Question 1

Suppose the Fed forecasts a reduction in excess reserve holdings by banks.It might offset the effect of this on the money supply by

Accepted Answer

A) buying government securities. 
B) lowering the required reserve ratio. 
C) lowering the discount rate. 
D) selling government securities. 
E) a,b,and c 
A) buying government securities. 
B) lowering the required reserve ratio. 
C) lowering the discount rate. 
D) selling government securities. 
E) a,b,and c

Question 2

When the Federal Reserve system was being created,some people thought that there should be as few district banks as possible to enhance efficiency and for ease of operation.

Accepted Answer

A) True 
 B)False

Question 3

Lowering the required reserve ratio __________ the simple deposit multiplier which will __________ the economy's money supply.

Accepted Answer

A) raises;increase 
B) raises;decrease 
C) lowers;increase 
D) lowers;decrease 
A) raises;increase 
B) raises;decrease 
C) lowers;increase 
D) lowers;decrease

Question 4

The corridor is the ________________ section of the ______________________ curve of reserves in the federal funds market.

Accepted Answer

A) vertical;demand 
B) horizontal;demand 
C) vertical;supply 
D) horizontal;supply 
A) vertical;demand 
B) horizontal;demand 
C) vertical;supply 
D) horizontal;supply

Question 5

Suppose the Fed sells a $50,000 U.S.Treasury security to Martha,a member of the public.If Martha writes a check to the Fed in order to buy this security,the money in her checking account will be transferred to

Accepted Answer

A) the Fed,and now the Fed will have $50,000 more in reserves than it had before. 
B) her bank,and now her bank will have $50,000 more in reserves than it had before. 
C) the Fed,and now it is as if the money doesn't exist. 
D) the Treasury,and now the Treasury will have $50,000 more in reserves than it had before. 
A) the Fed,and now the Fed will have $50,000 more in reserves than it had before. 
B) her bank,and now her bank will have $50,000 more in reserves than it had before. 
C) the Fed,and now it is as if the money doesn't exist. 
D) the Treasury,and now the Treasury will have $50,000 more in reserves than it had before.

Question 6

List and describe the three major monetary policy tools the Federal Reserve can use to increase the money supply.Be specific in your response regarding which direction the tool would need to change in order for the money supply to grow.

Accepted Answer

Open market operations are when the Fed

Question 7

When the Federal Open Market Committee (FOMC)votes on policy,they do so

Accepted Answer

A) in the following order: the chair,the vice chair,the remaining FOMC members in alphabetical order. 
B) in order based on seniority at the Fed. 
C) in the following order: the chair,the vice chair,the remaining FOMC members by seniority at the Fed. 
D) in alphabetical order. 
A) in the following order: the chair,the vice chair,the remaining FOMC members in alphabetical order. 
B) in order based on seniority at the Fed. 
C) in the following order: the chair,the vice chair,the remaining FOMC members by seniority at the Fed. 
D) in alphabetical order.

Question 8

Which of the following will cause the money supply to decline?

Accepted Answer

A) lowering the discount rate 
B) raising the required reserve ratio 
C) an open market purchase 
D) an open market sale 
E) b and d 
A) lowering the discount rate 
B) raising the required reserve ratio 
C) an open market purchase 
D) an open market sale 
E) b and d

Question 9

If Bank A borrows from Bank B,reserves in the banking system __________.If Bank A borrows from the Fed,reserves in the banking system __________.

Accepted Answer

A) rise;fall 
B) fall;remain unchanged 
C) remain unchanged;remain unchanged 
D) remain unchanged;rise 
E) rise;remain unchanged 
A) rise;fall 
B) fall;remain unchanged 
C) remain unchanged;remain unchanged 
D) remain unchanged;rise 
E) rise;remain unchanged

Question 10

Every time the Fed buys or sells on the open market,the __________ changes.

Accepted Answer

A) budget deficit 
B) income tax rate 
C) money supply 
D) a and b 
E) a,b,and c 
A) budget deficit 
B) income tax rate 
C) money supply 
D) a and b 
E) a,b,and c

Question 11

A bank is less likely to borrow from the Fed when the __________ falls relative to the __________.

Accepted Answer

A) discount rate;required reserve ratio 
B) excess reserve;required reserves 
C) discount rate;federal funds rate 
D) federal funds rate;discount rate 
A) discount rate;required reserve ratio 
B) excess reserve;required reserves 
C) discount rate;federal funds rate 
D) federal funds rate;discount rate

Question 12

When commercial banks borrow from other commercial banks,the immediate impact is that reserves in the banking system

Accepted Answer

A) increase. 
B) decrease. 
C) are unaffected. 
D) first increase,then decrease. 
E) first decrease,then increase. 
A) increase. 
B) decrease. 
C) are unaffected. 
D) first increase,then decrease. 
E) first decrease,then increase.

