Question 1

Which of the following statements is false?

Accepted Answer

A) The Fed has the legal authority to create money out of thin air. 
B) There is a direct relationship between the money supply and the required reserve ratio. 
C) The Fed can cause money to disappear into thin air. 
D) The federal funds market is a market in which banks can borrow money from other banks. 
A) The Fed has the legal authority to create money out of thin air. 
B) There is a direct relationship between the money supply and the required reserve ratio. 
C) The Fed can cause money to disappear into thin air. 
D) The federal funds market is a market in which banks can borrow money from other banks.

Question 2

An open market __________ by the Fed increases the money supply;a(n)__________ in the required reserve ratio increases the money supply.

Accepted Answer

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

Question 3

If the federal funds rate falls below the discount rate,banks will decrease their borrowings from __________ and __________ their borrowings from __________.It follows that when one bank borrows from __________,reserves in the banking system __________.

Accepted Answer

A) other banks;increase;the Fed;another bank;remain unchanged 
B) the Fed;decrease;other banks;another bank;remain unchanged 
C) other banks;increase;the U.S.Treasury;the Treasury;increase 
D) the Fed;increase;other banks;another bank;remain unchanged 
E) none of the above 
A) other banks;increase;the Fed;another bank;remain unchanged 
B) the Fed;decrease;other banks;another bank;remain unchanged 
C) other banks;increase;the U.S.Treasury;the Treasury;increase 
D) the Fed;increase;other banks;another bank;remain unchanged 
E) none of the above

Question 4

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

Accepted Answer

A) raises the required reserve ratio from 8 percent to 10 percent;decrease 
B) lowers the required reserve ratio from 10 percent to 8 percent;increase 
C) lowers the required reserve ratio from 10 percent to 8 percent;decrease 
D) raises the required reserve ratio from 8 percent to 10 percent;increase 
E) a and b 
A) raises the required reserve ratio from 8 percent to 10 percent;decrease 
B) lowers the required reserve ratio from 10 percent to 8 percent;increase 
C) lowers the required reserve ratio from 10 percent to 8 percent;decrease 
D) raises the required reserve ratio from 8 percent to 10 percent;increase 
E) a and b

Question 5

To limit political influence on Fed policy,the terms of the Fed Board of Governors are staggered so that one new appointment is made every four years to coincide with the presidential elections.

Accepted Answer

A) True 
 B)False

Question 6

The federal funds rate and the quantity demanded of reserves have a(n)____________ relationship.This is because as the federal funds rate moves down,it becomes _______________ for banks to hold reserves,encouraging banks to hold ____________ in reserves to guard against checkable deposit withdrawals.

Accepted Answer

A) inverse;more expensive;more 
B) direct;more expensive;less 
C) inverse;cheaper;more 
D) direct;cheaper;more 
A) inverse;more expensive;more 
B) direct;more expensive;less 
C) inverse;cheaper;more 
D) direct;cheaper;more

Question 7

When the Fed engages in quantitative easing,it alters ______________________ and when the Fed makes open market purchases it alters _______________________.

Accepted Answer

A) short-term interest rates;long-term interest rates 
B) long-term interest rates;short-term interest rates 
C) the required reserve ratio;income tax rates 
D) income tax rates;the required reserve ratio 
A) short-term interest rates;long-term interest rates 
B) long-term interest rates;short-term interest rates 
C) the required reserve ratio;income tax rates 
D) income tax rates;the required reserve ratio

Question 8

If the Fed raises the discount rate at the same time it conducts an open market sale,it follows that the money supply will

Accepted Answer

A) fall. 
B) rise. 
C) remain unchanged. 
D) There is not enough information to answer the question. 
A) fall. 
B) rise. 
C) remain unchanged. 
D) There is not enough information to answer the question.

Question 9

The demand for reserves curve in the federal funds market is

Accepted Answer

A) horizontal. 
B) vertical. 
C) upward sloping. 
D) downward sloping. 
A) horizontal. 
B) vertical. 
C) upward sloping. 
D) downward sloping.

Question 10

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

Accepted Answer

A) to provide check-clearing services 
B) to hold depository institutions' reserves 
C) to serve as the government's banker 
D) to serve as the borrower of last resort 
E) none of the above 
A) to provide check-clearing services 
B) to hold depository institutions' reserves 
C) to serve as the government's banker 
D) to serve as the borrower of last resort 
E) none of the above

Question 11

Which of the following is not a function of the Federal Reserve System?

