Question 1

If the Fed wants short-term interest rates to rise,it could:

Accepted Answer

A)  carry out open market purchases. 
B)  engage in a monetary contraction. 
C)  buy T-bills. 
D)  issue a directive for banks to raise interest rates. 
A)  carry out open market purchases. 
B)  engage in a monetary contraction. 
C)  buy T-bills. 
D)  issue a directive for banks to raise interest rates.

Question 2

A higher bank reserve ratio results in an increase in the money supply.

Accepted Answer

A) True 
 B)False

Question 3

The Federal Reserve:

Accepted Answer

A)  clears all checks. 
B)  regulates the banking system. 
C)  prints all currency. 
D)  makes loans to individuals. 
A)  clears all checks. 
B)  regulates the banking system. 
C)  prints all currency. 
D)  makes loans to individuals.

Question 4

Which asset would you classify as being most liquid?

Accepted Answer

A)  demand deposits 
B)  small-time deposits 
C)  a home 
D)  gold bullion 
A)  demand deposits 
B)  small-time deposits 
C)  a home 
D)  gold bullion

Question 5

Which institution usually has the most influence over aggregate demand in the United States?

Accepted Answer

A)  the Senate Banking Committee 
B)  the U.S.Department of the Treasury 
C)  the Comptroller of the Currency 
D)  the Federal Reserve 
A)  the Senate Banking Committee 
B)  the U.S.Department of the Treasury 
C)  the Comptroller of the Currency 
D)  the Federal Reserve

Question 6

Which would result from open market purchases made by the Fed totaling $50,000?

Accepted Answer

A)  The money supply would increase by more than $50,000. 
B)  Interest rates would rise. 
C)  The money multiplier would increase. 
D)  Bank reserves would decrease. 
A)  The money supply would increase by more than $50,000. 
B)  Interest rates would rise. 
C)  The money multiplier would increase. 
D)  Bank reserves would decrease.

Question 7

Other things held constant,if the Fed increases its payment of interest on bank reserves,the money supply will decrease.

Accepted Answer

A) True 
 B)False

Question 8

The discount rate is the interest rate charged on a(n):

Accepted Answer

A)  low-interest loan from the Federal Reserve to a bank. 
B)  loan from the Federal Reserve to a bank. 
C)  long-term loan from one bank to another. 
D)  overnight loan from one bank to another. 
A)  low-interest loan from the Federal Reserve to a bank. 
B)  loan from the Federal Reserve to a bank. 
C)  long-term loan from one bank to another. 
D)  overnight loan from one bank to another.

Question 9

The discount rate is the interest rate that banks:

Accepted Answer

A)  charge borrowers with the lowest credit risk. 
B)  charge borrowers with the highest credit risk. 
C)  pay when borrowing from other banks. 
D)  pay when borrowing directly from the Fed. 
A)  charge borrowers with the lowest credit risk. 
B)  charge borrowers with the highest credit risk. 
C)  pay when borrowing from other banks. 
D)  pay when borrowing directly from the Fed.

Question 10

The relationship between bond prices and interest rates is:

Accepted Answer

A)  neither positive nor negative. 
B)  positive. 
C)  negative. 
D)  sometimes positive and sometimes negative. 
A)  neither positive nor negative. 
B)  positive. 
C)  negative. 
D)  sometimes positive and sometimes negative.

Question 11

What is the central bank in the United States,what is its primary function,and how does it carry out this function?

Accepted Answer

The U.S.central bank is the Federal Rese

Question 12

M1 is equal to currency plus:

Accepted Answer

A)  checkable deposits. 
B)  total reserves held at the Federal Reserve. 
C)  savings deposits. 
D)  small-time deposits. 
A)  checkable deposits. 
B)  total reserves held at the Federal Reserve. 
C)  savings deposits. 
D)  small-time deposits.

Question 13

If banks did not hold reserves,ATMs would not function.

Accepted Answer

A) True 
 B)False

Question 14

Ben Bernanke was _____ during the financial crisis of 2008.

Accepted Answer

A)  Secretary of the U.S.Treasury 
B)  Chairman of the President's Council of Economic Advisors 
C)  Vice President of the United States 
D)  Chairman of the Federal Reserve 
A)  Secretary of the U.S.Treasury 
B)  Chairman of the President's Council of Economic Advisors 
C)  Vice President of the United States 
D)  Chairman of the Federal Reserve

Question 15

When the Federal Reserve makes an open market purchase,the amount of money available for the banking system to loan:

Accepted Answer

A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  becomes difficult to predict. 
A)  increases. 
B)  decreases. 
C)  remains constant. 
D)  becomes difficult to predict.

Question 16

The Federal Reserve acquires its exclusive powers through its ability to:

Accepted Answer

A)  tax individuals and firms. 
B)  stop economic recessions. 
C)  issue money. 
D)  make loans. 
A)  tax individuals and firms. 
B)  stop economic recessions. 
C)  issue money. 
D)  make loans.

Question 17

M1 refers to:

Accepted Answer

A)  currency. 
B)  currency plus total reserves held at the Fed. 
C)  currency plus checkable deposits. 
D)  currency,checkable deposits,savings deposits,money market mutual funds,and small-time deposits. 
A)  currency. 
B)  currency plus total reserves held at the Fed. 
C)  currency plus checkable deposits. 
D)  currency,checkable deposits,savings deposits,money market mutual funds,and small-time deposits.

Question 18

M2 is included in M1.

Accepted Answer

A) True 
 B)False

Question 19

Very little U.S.currency is used outside the United States.

Accepted Answer

A) True 
 B)False

Question 20

Open market operations occur when:

Accepted Answer

A)  the Fed buys and sells government bonds. 
B)  the Fed loans money to banks and other financial institutions when no one else will. 
C)  banks become insolvent. 
D)  banks are illiquid. 
A)  the Fed buys and sells government bonds. 
B)  the Fed loans money to banks and other financial institutions when no one else will. 
C)  banks become insolvent. 
D)  banks are illiquid.

Exam 15: The Federal Reserve System

If the Fed wants short-term interest rates to rise,it could:

A higher bank reserve ratio results in an increase in the money supply.

The Federal Reserve:

Which asset would you classify as being most liquid?

Which institution usually has the most influence over aggregate demand in the United States?

Which would result from open market purchases made by the Fed totaling $50,000?

Other things held constant,if the Fed increases its payment of interest on bank reserves,the money supply will decrease.

The discount rate is the interest rate charged on a(n):

The discount rate is the interest rate that banks:

The relationship between bond prices and interest rates is:

What is the central bank in the United States,what is its primary function,and how does it carry out this function?

M1 is equal to currency plus:

If banks did not hold reserves,ATMs would not function.

Ben Bernanke was _____ during the financial crisis of 2008.

When the Federal Reserve makes an open market purchase,the amount of money available for the banking system to loan:

The Federal Reserve acquires its exclusive powers through its ability to:

M1 refers to:

M2 is included in M1.

Very little U.S.currency is used outside the United States.

Open market operations occur when:

The Big Ideas

The Power of Trade

Supply and Demand

Equilibrium- How Supply and Demand

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth,capital Accumulation

Saving,investment,and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations

Transmission and Amplification Mechanisms

Monetary Policy

The Federal Budget- Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

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