Question 1

When the Fed is acting as fiscal agent for the Treasury,it will

Accepted Answer

A) buy securities from the Treasury,thereby providing the Treasury with money to pay the government's bills. 
B) receive and process bids for Treasury securities in preparation for the Treasury's auction of securities. 
C) serve as a lender of last resort. 
D) supply the Treasury with paper money whenever the Treasury does not have enough funds to meet its bills. 
E) supervise the Treasury by examining its books. 
A) buy securities from the Treasury,thereby providing the Treasury with money to pay the government's bills. 
B) receive and process bids for Treasury securities in preparation for the Treasury's auction of securities. 
C) serve as a lender of last resort. 
D) supply the Treasury with paper money whenever the Treasury does not have enough funds to meet its bills. 
E) supervise the Treasury by examining its books.

Question 2

When a bank repays a _________________ loan,the Fed _____________________ the bank's reserve account.

Accepted Answer

A) overnight;subtracts the repayment from 
B) overnight;adds the repayment to 
C) discount;adds the repayment to 
D) discount;subtracts the repayment from 
A) overnight;subtracts the repayment from 
B) overnight;adds the repayment to 
C) discount;adds the repayment to 
D) discount;subtracts the repayment from

Question 3

The Board of Governors of the Federal Reserve is comprised of

Accepted Answer

A) seven persons,each appointed to a seven-year term. 
B) seven persons,each appointed to a fourteen-year term. 
C) fourteen persons,each appointed to a seven-year term. 
D) twelve persons,each appointed to a seven-year term. 
E) twelve persons,each appointed to a fourteen-year term. 
A) seven persons,each appointed to a seven-year term. 
B) seven persons,each appointed to a fourteen-year term. 
C) fourteen persons,each appointed to a seven-year term. 
D) twelve persons,each appointed to a seven-year term. 
E) twelve persons,each appointed to a fourteen-year term.

Question 4

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

Accepted Answer

A) St.Louis,Missouri 
B) Richmond,Virginia 
C) Atlanta,Georgia 
D) San Francisco,California 
E) all of the above 
A) St.Louis,Missouri 
B) Richmond,Virginia 
C) Atlanta,Georgia 
D) San Francisco,California 
E) all of the above

Question 5

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 6

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 7

Which of the following will decrease the money supply?

Accepted Answer

A) an increase in the discount rate (relative to the federal funds rate) 
B) an increase in the required reserve ratio 
C) an open market purchase by the Fed 
D) a and b 
E) a,b,and c 
A) an increase in the discount rate (relative to the federal funds rate) 
B) an increase in the required reserve ratio 
C) an open market purchase by the Fed 
D) a and b 
E) a,b,and c

Question 8

Suppose that the Fed undertakes an open market sale,selling $1 million worth of securities to a bank.If the required reserve ratio is 8%,checkable deposits (or the money supply),would _______________ by ________________ million,assuming that there are no cash leakages and that banks hold zero excess reserves.

Accepted Answer

A) rise;$12.5 
B) decline;$8 
C) decline;$12.5 
D) rise;$8 
A) rise;$12.5 
B) decline;$8 
C) decline;$12.5 
D) rise;$8

Question 9

The discount rate is sometimes also known as the primary credit rate.

Accepted Answer

A) True 
 B)False

Question 10

The Federal Reserve System came into existence with the Federal Reserve Act of

Accepted Answer

A) 1877. 
B) 1933. 
C) 1965. 
D) 1913. 
E) 1922. 
A) 1877. 
B) 1933. 
C) 1965. 
D) 1913. 
E) 1922.

Question 11

When a bank obtains a loan from the Fed,it follows that the

Accepted Answer

A) simple deposit multiplier rises. 
B) bank (itself)can create more loans. 
C) bank's reserves decrease. 
D) bank's reserves remain unchanged. 
E) none of the above 
A) simple deposit multiplier rises. 
B) bank (itself)can create more loans. 
C) bank's reserves decrease. 
D) bank's reserves remain unchanged. 
E) none of the above

Question 12

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

Accepted Answer

A) True 
 B)False

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

Both open market purchases and quantitative easing are directed at increasing reserves in the banking system and increasing the money supply.