Accepted Answer

A) to clear checks 
B) to supervise member banks 
C) to serve as the lender of last resort 
D) to handle the sale of U.S.Treasury securities 
E) to serve as the government's tax collector 
A) to clear checks 
B) to supervise member banks 
C) to serve as the lender of last resort 
D) to handle the sale of U.S.Treasury securities 
E) to serve as the government's tax collector

Question 12

The lower the required reserve ratio,

Accepted Answer

A) the less money that can be loaned at each round of the lending process. 
B) the larger the simple deposit multiplier. 
C) the smaller the simple deposit multiplier. 
D) the fewer excess reserves there are at each round of the simple deposit multiplier process. 
E) a,c,and d 
A) the less money that can be loaned at each round of the lending process. 
B) the larger the simple deposit multiplier. 
C) the smaller the simple deposit multiplier. 
D) the fewer excess reserves there are at each round of the simple deposit multiplier process. 
E) a,c,and d

Question 13

When a check is written on an account at Bank A and deposited in Bank B,the reserve account of __________ will rise and reserves of the entire banking system will __________.

Accepted Answer

A) Bank A;rise 
B) Bank A;remain constant 
C) Bank B;rise 
D) Bank B;remain constant 
A) Bank A;rise 
B) Bank A;remain constant 
C) Bank B;rise 
D) Bank B;remain constant

Question 14

If the Fed wants to increase the money supply,it can __________ the required reserve ratio,conduct an open market __________,or __________the discount rate.

Accepted Answer

A) lower;sale;raise 
B) lower;purchase;raise 
C) lower;purchase;lower 
D) raise;sale;lower 
E) raise;purchase;raise 
A) lower;sale;raise 
B) lower;purchase;raise 
C) lower;purchase;lower 
D) raise;sale;lower 
E) raise;purchase;raise

Question 15

William Jennings Bryan,Secretary of State at the time of the passage of the Federal Reserve Act,argued in favor of having ______ district banks.

Accepted Answer

A) six 
B) not less than eight nor more than twelve 
C) twelve 
D) fifty 
A) six 
B) not less than eight nor more than twelve 
C) twelve 
D) fifty

Question 16

The Federal Reserve System began operations in

Accepted Answer

A) 1834. 
B) 1896. 
C) 1914. 
D) 1935. 
A) 1834. 
B) 1896. 
C) 1914. 
D) 1935.

Question 17

The Federal Open Market Committee (FOMC)

Accepted Answer

A) has six members. 
B) conducts open market operations. 
C) is the policy-making body within the Treasury. 
D) is the governing body of the Federal Reserve System. 
E) a,b,and c 
A) has six members. 
B) conducts open market operations. 
C) is the policy-making body within the Treasury. 
D) is the governing body of the Federal Reserve System. 
E) a,b,and c

Question 18

The president of the ________________________ holds a permanent seat on the FOMC.

Accepted Answer

A) United States 
B) Federal Reserve District Bank of New York 
C) Federal Reserve District Bank of San Francisco 
D) U.S.Senate banking committee 
E) none of the above 
A) United States 
B) Federal Reserve District Bank of New York 
C) Federal Reserve District Bank of San Francisco 
D) U.S.Senate banking committee 
E) none of the above

Exam 13: The Federal Reserve System

Which of the following statements is false?

An open market __________ by the Fed increases the money supply;a(n)__________ in the required reserve ratio increases the money supply.

If the federal funds rate falls below the discount rate,banks will decrease their borrowings from __________ and __________ their borrowings from __________.It follows that when one bank borrows from __________,reserves in the banking system __________.

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

To limit political influence on Fed policy,the terms of the Fed Board of Governors are staggered so that one new appointment is made every four years to coincide with the presidential elections.

When the Fed engages in quantitative easing,it alters ______________________ and when the Fed makes open market purchases it alters _______________________.

If the Fed raises the discount rate at the same time it conducts an open market sale,it follows that the money supply will

The demand for reserves curve in the federal funds market is

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

Which of the following is not a function of the Federal Reserve System?

The lower the required reserve ratio,

When a check is written on an account at Bank A and deposited in Bank B,the reserve account of __________ will rise and reserves of the entire banking system will __________.

If the Fed wants to increase the money supply,it can __________ the required reserve ratio,conduct an open market __________,or __________the discount rate.

William Jennings Bryan,Secretary of State at the time of the passage of the Federal Reserve Act,argued in favor of having ______ district banks.

The Federal Reserve System began operations in

The Federal Open Market Committee (FOMC)

The president of the ________________________ holds a permanent seat on the FOMC.

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

An open market by the Fed increases the money supply;a(n) in the required reserve ratio increases the money supply.

If the federal funds rate falls below the discount rate,banks will decrease their borrowings from and their borrowings from .It follows that when one bank borrows from ,reserves in the banking system __.

If the Fed ____________,the money supply will ultimately .

When the Fed engages in quantitative easing,it alters and when the Fed makes open market purchases it alters _.

When a check is written on an account at Bank A and deposited in Bank B,the reserve account of will rise and reserves of the entire banking system will .

If the Fed wants to increase the money supply,it can the required reserve ratio,conduct an open market ,or __the discount rate.