Question 1

Open market purchases of government securities

Accepted Answer

A) are designed to increase trading on the stock exchange. 
B) generally decrease the money supply. 
C) always decrease the money supply. 
D) cause bank reserves to increase. 
E) all of the above 
A) are designed to increase trading on the stock exchange. 
B) generally decrease the money supply. 
C) always decrease the money supply. 
D) cause bank reserves to increase. 
E) all of the above

Question 2

Open Market Operations are conducted by D.C.

Accepted Answer

A) the main Fed office in Washington, 
B) the U.S.Treasury on behalf of the Fed. 
C) the Federal Reserve Bank of New York. 
D) a consortium of private banks contracted by the Fed. 
A) the main Fed office in Washington, 
B) the U.S.Treasury on behalf of the Fed. 
C) the Federal Reserve Bank of New York. 
D) a consortium of private banks contracted by the Fed.

Question 3

A required reserve ratio of 7 percent gives rise to a simple deposit multiplier of

Accepted Answer

A) 14.29. 
B) 83.33. 
C) 1.43. 
D) 93. 
E) 7. 
A) 14.29. 
B) 83.33. 
C) 1.43. 
D) 93. 
E) 7.

Question 4

The sale of government securities 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 5

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

Accepted Answer

A) supervising member banks 
B) serving as the lender of last resort 
C) determining the level of government spending 
D) providing check-clearing services 
E) supplying the economy with Federal Reserve Notes 
A) supervising member banks 
B) serving as the lender of last resort 
C) determining the level of government spending 
D) providing check-clearing services 
E) supplying the economy with Federal Reserve Notes

Question 6

Discuss in detail the three things mentioned in the text that the Federal Reserve did to deal with the 2007-2009 financial crisis.

Accepted Answer

To deal with the financial crisis of 200

Question 7

A bank is reserve deficient when

Accepted Answer

A) its reserves fall short of the level determined by the required reserve ratio. 
B) its excess reserves are greater than its required reserves. 
C) its required reserves are greater than its excess reserves. 
D) it purchases government securities from the Fed. 
A) its reserves fall short of the level determined by the required reserve ratio. 
B) its excess reserves are greater than its required reserves. 
C) its required reserves are greater than its excess reserves. 
D) it purchases government securities from the Fed.

Question 8

Federal Reserve Notes held by the Fed are considered part of the

Accepted Answer

A) money supply. 
B) bank reserves. 
C) both of the above 
D) none of the above 
A) money supply. 
B) bank reserves. 
C) both of the above 
D) none of the above

Question 9

Suppose that the current federal funds rate is above the federal funds target rate.In order to lower 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 10

The Federal Reserve System

Accepted Answer

A) is the central bank of the United States. 
B) controls the money supply. 
C) is the lender of last resort. 
D) handles the sale of U.S.Treasury securities. 
E) all of the above 
A) is the central bank of the United States. 
B) controls the money supply. 
C) is the lender of last resort. 
D) handles the sale of U.S.Treasury securities. 
E) all of the above

Question 11

The required reserve ratio is set by the

Accepted Answer

A) U.S.Congress. 
B) President of the United States. 
C) Secretary of the Treasury. 
D) Federal Reserve. 
E) Director of Monetary Affairs. 
A) U.S.Congress. 
B) President of the United States. 
C) Secretary of the Treasury. 
D) Federal Reserve. 
E) Director of Monetary Affairs.

Question 12

One of the Fed's functions is to be the government's banker.This function means that the

Accepted Answer

A) Fed holds bank reserves 
B) Fed extends loans to the government whenever it spends more than it collects in tax revenues. 
C) government's checking account is at the Fed. 
D) all of the above 
A) Fed holds bank reserves 
B) Fed extends loans to the government whenever it spends more than it collects in tax revenues. 
C) government's checking account is at the Fed. 
D) all of the above

Question 13

If the Fed lowers the required reserve ratio,__________ in the banking system will remain unchanged but __________ will rise.This will (likely)lead to an increase in new loans and checkable deposits and a(n)__________ in the money supply.

Accepted Answer

A) excess reserves;vault cash;increase 
B) reserves;vault cash;decrease 
C) reserves;excess reserves;increase 
D) reserves;required reserves;increase 
E) none of the above 
A) excess reserves;vault cash;increase 
B) reserves;vault cash;decrease 
C) reserves;excess reserves;increase 
D) reserves;required reserves;increase 
E) none of the above

Question 14

Under free banking,banks are regulated by the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 15

To deal with the financial crisis of 2007-2009,the Fed extended its lender of last resort function to include institutions other than banks.

Accepted Answer

A) True 
 B)False

Question 16

Summarize the history of how the Federal Reserve came to have twelve districts.

Accepted Answer

The prevailing popular opinion of the ti

Question 17

The United States is divided into __________ Federal Reserve districts,each with a district bank.

Accepted Answer

A) three 
B) eight 
C) twelve 
D) twenty 
E) fifty 
A) three 
B) eight 
C) twelve 
D) twenty 
E) fifty

Question 18

A commercial bank can receive a loan from another commercial bank in the

Accepted Answer

A) federal funds market. 
B) bank loan market. 
C) Fed market. 
D) discount market. 
A) federal funds market. 
B) bank loan market. 
C) Fed market. 
D) discount market.

Question 19

Which of the following describes a change that the Federal Reserve made in response to the financial crisis of 2007-2009?

Accepted Answer

A) The Fed extended the lender of last resort function to institutions other than banks. 
B) The Fed narrowed the scope of its open market operations,choosing to limit it to only buying Treasury securities from banks. 
C) The Fed discontinued its term auction facility (TAF)program. 
D) all of the above 
A) The Fed extended the lender of last resort function to institutions other than banks. 
B) The Fed narrowed the scope of its open market operations,choosing to limit it to only buying Treasury securities from banks. 
C) The Fed discontinued its term auction facility (TAF)program. 
D) all of the above

Question 20

The most important responsibility of the Fed is to

Accepted Answer

A) clear checks. 
B) supervise member banks. 
C) serve as fiscal agent for the U.S.Treasury. 
D) control the money supply. 
A) clear checks. 
B) supervise member banks. 
C) serve as fiscal agent for the U.S.Treasury. 
D) control the money supply.

Exam 13: The Federal Reserve System

Open market purchases of government securities

Open Market Operations are conducted by D.C.

A required reserve ratio of 7 percent gives rise to a simple deposit multiplier of

The sale of government securities by the Fed

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

Discuss in detail the three things mentioned in the text that the Federal Reserve did to deal with the 2007-2009 financial crisis.

A bank is reserve deficient when

Federal Reserve Notes held by the Fed are considered part of the

The Federal Reserve System

The required reserve ratio is set by the

One of the Fed's functions is to be the government's banker.This function means that the

If the Fed lowers the required reserve ratio,__________ in the banking system will remain unchanged but __________ will rise.This will (likely)lead to an increase in new loans and checkable deposits and a(n)__________ in the money supply.

Under free banking,banks are regulated by the Federal Reserve.

To deal with the financial crisis of 2007-2009,the Fed extended its lender of last resort function to include institutions other than banks.

Summarize the history of how the Federal Reserve came to have twelve districts.

The United States is divided into __________ Federal Reserve districts,each with a district bank.

A commercial bank can receive a loan from another commercial bank in the

Which of the following describes a change that the Federal Reserve made in response to the financial crisis of 2007-2009?

The most important responsibility of the Fed is to

What Economics Is About

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If the Fed lowers the required reserve ratio, in the banking system will remain unchanged but will rise.This will (likely)lead to an increase in new loans and checkable deposits and a(n)__ in the money supply.