Accepted Answer

A) True 
 B)False

Question 15

The Federal Open Market Committee (FOMC)is composed of the seven members of the Board of Governors,

Accepted Answer

A) the president of the New York Federal Reserve District Bank,and four of the remaining 11 Federal Reserve District Bank presidents who rotate on an annual basis. 
B) and five state governors who rotate on an annual basis. 
C) four Federal Reserve District Bank presidents who rotate on an annual basis,and the head of the Senate Banking Committee. 
D) and the Secretary of the Treasury. 
A) the president of the New York Federal Reserve District Bank,and four of the remaining 11 Federal Reserve District Bank presidents who rotate on an annual basis. 
B) and five state governors who rotate on an annual basis. 
C) four Federal Reserve District Bank presidents who rotate on an annual basis,and the head of the Senate Banking Committee. 
D) and the Secretary of the Treasury.

Question 16

When we speak of the Fed's responsibility to supervise member banks,we are saying that the

Accepted Answer

A) Fed's advisory board will help member banks manage their assets and liabilities. 
B) Fed's Open Market Committee will advise member banks regarding the purchase and sale of government securities. 
C) Fed's Board of Governors will advise member banks regarding the appropriate interest rates to be charged on various loans. 
D) Fed will advise member banks regarding the nature of loans and compliance with regulations. 
E) Fed will advise member banks about the proper control of each individual bank's money supply. 
A) Fed's advisory board will help member banks manage their assets and liabilities. 
B) Fed's Open Market Committee will advise member banks regarding the purchase and sale of government securities. 
C) Fed's Board of Governors will advise member banks regarding the appropriate interest rates to be charged on various loans. 
D) Fed will advise member banks regarding the nature of loans and compliance with regulations. 
E) Fed will advise member banks about the proper control of each individual bank's money supply.

Question 17

Suppose that the Fed undertakes an open market purchase of $5 million worth of securities from a bank.If 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) $4.17 million 
B) $7.95 million 
C) $5.68 million 
D) $41.67 million 
A) $4.17 million 
B) $7.95 million 
C) $5.68 million 
D) $41.67 million

Question 18

The Banking Act of 1935 changed the name of the _______________ to the Board of Governors of the Federal Reserve System.

Accepted Answer

A) Federal Open Market Committee 
B) Board of Monetary Affairs 
C) Central Bank Board 
D) Federal Reserve Board 
A) Federal Open Market Committee 
B) Board of Monetary Affairs 
C) Central Bank Board 
D) Federal Reserve Board

Question 19

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 20

If reserves increase by $4 million and the required reserve ratio is 8%,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) $3.2 million 
B) $3.7 million 
C) $5 million 
D) $50 million 
A) $3.2 million 
B) $3.7 million 
C) $5 million 
D) $50 million

Exam 13: The Federal Reserve System

When the Fed is acting as fiscal agent for the Treasury,it will

When a bank repays a _________________ loan,the Fed _____________________ the bank's reserve account.

The Board of Governors of the Federal Reserve is comprised of

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

When a commercial bank borrows from the Fed,

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

Which of the following will decrease the money supply?

The discount rate is sometimes also known as the primary credit rate.

The Federal Reserve System came into existence with the Federal Reserve Act of

When a bank obtains a loan from the Fed,it follows that the

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

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

Both open market purchases and quantitative easing are directed at increasing reserves in the banking system and increasing the money supply.

The Federal Open Market Committee (FOMC)is composed of the seven members of the Board of Governors,

When we speak of the Fed's responsibility to supervise member banks,we are saying that the

Suppose that the Fed undertakes an open market purchase of $5 million worth of securities from a bank.If 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?

The Banking Act of 1935 changed the name of the _______________ to the Board of Governors of the Federal Reserve System.

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

If reserves increase by $4 million and the required reserve ratio is 8%,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?

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

When a bank repays a _ loan,the Fed _____ the bank's reserve account.