Question 1

The Federal Open Market Committee (FOMC)meets on the first Tuesday of each month.

Accepted Answer

A) True 
 B)False

Question 2

When the Federal Open Market Committee (FOMC)votes on policy,it does so in the following order: the chair votes first,the vice chair votes second,and the remaining FOMC members vote based on their seniority at the Fed.

Accepted Answer

A) True 
 B)False

Question 3

In the federal funds market,

Accepted Answer

A) banks make loans to the Fed. 
B) banks make loans to other banks. 
C) the Fed makes short-term loans to banks. 
D) the Fed makes long-term loans to banks. 
A) banks make loans to the Fed. 
B) banks make loans to other banks. 
C) the Fed makes short-term loans to banks. 
D) the Fed makes long-term loans to banks.

Question 4

The supply curve of reserves has two kinks in it: one at the _________________ and the other at the ____________________ rate.

Accepted Answer

A) interest rate that the Fed pays on reserves;discount 
B) federal funds rate;discount 
C) prime rate;discount 
D) discount rate;federal funds rate 
A) interest rate that the Fed pays on reserves;discount 
B) federal funds rate;discount 
C) prime rate;discount 
D) discount rate;federal funds rate

Question 5

The Fed can change the money supply by changing

Accepted Answer

A) the required reserve ratio. 
B) marginal income tax rates. 
C) federal excise taxes. 
D) unemployment benefits. 
A) the required reserve ratio. 
B) marginal income tax rates. 
C) federal excise taxes. 
D) unemployment benefits.

Question 6

Why does the president of the Federal Reserve Bank of New York hold a permanent seat on the FOMC?

Accepted Answer

A) The New York Fed is responsible for executing open market operations. 
B) A substantial amount of financial activity takes place in New York City. 
C) The Fed Board of Governors holds its regularly scheduled meetings in New York City. 
D) The Federal Reserve Bank of New York is the original Fed district;the other eleven districts were formed later by the Banking Act of 1935 
E) a and b 
A) The New York Fed is responsible for executing open market operations. 
B) A substantial amount of financial activity takes place in New York City. 
C) The Fed Board of Governors holds its regularly scheduled meetings in New York City. 
D) The Federal Reserve Bank of New York is the original Fed district;the other eleven districts were formed later by the Banking Act of 1935 
E) a and b

Question 7

Use the simple deposit multiplier to help show why the money supply increases when the Fed lowers the required reserve ratio (r).

Accepted Answer

The used to determine the simp

Question 8

In 2007,the Fed began using an additional monetary policy tool called the term auction facility program.

Accepted Answer

A) True 
 B)False

Question 9

When Bank A obtains a loan from the Fed,the

Accepted Answer

A) discount rate is probably higher than the federal funds rate. 
B) bank's reserves increase. 
C) simple deposit multiplier decreases. 
D) b and c 
E) none of the above 
A) discount rate is probably higher than the federal funds rate. 
B) bank's reserves increase. 
C) simple deposit multiplier decreases. 
D) b and c 
E) none of the above

Question 10

The lower the discount rate relative to the federal funds rate,the more likely a commercial bank will borrow from

Accepted Answer

A) another commercial bank instead of the Fed. 
B) the Fed instead of another commercial bank. 
C) the U.S.Treasury instead of either the Fed or another commercial bank. 
D) the public. 
A) another commercial bank instead of the Fed. 
B) the Fed instead of another commercial bank. 
C) the U.S.Treasury instead of either the Fed or another commercial bank. 
D) the public.

Question 11

Which of the following will not increase the money supply in the United States?

Accepted Answer

A) lowering the required reserve ratio 
B) Fed purchases of government securities on the open market 
C) lowering the discount rate relative to the federal funds rate 
D) Fed sales of government securities on the open market 
E) none of the above 
A) lowering the required reserve ratio 
B) Fed purchases of government securities on the open market 
C) lowering the discount rate relative to the federal funds rate 
D) Fed sales of government securities on the open market 
E) none of the above

Question 12

If banks are currently holding zero excess reserves and the Fed raises the required reserve ratio,which of the following will happen?

Accepted Answer

A) Banks will have a reserve deficiency. 
B) Banks will have positive excess reserves. 
C) Banks will begin to extend more loans. 
D) Banks will begin to extend more credit. 
E) b and d 
A) Banks will have a reserve deficiency. 
B) Banks will have positive excess reserves. 
C) Banks will begin to extend more loans. 
D) Banks will begin to extend more credit. 
E) b and d

Question 13

Suppose that the Fed undertakes an open market purchase of $1 million worth of securities from a bank.If the required reserve ratio is 9%,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) $11.11 million 
B) $9 million 
C) $1.09 million 
D) $90 million 
A) $11.11 million 
B) $9 million 
C) $1.09 million 
D) $90 million

Question 14

Here is how an open market sale works: A commercial bank __________ government securities to (from)the Fed,which lowers the bank's deposits at the __________ and __________ the bank's __________.

