Question 1

The members of the Board of Governors of the Federal Reserve are

Accepted Answer

A) elected by a vote of the Federal Reserve District Bank presidents. 
B) appointed by the President of the United States with approval by the Senate. 
C) appointed by the Congress with approval by the President of the United States. 
D) elected by a general election of the citizens of the United States. 
A) elected by a vote of the Federal Reserve District Bank presidents. 
B) appointed by the President of the United States with approval by the Senate. 
C) appointed by the Congress with approval by the President of the United States. 
D) elected by a general election of the citizens of the United States.

Question 2

Lowering the required reserve ratio raises the simple deposit multiplier.

Accepted Answer

A) True 
 B)False

Question 3

The larger the simple deposit multiplier,

Accepted Answer

A) the higher the required reserve ratio. 
B) the higher the discount rate. 
C) the larger the change in the money supply for a given change in deposits. 
D) the less likely the Fed will be to use its monetary policy tools. 
A) the higher the required reserve ratio. 
B) the higher the discount rate. 
C) the larger the change in the money supply for a given change in deposits. 
D) the less likely the Fed will be to use its monetary policy tools.

Question 4

An "open market operation" is said to occur when the Fed

Accepted Answer

A) arranges for the merger of two banks. 
B) changes the interest rate at which it lends reserves. 
C) transfers reserves between banks. 
D) buys or sells government securities. 
A) arranges for the merger of two banks. 
B) changes the interest rate at which it lends reserves. 
C) transfers reserves between banks. 
D) buys or sells government securities.

Question 5

Suppose the Fed forecasts a reduction in cash leakages.It might offset the effect of this on the money supply by

Accepted Answer

A) buying government securities. 
B) selling government securities. 
C) lowering the required reserve ratio. 
D) lowering the discount rate. 
A) buying government securities. 
B) selling government securities. 
C) lowering the required reserve ratio. 
D) lowering the discount rate.

Question 6

The funds the Fed receives from selling government securities D.C.

Accepted Answer

A) are deposited in a commercial bank. 
B) disappear into thin air. 
C) are turned over to the Office of Management and Budget in Washington, 
D) are deposited in the U.S.Treasury. 
A) are deposited in a commercial bank. 
B) disappear into thin air. 
C) are turned over to the Office of Management and Budget in Washington, 
D) are deposited in the U.S.Treasury.

Question 7

To decrease the money supply,the Fed may sell government securities or lower taxes.

Accepted Answer

A) True 
 B)False

Question 8

If the Fed _____________________,the money supply will ultimately __________.

Accepted Answer

A) raises the discount rate relative to the federal funds rate;decrease 
B) lowers the discount rate relative to the federal funds rate;increase 
C) lowers the discount rate relative to the federal funds rate;decrease 
D) raises the discount rate relative to the federal funds rate;increase 
E) a and b 
A) raises the discount rate relative to the federal funds rate;decrease 
B) lowers the discount rate relative to the federal funds rate;increase 
C) lowers the discount rate relative to the federal funds rate;decrease 
D) raises the discount rate relative to the federal funds rate;increase 
E) a and b

Question 9

If reserves increase by $5 million,what is the difference in the resulting change in checkable deposits when the required reserve ratio is 12.5 percent compared to when it is 10 percent?

Accepted Answer

A) $12.5 million 
B) $10 million 
C) $2.5 million 
D) $100 million 
A) $12.5 million 
B) $10 million 
C) $2.5 million 
D) $100 million

Question 10

Controlling the nation's money supply is the most important duty of the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 11

An open market purchase by the Fed

Accepted Answer

A) decreases the supply of money. 
B) increases the supply of money. 
C) decreases the demand for money. 
D) increases the demand for money. 
A) decreases the supply of money. 
B) increases the supply of money. 
C) decreases the demand for money. 
D) increases the demand for money.

Question 12

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 13

The Federal Reserve System is the

Accepted Answer

A) federal government agency that collects taxes and spends these receipts on tanks,bridges,government employees' salaries,etc. 
B) company that delivers packages to your front door. 
C) central bank of the United States. 
D) federal government agency that collects and disseminates all the economic data that economists are interested in. 
A) federal government agency that collects taxes and spends these receipts on tanks,bridges,government employees' salaries,etc. 
B) company that delivers packages to your front door. 
C) central bank of the United States. 
D) federal government agency that collects and disseminates all the economic data that economists are interested in.

