve requirement. 
D)  Foreign-exchange operations. 
A)  Changes in the discount rate. 
B)  Buying and selling bonds. 
C)  Changes in the reserve requirement. 
D)  Foreign-exchange operations.

Question 6

Figure 14.1  
-Refer to Figure 14.1.Suppose the Federal Reserve _______ bonds in the open market.The money supply will decrease and cause a shift from ______.

Accepted Answer

A)  Buys;AD1 to AD2 
B)  Buys;AS2 to AS3 
C)  Sells;AD2 to AD1 
D)  Sells;AS2 to AS3 
A)  Buys;AD1 to AD2 
B)  Buys;AS2 to AS3 
C)  Sells;AD2 to AD1 
D)  Sells;AS2 to AS3

Question 7

When the Fed sells bonds,the quantity of reserves in the banking system declines and the money supply decreases.

Accepted Answer

A) True 
 B)False

Question 8

Excess reserves are:

Accepted Answer

A)  Bank reserves in excess of required reserves. 
B)  Legal reserves in excess of lending reserves. 
C)  Transactions deposits plus traveler's checks. 
D)  Total reserves plus deficient reserves. 
A)  Bank reserves in excess of required reserves. 
B)  Legal reserves in excess of lending reserves. 
C)  Transactions deposits plus traveler's checks. 
D)  Total reserves plus deficient reserves.

Question 9

Which of the following is not true about excess reserves?

Accepted Answer

A)  They change when the reserve requirement changes. 
B)  They are equal to the required reserve ratio times transactions deposits. 
C)  They are bank reserves beyond what the bank is required to hold. 
D)  They represent the dollars an individual bank can lenD. 
A)  They change when the reserve requirement changes. 
B)  They are equal to the required reserve ratio times transactions deposits. 
C)  They are bank reserves beyond what the bank is required to hold. 
D)  They represent the dollars an individual bank can lenD.

Question 10

Which of the following cannot be used to shift aggregate demand?

Accepted Answer

A)  A change in government spending. 
B)  A change in taxes. 
C)  Monetary policy. 
D)  A change in the price level. 
A)  A change in government spending. 
B)  A change in taxes. 
C)  Monetary policy. 
D)  A change in the price level.

Question 11

Members of the Federal Reserve Board of Governors are appointed for one fourteen-year term so that they:

Accepted Answer

A)  Have time to learn how the Fed operates. 
B)  Are more likely to make politically acceptable decisions. 
C)  Make their decisions based on economic,rather than political,considerations. 
D)  Have enough time to travel to all 12 regional banks. 
A)  Have time to learn how the Fed operates. 
B)  Are more likely to make politically acceptable decisions. 
C)  Make their decisions based on economic,rather than political,considerations. 
D)  Have enough time to travel to all 12 regional banks.

Question 12

When the Fed announces that it is raising the federal funds rate,this signals its intention to _______ bonds in the open market and _______ the money supply.

Accepted Answer

A)  Buy;reduce 
B)  Buy;increase 
C)  Sell;reduce 
D)  Sell;increase 
A)  Buy;reduce 
B)  Buy;increase 
C)  Sell;reduce 
D)  Sell;increase

Question 13

Which of the following approaches should the Fed use if it experiences large lags and mistakes in monetary policy?

Accepted Answer

A)  Discretionary policy 
B)  An eclectic approach 
C)  Fixed rules 
D)  Fiscal policy 
A)  Discretionary policy 
B)  An eclectic approach 
C)  Fixed rules 
D)  Fiscal policy

Question 14

To decrease the money supply the Fed can:

Accepted Answer

A)  Reduce the reserve requirement,raise the discount rate,or sell bonds. 
B)  Raise the reserve requirement,raise the discount rate,or sell bonds. 
C)  Raise the reserve requirement,reduce the discount rate,or buy bonds. 
D)  Raise the reserve requirement,raise the discount rate,or buy bonds. 
A)  Reduce the reserve requirement,raise the discount rate,or sell bonds. 
B)  Raise the reserve requirement,raise the discount rate,or sell bonds. 
C)  Raise the reserve requirement,reduce the discount rate,or buy bonds. 
D)  Raise the reserve requirement,raise the discount rate,or buy bonds.

Question 15

Both monetary policy and fiscal policy shift the aggregate demand curve.

Accepted Answer

A) True 
 B)False

Question 16

The Fed's eclecticism reflects:

Accepted Answer

A)  A combination of flexible rules and limited discretion. 
B)  Fixed rules that are set for monetary growth rates. 
C)  Discretionary policy but not rules. 
D)  The targeting of interest rates as the primary goal to be achieved by monetary policy. 
A)  A combination of flexible rules and limited discretion. 
B)  Fixed rules that are set for monetary growth rates. 
C)  Discretionary policy but not rules. 
D)  The targeting of interest rates as the primary goal to be achieved by monetary policy.

