Question 1

The Fed

Accepted Answer

A) clears checks. 
B) holds depository institutions' reserves. 
C) is the government's banker. 
D) supplies Federal Reserve Notes. 
E) all of the above 
A) clears checks. 
B) holds depository institutions' reserves. 
C) is the government's banker. 
D) supplies Federal Reserve Notes. 
E) all of the above

Question 2

Here is how an open market purchase works: The Fed __________ government securities to (from)a commercial bank,which raises the bank's deposits at the __________ and increases the bank's __________.

Accepted Answer

A) sells;Fed;reserves 
B) buys;Fed;reserves 
C) buys;Treasury;discount loans 
D) sells;Treasury;required reserve ratio 
E) buys;Fed;liabilities 
A) sells;Fed;reserves 
B) buys;Fed;reserves 
C) buys;Treasury;discount loans 
D) sells;Treasury;required reserve ratio 
E) buys;Fed;liabilities

Question 3

Explain the difference between the discount rate and the federal funds rate.If the Fed wants to lower one of these rates,which one can the Fed change by issuing an order? Describe in detail how the Fed helps to lower the other rate.

Accepted Answer

The federal funds rate is the interest r

Question 4

Explain the major differences between the Federal Reserve and the U.S.Treasury.

Accepted Answer

Although many people confuse the Treasur

Question 5

Which of the following Fed actions will decrease the money supply?

Accepted Answer

A) an open market purchase of Treasury bills 
B) an increase in the required reserve ratio 
C) a decrease in the discount rate relative to the federal funds rate 
D) all of the above 
E) none of the above 
A) an open market purchase of Treasury bills 
B) an increase in the required reserve ratio 
C) a decrease in the discount rate relative to the federal funds rate 
D) all of the above 
E) none of the above

Question 6

Which of the following has never been a monetary policy tool of the Fed?

Accepted Answer

A) open market operations 
B) the required reserve ratio 
C) the discount rate 
D) the term auction facility (TAF)program 
E) income tax rates 
A) open market operations 
B) the required reserve ratio 
C) the discount rate 
D) the term auction facility (TAF)program 
E) income tax rates

Question 7

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.

Question 8

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

Accepted Answer

A) controlling the money supply 
B) serving as the federal government's banker 
C) determining tax rates 
D) acting as a lender of last resort 
A) controlling the money supply 
B) serving as the federal government's banker 
C) determining tax rates 
D) acting as a lender of last resort

Question 9

If the Fed wants to decrease the money supply,it can __________ the required reserve ratio,conduct an open market __________,or __________ the discount rate.

Accepted Answer

A) raise;purchase;lower 
B) lower;purchase;lower 
C) raise;sale;raise 
D) lower;sale;lower 
E) none of the above 
A) raise;purchase;lower 
B) lower;purchase;lower 
C) raise;sale;raise 
D) lower;sale;lower 
E) none of the above

Question 10

The Fed

Accepted Answer

A) can examine the books of a member bank without warning. 
B) can examine the books of a member bank after giving advance notice. 
C) can examine the books of a member bank with the bank's permission. 
D) is never allowed to see the books of a privately owned bank. 
A) can examine the books of a member bank without warning. 
B) can examine the books of a member bank after giving advance notice. 
C) can examine the books of a member bank with the bank's permission. 
D) is never allowed to see the books of a privately owned bank.

Question 11

When the Fed increases the required reserve ratio,a bank's

Accepted Answer

A) required reserves are unaffected. 
B) required reserves are increased. 
C) required reserves are decreased. 
D) excess reserves are decreased. 
E) b and d 
A) required reserves are unaffected. 
B) required reserves are increased. 
C) required reserves are decreased. 
D) excess reserves are decreased. 
E) b and d

Question 12

If the Fed purchases government securities from commercial banks,the reserves of the banking system will immediately

Accepted Answer

A) increase by the amount of the purchase. 
B) increase by more than the amount of the purchase. 
C) remain constant. 
D) decrease by the amount of the purchase. 
E) decrease by more than the amount of the purchase. 
A) increase by the amount of the purchase. 
B) increase by more than the amount of the purchase. 
C) remain constant. 
D) decrease by the amount of the purchase. 
E) decrease by more than the amount of the purchase.

Question 13

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 14

Which of the following actions is most likely to lead to an increase in the money supply?