Question 13

The discount rate is the interest rate

Accepted Answer

A) banks pay on certificates of deposit. 
B) the Fed pays on reserves held by banks. 
C) the Fed charges when it lends reserves to banks. 
D) banks charge their loan customers. 
E) on short-term Treasury securities. 
A) banks pay on certificates of deposit. 
B) the Fed pays on reserves held by banks. 
C) the Fed charges when it lends reserves to banks. 
D) banks charge their loan customers. 
E) on short-term Treasury securities.

Question 14

When the Fed was created,its governing body was called the Federal Reserve Board,but it was later officially renamed the Board of Governors of the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) open market purchases of Treasury notes 
B) an increase in the required reserve ratio 
C) an increase in the discount rate 
D) all of the above 
E) none of the above 
A) open market purchases of Treasury notes 
B) an increase in the required reserve ratio 
C) an increase in the discount rate 
D) all of the above 
E) none of the above

Question 16

The Board of Governors of the Federal Reserve is part of a larger policy-making group called the

Accepted Answer

A) Senate Banking Committee. 
B) Federal Deposit Insurance Corporation. 
C) American Banking Association. 
D) Federal Open Market Committee. 
A) Senate Banking Committee. 
B) Federal Deposit Insurance Corporation. 
C) American Banking Association. 
D) Federal Open Market Committee.

Question 17

A decrease in the required reserve ratio __________ the money supply;an open market purchase __________ the money supply.

Accepted Answer

A) decreases;decreases 
B) decreases;increases 
C) increases;increases 
D) increases;decreases 
A) decreases;decreases 
B) decreases;increases 
C) increases;increases 
D) increases;decreases

Question 18

The boundaries of the Federal Reserve districts were determined based on trade patterns between cities.

Accepted Answer

A) True 
 B)False

Question 19

With quantitative easing,the Fed purchases _____________________.With open market operations,the Fed purchases ______________________________.

Accepted Answer

A) short-term and long-term government securities,as well as private sector bonds and securities;short-term government securities 
B) short-term government securities,only;long-term government securities,only 
C) long-term government securities,only;short-term government securities,only 
D) government securities,only;private sector bonds and securities 
A) short-term and long-term government securities,as well as private sector bonds and securities;short-term government securities 
B) short-term government securities,only;long-term government securities,only 
C) long-term government securities,only;short-term government securities,only 
D) government securities,only;private sector bonds and securities

Question 20

In the United States,paper currency is printed at the

Accepted Answer

A) Bureau of Engraving and Printing. 
B) Federal Reserve District banks. 
C) U.S.Mint. 
D) U.S.Treasury. 
A) Bureau of Engraving and Printing. 
B) Federal Reserve District banks. 
C) U.S.Mint. 
D) U.S.Treasury.

Exam 13: The Federal Reserve System

Suppose the Fed forecasts a reduction in excess reserve holdings by banks.It might offset the effect of this on the money supply by

When the Federal Reserve system was being created,some people thought that there should be as few district banks as possible to enhance efficiency and for ease of operation.

Lowering the required reserve ratio __________ the simple deposit multiplier which will __________ the economy's money supply.

The corridor is the ________________ section of the ______________________ curve of reserves in the federal funds market.

Suppose the Fed sells a $50,000 U.S.Treasury security to Martha,a member of the public.If Martha writes a check to the Fed in order to buy this security,the money in her checking account will be transferred to

List and describe the three major monetary policy tools the Federal Reserve can use to increase the money supply.Be specific in your response regarding which direction the tool would need to change in order for the money supply to grow.

When the Federal Open Market Committee (FOMC)votes on policy,they do so

Which of the following will cause the money supply to decline?

If Bank A borrows from Bank B,reserves in the banking system __________.If Bank A borrows from the Fed,reserves in the banking system __________.

Every time the Fed buys or sells on the open market,the __________ changes.

A bank is less likely to borrow from the Fed when the __________ falls relative to the __________.

When commercial banks borrow from other commercial banks,the immediate impact is that reserves in the banking system

The discount rate is the interest rate

When the Fed was created,its governing body was called the Federal Reserve Board,but it was later officially renamed the Board of Governors of the Federal Reserve System.

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

The Board of Governors of the Federal Reserve is part of a larger policy-making group called the

A decrease in the required reserve ratio __________ the money supply;an open market purchase __________ the money supply.

The boundaries of the Federal Reserve districts were determined based on trade patterns between cities.

With quantitative easing,the Fed purchases _____________________.With open market operations,the Fed purchases ______________________________.

In the United States,paper currency is printed at the

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

Lowering the required reserve ratio the simple deposit multiplier which will the economy's money supply.

The corridor is the section of the ______ curve of reserves in the federal funds market.

If Bank A borrows from Bank B,reserves in the banking system .If Bank A borrows from the Fed,reserves in the banking system .

A bank is less likely to borrow from the Fed when the falls relative to the .

A decrease in the required reserve ratio the money supply;an open market purchase the money supply.

With quantitative easing,the Fed purchases _.With open market operations,the Fed purchases __________.