Question 17

Restrictive monetary policy will:

Accepted Answer

A)  Decrease the lending capacity for banks. 
B)  Reduce interest rates. 
C)  Cause a rightward shift of aggregate demand. 
D)  Raise the equilibrium price level. 
A)  Decrease the lending capacity for banks. 
B)  Reduce interest rates. 
C)  Cause a rightward shift of aggregate demand. 
D)  Raise the equilibrium price level.

Question 18

Profit-maximizing banks try to keep their excess reserves as high as possible.

Accepted Answer

A) True 
 B)False

Question 19

The key decision maker for general Federal Reserve policy is the:

Accepted Answer

A)  Federal Open Market Committee. 
B)  Board of Governors. 
C)  Federal Advisory Council. 
D)  Regional Federal Reserve banks. 
A)  Federal Open Market Committee. 
B)  Board of Governors. 
C)  Federal Advisory Council. 
D)  Regional Federal Reserve banks.

Question 20

A change in the reserve requirement affects:

Accepted Answer

A)  The money multiplier and excess reserves. 
B)  Excess reserves and the discount rate. 
C)  The discount rate and the federal funds rate. 
D)  The money multiplier and the federal funds rate. 
A)  The money multiplier and excess reserves. 
B)  Excess reserves and the discount rate. 
C)  The discount rate and the federal funds rate. 
D)  The money multiplier and the federal funds rate.

If the Fed wants to decrease the money supply,it can:

The key decision maker for U.S.monetary policy is:

Suppose the banks in the Federal Reserve System have $1 billion in transactions accounts and the reserve requirement is 0.10.Ceteris paribus,if the reserve requirement is increased to 0.20,then excess reserves will:

The Federal Reserve banks accept deposits from individuals and banks.

The policy lever most commonly used by the Fed is:

Figure 14.1 -Refer to Figure 14.1.Suppose the Federal Reserve _ bonds in the open market.The money supply will decrease and cause a shift from .

When the Fed sells bonds,the quantity of reserves in the banking system declines and the money supply decreases.

Excess reserves are:

Which of the following is not true about excess reserves?

Which of the following cannot be used to shift aggregate demand?

Members of the Federal Reserve Board of Governors are appointed for one fourteen-year term so that they:

When the Fed announces that it is raising the federal funds rate,this signals its intention to _ bonds in the open market and _ the money supply.

Which of the following approaches should the Fed use if it experiences large lags and mistakes in monetary policy?

To decrease the money supply the Fed can:

Both monetary policy and fiscal policy shift the aggregate demand curve.

The Fed's eclecticism reflects:

Restrictive monetary policy will:

Profit-maximizing banks try to keep their excess reserves as high as possible.

The key decision maker for general Federal Reserve policy is the:

A change in the reserve requirement affects:

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 decrease the money supply,it can:

The key decision maker for U.S.monetary policy is:

Suppose the banks in the Federal Reserve System have $1 billion in transactions accounts and the reserve requirement is 0.10.Ceteris paribus,if the reserve requirement is increased to 0.20,then excess reserves will:

The Federal Reserve banks accept deposits from individuals and banks.

The policy lever most commonly used by the Fed is:

Figure 14.1 -Refer to Figure 14.1.Suppose the Federal Reserve _______ bonds in the open market.The money supply will decrease and cause a shift from ______.

When the Fed sells bonds,the quantity of reserves in the banking system declines and the money supply decreases.

Excess reserves are:

Which of the following is not true about excess reserves?

Which of the following cannot be used to shift aggregate demand?

Members of the Federal Reserve Board of Governors are appointed for one fourteen-year term so that they:

When the Fed announces that it is raising the federal funds rate,this signals its intention to _______ bonds in the open market and _______ the money supply.

Which of the following approaches should the Fed use if it experiences large lags and mistakes in monetary policy?

To decrease the money supply the Fed can:

Both monetary policy and fiscal policy shift the aggregate demand curve.

The Fed's eclecticism reflects:

Restrictive monetary policy will:

Profit-maximizing banks try to keep their excess reserves as high as possible.

The key decision maker for general Federal Reserve policy is the:

A change in the reserve requirement affects:

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

Figure 14.1 -Refer to Figure 14.1.Suppose the Federal Reserve _ bonds in the open market.The money supply will decrease and cause a shift from .

When the Fed announces that it is raising the federal funds rate,this signals its intention to _ bonds in the open market and _ the money supply.