Accepted Answer

A) Fed purchases of government securities 
B) an increase in the required reserve ratio 
C) an increase in the discount rate 
D) none of the above 
A) Fed purchases of government securities 
B) an increase in the required reserve ratio 
C) an increase in the discount rate 
D) none of the above

Question 15

The Fed is one of the largest departments within the U.S.Treasury.

Accepted Answer

A) True 
 B)False

Question 16

If reserves increase by $7 million and the required reserve ratio is 12%,what is the resulting change in checkable deposits (or the money supply),assuming that there are no cash leakages and that banks hold zero excess reserves?

Accepted Answer

A) $0.84 million 
B) $7.95 million 
C) $5.83 million 
D) $58.33 million 
A) $0.84 million 
B) $7.95 million 
C) $5.83 million 
D) $58.33 million

Question 17

Which of the following statements is false?

Accepted Answer

A) The Fed serves as the lender of last resort for banks. 
B) The Fed serves as a fiscal agent for the U.S.Treasury. 
C) A major responsibility of the Fed is to control the nation's money supply. 
D) The federal government is the Fed's banker. 
A) The Fed serves as the lender of last resort for banks. 
B) The Fed serves as a fiscal agent for the U.S.Treasury. 
C) A major responsibility of the Fed is to control the nation's money supply. 
D) The federal government is the Fed's banker.

Question 18

If the Fed purchases government securities from Bank A,__________ in the banking system __________ and the money supply __________.

Accepted Answer

A) reserves;fall;falls 
B) reserves;rise;falls 
C) reserves;rise;rises 
D) excess reserves;fall;rises 
E) excess reserves;rise;falls 
A) reserves;fall;falls 
B) reserves;rise;falls 
C) reserves;rise;rises 
D) excess reserves;fall;rises 
E) excess reserves;rise;falls

Question 19

The president of the Federal Reserve District Bank of New York holds a permanent seat on the Federal Open Market Committee.

Accepted Answer

A) True 
 B)False

Question 20

-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.At the end of this process of money creation,what is the total amount of new checkable deposits?

Accepted Answer

A) $1,000,000 
B) $1,000 
C) $10,000 
D) $100,000 
A) $1,000,000 
B) $1,000 
C) $10,000 
D) $100,000

Exam 13: The Federal Reserve System

The Fed

Here is how an open market purchase works: The Fed __________ government securities to (from)a commercial bank,which raises the bank's deposits at the __________ and increases the bank's __________.

Explain the difference between the discount rate and the federal funds rate.If the Fed wants to lower one of these rates,which one can the Fed change by issuing an order? Describe in detail how the Fed helps to lower the other rate.

Explain the major differences between the Federal Reserve and the U.S.Treasury.

Which of the following Fed actions will decrease the money supply?

Which of the following has never been a monetary policy tool of the Fed?

Open market operations are the

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

If the Fed wants to decrease the money supply,it can __________ the required reserve ratio,conduct an open market __________,or __________ the discount rate.

The Fed

When the Fed increases the required reserve ratio,a bank's

If the Fed purchases government securities from commercial banks,the reserves of the banking system will immediately

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

Which of the following actions is most likely to lead to an increase in the money supply?

The Fed is one of the largest departments within the U.S.Treasury.

If reserves increase by $7 million and the required reserve ratio is 12%,what is the resulting change in checkable deposits (or the money supply),assuming that there are no cash leakages and that banks hold zero excess reserves?

Which of the following statements is false?

If the Fed purchases government securities from Bank A,__________ in the banking system __________ and the money supply __________.

The president of the Federal Reserve District Bank of New York holds a permanent seat on the Federal Open Market Committee.

-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.At the end of this process of money creation,what is the total amount of new checkable deposits?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, controlled, and Relative

Supply,demand,and Price: Applications

Macroeconomic Measurements, part I: Prices and Unemployment

Macroeconomic Measurements, part II: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self-Regulating Economy

Keynesian Macroeconomics and Economic Instability: a Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money,banking,and the Financial System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, technology, ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case for and Against Government: Five Topics Considered

Stocks, bonds, futures, and Options

Filters

Here is how an open market purchase works: The Fed government securities to (from)a commercial bank,which raises the bank's deposits at the and increases the bank's __.

If the Fed wants to decrease the money supply,it can the required reserve ratio,conduct an open market ,or __ the discount rate.

If the Fed purchases government securities from Bank A, in the banking system and the money supply __.