Accepted Answer

A) buys;Fed;lowers;reserves 
B) sells;Treasury;raises;reserves 
C) sells;Fed;raises;reserves 
D) buys;Treasury;lowers;liabilities 
E) none of the above 
A) buys;Fed;lowers;reserves 
B) sells;Treasury;raises;reserves 
C) sells;Fed;raises;reserves 
D) buys;Treasury;lowers;liabilities 
E) none of the above

Question 15

If banks are currently holding zero excess reserves and the Fed lowers the required reserve ratio,which of the following will happen?

Accepted Answer

A) Banks will have a reserve deficiency. 
B) Banks will have positive excess reserves. 
C) Banks will extend fewer loans. 
D) Banks will call in some of their loans to meet the reserve deficiency. 
A) Banks will have a reserve deficiency. 
B) Banks will have positive excess reserves. 
C) Banks will extend fewer loans. 
D) Banks will call in some of their loans to meet the reserve deficiency.

Question 16

Each of the governors of the Federal Reserve System is appointed for a term of __________ years.The Board of Governors is comprised of _____________ members and the FOMC is comprised of __________ members.

Accepted Answer

A) 12;7;19 
B) 14;6;22 
C) 6;5;14 
D) 14;7;12 
E) 12;6;12 
A) 12;7;19 
B) 14;6;22 
C) 6;5;14 
D) 14;7;12 
E) 12;6;12

Question 17

Raising 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 18

There are __________ Federal Reserve Districts.

Accepted Answer

A) seven 
B) eleven 
C) twelve 
D) fourteen 
A) seven 
B) eleven 
C) twelve 
D) fourteen

Question 19

The interest rate that the Fed charges when it lends reserves to banks is called the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 20

The banking system currently holds $20 billion in required reserves and zero excess reserves.The Fed lowers the required reserve ratio from 15 percent to 12.5 percent.Assuming that there are no cash leakages,the resulting change in checkable deposits (or the money supply)is approximately

Accepted Answer

A) $2.7 billion. 
B) $1.5 billion. 
C) $2.0 billion. 
D) $12.5 billion. 
E) $26.6 billion. 
A) $2.7 billion. 
B) $1.5 billion. 
C) $2.0 billion. 
D) $12.5 billion. 
E) $26.6 billion.

Exam 13: The Federal Reserve System

The Federal Open Market Committee (FOMC)meets on the first Tuesday of each month.

When the Federal Open Market Committee (FOMC)votes on policy,it does so in the following order: the chair votes first,the vice chair votes second,and the remaining FOMC members vote based on their seniority at the Fed.

In the federal funds market,

The supply curve of reserves has two kinks in it: one at the _________________ and the other at the ____________________ rate.

The Fed can change the money supply by changing

Why does the president of the Federal Reserve Bank of New York hold a permanent seat on the FOMC?

Use the simple deposit multiplier to help show why the money supply increases when the Fed lowers the required reserve ratio (r).

In 2007,the Fed began using an additional monetary policy tool called the term auction facility program.

When Bank A obtains a loan from the Fed,the

The lower the discount rate relative to the federal funds rate,the more likely a commercial bank will borrow from

Which of the following will not increase the money supply in the United States?

If banks are currently holding zero excess reserves and the Fed raises the required reserve ratio,which of the following will happen?

Suppose that the Fed undertakes an open market purchase of $1 million worth of securities from a bank.If the required reserve ratio is 9%,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?

Here is how an open market sale works: A commercial bank __________ government securities to (from)the Fed,which lowers the bank's deposits at the __________ and __________ the bank's __________.

If banks are currently holding zero excess reserves and the Fed lowers the required reserve ratio,which of the following will happen?

Each of the governors of the Federal Reserve System is appointed for a term of __________ years.The Board of Governors is comprised of _____________ members and the FOMC is comprised of __________ members.

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

There are __________ Federal Reserve Districts.

The interest rate that the Fed charges when it lends reserves to banks is called the federal funds rate.

The banking system currently holds $20 billion in required reserves and zero excess reserves.The Fed lowers the required reserve ratio from 15 percent to 12.5 percent.Assuming that there are no cash leakages,the resulting change in checkable deposits (or the money supply)is approximately

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

The supply curve of reserves has two kinks in it: one at the _ and the other at the ____ rate.

Here is how an open market sale works: A commercial bank government securities to (from)the Fed,which lowers the bank's deposits at the and the bank's .

Each of the governors of the Federal Reserve System is appointed for a term of ____ years.The Board of Governors is comprised of _ members and the FOMC is comprised of ____ members.

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