Question 14

If a bank has zero excess reserves and one of its creditworthy customers applies for a loan,the bank may be able to grant the loan if it can

Accepted Answer

A) apply some of its loan repayments to obtain the funds for the new loan. 
B) obtain extra funds in the federal funds market. 
C) obtain extra funds by borrowing from the Fed. 
D) any of the above 
E) b or c 
A) apply some of its loan repayments to obtain the funds for the new loan. 
B) obtain extra funds in the federal funds market. 
C) obtain extra funds by borrowing from the Fed. 
D) any of the above 
E) b or c

Question 15

When the federal government incurs a budget deficit,it will

Accepted Answer

A) mint more coins and spend them. 
B) create money out of thin air. 
C) impose a special tax on all income earners. 
D) borrow money from the Federal Reserve System by issuing securities. 
E) borrow money from the public by issuing government securities. 
A) mint more coins and spend them. 
B) create money out of thin air. 
C) impose a special tax on all income earners. 
D) borrow money from the Federal Reserve System by issuing securities. 
E) borrow money from the public by issuing government securities.

Question 16

A required reserve ratio of 12 percent gives rise to a simple deposit multiplier of

Accepted Answer

A) 12. 
B) 83.33. 
C) 6.67. 
D) 8.33. 
A) 12. 
B) 83.33. 
C) 6.67. 
D) 8.33.

Question 17

Suppose that the current federal funds rate is below the federal funds target rate.In order to raise the federal funds rate the Fed will ________________ securities on the open market which will ________________ the supply of reserves in the market for reserves,pushing the rate closer to the target rate.

Accepted Answer

A) sell;increase 
B) purchase;increase 
C) purchase;decrease 
D) sell;decrease 
A) sell;increase 
B) purchase;increase 
C) purchase;decrease 
D) sell;decrease

Question 18

The simple deposit multiplier is

Accepted Answer

A) the reciprocal of the required reserve ratio. 
B) always 1. 
C) the same as the required reserve ratio. 
D) different from bank to bank even if the required reserve ratio is the same for all banks. 
A) the reciprocal of the required reserve ratio. 
B) always 1. 
C) the same as the required reserve ratio. 
D) different from bank to bank even if the required reserve ratio is the same for all banks.

Question 19

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 20

If the Fed purchases government securities from a commercial bank,which of the following will happen?

Accepted Answer

A) The Fed will increase the bank's reserves on deposit at the Fed. 
B) The Fed will decrease the bank's reserves on deposit at the Fed. 
C) The assets (government securities)of the Fed will decrease. 
D) The assets (government securities)of the Fed will increase. 
E) a and d 
A) The Fed will increase the bank's reserves on deposit at the Fed. 
B) The Fed will decrease the bank's reserves on deposit at the Fed. 
C) The assets (government securities)of the Fed will decrease. 
D) The assets (government securities)of the Fed will increase. 
E) a and d

Exam 13: The Federal Reserve System

The members of the Board of Governors of the Federal Reserve are

Lowering the required reserve ratio raises the simple deposit multiplier.

The larger the simple deposit multiplier,

An "open market operation" is said to occur when the Fed

Suppose the Fed forecasts a reduction in cash leakages.It might offset the effect of this on the money supply by

The funds the Fed receives from selling government securities D.C.

To decrease the money supply,the Fed may sell government securities or lower taxes.

If the Fed _____________________,the money supply will ultimately __________.

If reserves increase by $5 million,what is the difference in the resulting change in checkable deposits when the required reserve ratio is 12.5 percent compared to when it is 10 percent?

Controlling the nation's money supply is the most important duty of the Federal Reserve.

An open market purchase by the Fed

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

The Federal Reserve System is the

If a bank has zero excess reserves and one of its creditworthy customers applies for a loan,the bank may be able to grant the loan if it can

When the federal government incurs a budget deficit,it will

A required reserve ratio of 12 percent gives rise to a simple deposit multiplier of

The simple deposit multiplier is

When commercial banks need more Federal Reserve Notes,

If the Fed purchases government securities from a commercial bank,which of the following will happen?

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

If the Fed ___________,the money supply will ultimately .