Question 1

The money supply in the United States is measured as the amount of currency,including coins,in circulation.

Accepted Answer

A) True 
 B)False

Question 2

When banks borrow directly from the Fed,the interest rate they pay is called the:

Accepted Answer

A)  prime rate. 
B)  discount rate. 
C)  Federal Funds rate. 
D)  required reserve rate. 
A)  prime rate. 
B)  discount rate. 
C)  Federal Funds rate. 
D)  required reserve rate.

Question 3

Money is best defined as:

Accepted Answer

A)  anything that has a high nominal value. 
B)  anything that is a widely accepted means of payment. 
C)  only the amount we spend in a given period. 
D)  the total amount of fixed assets we own. 
A)  anything that has a high nominal value. 
B)  anything that is a widely accepted means of payment. 
C)  only the amount we spend in a given period. 
D)  the total amount of fixed assets we own.

Question 4

When the Federal Reserve buys bonds,the demand curve for bonds:

Accepted Answer

A)  does not shift. 
B)  shifts outward. 
C)  shifts inward. 
D)  sometimes shifts inward and sometimes shifts outward. 
A)  does not shift. 
B)  shifts outward. 
C)  shifts inward. 
D)  sometimes shifts inward and sometimes shifts outward.

Question 5

Why does a one-dollar change in bank deposits cause a change in the money supply by more than one dollar?

Accepted Answer

Banks keep only a fraction of bank depos

Question 6

An illiquid bank is one that:

Accepted Answer

A)  borrows in the market for federal funds. 
B)  borrows at the discount window. 
C)  has more short-term liabilities than short-term assets. 
D)  has more long-term assets than liabilities. 
A)  borrows in the market for federal funds. 
B)  borrows at the discount window. 
C)  has more short-term liabilities than short-term assets. 
D)  has more long-term assets than liabilities.

Question 7

The main difference between M1 and M2 is that:

Accepted Answer

A)  M1 includes some less liquid assets in addition to the assets in M2. 
B)  M1 includes more liquid assets in addition to the assets in M2. 
C)  M2 includes some less liquid assets in addition to the assets in M1. 
D)  M2 includes more liquid assets in addition to the assets in M1. 
A)  M1 includes some less liquid assets in addition to the assets in M2. 
B)  M1 includes more liquid assets in addition to the assets in M2. 
C)  M2 includes some less liquid assets in addition to the assets in M1. 
D)  M2 includes more liquid assets in addition to the assets in M1.

Question 8

The Fed has the most control over:

Accepted Answer

A)  the monetary base. 
B)  M1. 
C)  M2. 
D)  money market mutual funds. 
A)  the monetary base. 
B)  M1. 
C)  M2. 
D)  money market mutual funds.

Question 9

If the Fed increases the amount of bank reserves by $100 million,the total money supply will potentially increase by more than $100 million.

Accepted Answer

A) True 
 B)False

Question 10

The Federal Reserve acquires its unique power through its ability to issue money.

Accepted Answer

A) True 
 B)False

Question 11

The money multiplier is the amount the:

Accepted Answer

A)  money supply can potentially expand with each dollar increase in reserves. 
B)  money supply can potentially expand with each dollar increase in deposits. 
C)  reserves expand with each dollar increase in deposits. 
D)  deposits expand with each dollar increase in reserves. 
A)  money supply can potentially expand with each dollar increase in reserves. 
B)  money supply can potentially expand with each dollar increase in deposits. 
C)  reserves expand with each dollar increase in deposits. 
D)  deposits expand with each dollar increase in reserves.

Question 12

If the value of a bank's liabilities is greater than its assets,there is a:

Accepted Answer

A)  solvency crisis. 
B)  liquidity crisis. 
C)  liability crisis. 
D)  profitability crisis. 
A)  solvency crisis. 
B)  liquidity crisis. 
C)  liability crisis. 
D)  profitability crisis.

Question 13

The monetary base is larger than M2.

Accepted Answer

A) True 
 B)False

Question 14

Which definition of the money supply includes the most assets?

Accepted Answer

A)  currency 
B)  M1 
C)  M2 
D)  the monetary base 
A)  currency 
B)  M1 
C)  M2 
D)  the monetary base

Question 15

Which is the MOST liquid asset?

Accepted Answer

A)  currency 
B)  checkable deposits 
C)  savings deposits 
D)  money market mutual funds 
A)  currency 
B)  checkable deposits 
C)  savings deposits 
D)  money market mutual funds

Question 16

The Fed sets up the Term Auction Facility when it wants to:

Accepted Answer

A)  inject a certain quantity of reserves into banks. 
B)  tighten the money supply in the economy. 
C)  sell a portion of the government bonds it holds. 
D)  close the discount window. 
A)  inject a certain quantity of reserves into banks. 
B)  tighten the money supply in the economy. 
C)  sell a portion of the government bonds it holds. 
D)  close the discount window.

Question 17

The Federal Reserve is the:

Accepted Answer

A)  federal government's bank. 
B)  U.S.central bank. 
C)  banker's bank in the United States. 
D)  federal government's bank,central bank,and banker's bank in the United States. 
A)  federal government's bank. 
B)  U.S.central bank. 
C)  banker's bank in the United States. 
D)  federal government's bank,central bank,and banker's bank in the United States.

Question 18

The size of the money multiplier is not fixed,but instead depends on how much of their assets banks wish to hold as reserves.

Accepted Answer

A) True 
 B)False

Question 19

When the Federal Reserve makes an open market purchase,the Federal Reserve buys reserves from the banking system.

Accepted Answer

A) True 
 B)False

Question 20

The Federal Reserve is one of the most independent agencies in the U.S.government.

Accepted Answer

A) True 
 B)False

Exam 15: The Federal Reserve System

The money supply in the United States is measured as the amount of currency,including coins,in circulation.

When banks borrow directly from the Fed,the interest rate they pay is called the:

Money is best defined as:

When the Federal Reserve buys bonds,the demand curve for bonds:

Why does a one-dollar change in bank deposits cause a change in the money supply by more than one dollar?

An illiquid bank is one that:

The main difference between M1 and M2 is that:

The Fed has the most control over:

If the Fed increases the amount of bank reserves by $100 million,the total money supply will potentially increase by more than $100 million.

The Federal Reserve acquires its unique power through its ability to issue money.

The money multiplier is the amount the:

If the value of a bank's liabilities is greater than its assets,there is a:

The monetary base is larger than M2.

Which definition of the money supply includes the most assets?

Which is the MOST liquid asset?

The Fed sets up the Term Auction Facility when it wants to:

The Federal Reserve is the:

The size of the money multiplier is not fixed,but instead depends on how much of their assets banks wish to hold as reserves.

When the Federal Reserve makes an open market purchase,the Federal Reserve buys reserves from the banking system.

The Federal Reserve is one of the most independent agencies in the U.S.government.

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

Filters