Question 1

Money is:

Accepted Answer

A)  anything that is widely accepted as a means of payment. 
B)  currency only. 
C)  another name for income. 
D)  stocks and bonds. 
A)  anything that is widely accepted as a means of payment. 
B)  currency only. 
C)  another name for income. 
D)  stocks and bonds.

Question 2

The Fed will be most effective at changing the money supply when:

Accepted Answer

A)  banks have low reserves and the money multiplier is small. 
B)  banks have low reserves and the money multiplier is large. 
C)  banks have high reserves and the money multiplier is small. 
D)  banks have high reserves and the money multiplier is large. 
A)  banks have low reserves and the money multiplier is small. 
B)  banks have low reserves and the money multiplier is large. 
C)  banks have high reserves and the money multiplier is small. 
D)  banks have high reserves and the money multiplier is large.

Question 3

When the Federal Reserve buys bonds,the supply 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 4

The major tools that the Fed uses to control the money supply include:

Accepted Answer

A)  controlling the amount of government spending. 
B)  discount rate lending. 
C)  open market operations. 
D)  discount rate lending and open market operations. 
A)  controlling the amount of government spending. 
B)  discount rate lending. 
C)  open market operations. 
D)  discount rate lending and open market operations.

Question 5

Systemic risk is present when:

Accepted Answer

A)  a bank or other financial institution acts recklessly,hoping that the Fed and regulators will later bail them out. 
B)  the U.S.government defaults on Treasury securities. 
C)  the failure of one financial institution will bring down other institutions as well. 
D)  the Fed increases the money supply when it should decrease it. 
A)  a bank or other financial institution acts recklessly,hoping that the Fed and regulators will later bail them out. 
B)  the U.S.government defaults on Treasury securities. 
C)  the failure of one financial institution will bring down other institutions as well. 
D)  the Fed increases the money supply when it should decrease it.

Question 6

The Fed has the greatest influence over _____ interest rates.Investment spending depends on _____ interest rates.

Accepted Answer

A)  short-term;short-term 
B)  short-term;long-term 
C)  long-term;short-term 
D)  long-term;long-term 
A)  short-term;short-term 
B)  short-term;long-term 
C)  long-term;short-term 
D)  long-term;long-term

Question 7

In what ways is the Federal Reserve System independent of the political process in the United States?

Accepted Answer

Although members of the Board of Governo

Question 8

We often think of the Fed as controlling the money supply.Explain how the Fed,in reality,controls only a small part of the money supply.

Accepted Answer

The Fed directly controls the monetary b

Question 9

Which is NOT a widely used means of payment in the United States today?

Accepted Answer

A)  currency 
B)  savings deposits 
C)  gold 
D)  checkable deposits 
A)  currency 
B)  savings deposits 
C)  gold 
D)  checkable deposits

Question 10

When the Fed sells government bonds in the open market:

Accepted Answer

A)  the monetary base increases and interest rates decrease. 
B)  the monetary base decreases and interest rates increase. 
C)  both the monetary base and interest rates decrease. 
D)  both the monetary base and interest rates increase. 
A)  the monetary base increases and interest rates decrease. 
B)  the monetary base decreases and interest rates increase. 
C)  both the monetary base and interest rates decrease. 
D)  both the monetary base and interest rates increase.

Question 11

If the Fed was concerned about the economy falling into recession,it might try to stimulate the economy by:

Accepted Answer

A)  raising the interest rate paid on reserves. 
B)  purchasing additional government securities. 
C)  conduct open market sales. 
D)  raising the discount rate. 
A)  raising the interest rate paid on reserves. 
B)  purchasing additional government securities. 
C)  conduct open market sales. 
D)  raising the discount rate.

Question 12

Quantitative easing occurs when the Fed sells longer-term government bonds or other securities.

Accepted Answer

A) True 
 B)False

Question 13

If the Fed wants to decrease the money supply,it will:

Accepted Answer

A)  buy government bonds. 
B)  lower the discount rate on lending. 
C)  set up the Term Auction Facility. 
D)  increase the rate of interest paid on reserves. 
A)  buy government bonds. 
B)  lower the discount rate on lending. 
C)  set up the Term Auction Facility. 
D)  increase the rate of interest paid on reserves.

Question 14

The Fed has direct control over the M1 supply of money,but only indirect control over M2.

Accepted Answer

A) True 
 B)False

Question 15

How are credit cards related to the money supply?

Accepted Answer

Credit cards themselves are not money be

Question 16

Bank notes are issued by:

Accepted Answer

A)  the leading financial institutions of the United States. 
B)  investment houses and banks. 
C)  the Federal Reserve only. 
D)  private banks and the Federal Reserve. 
A)  the leading financial institutions of the United States. 
B)  investment houses and banks. 
C)  the Federal Reserve only. 
D)  private banks and the Federal Reserve.

Question 17

Withdrawing which asset will incur a penalty before a certain period has passed?

Accepted Answer

A)  checkable deposits 
B)  savings deposits 
C)  small-time deposits 
D)  traveler's checks 
A)  checkable deposits 
B)  savings deposits 
C)  small-time deposits 
D)  traveler's checks

Question 18

The extra lending by the Fed during the 2007-2009 recession was done primarily to:

Accepted Answer

A)  lower interest rates. 
B)  restore confidence in the banking system. 
C)  restore liquidity to credit markets. 
D)  increase the money supply. 
A)  lower interest rates. 
B)  restore confidence in the banking system. 
C)  restore liquidity to credit markets. 
D)  increase the money supply.

Question 19

Banks might not borrow at the discount window for fear that such borrowing will be viewed as a sign of weakness.

Accepted Answer

A) True 
 B)False

Question 20

When the Fed buys bonds,it increases the demand for bonds,which pushes:

Accepted Answer

A)  up the price of bonds,thus raising the interest rate. 
B)  up the price of bonds,thus lowering the interest rate. 
C)  down the price of bonds,thus raising the interest rate. 
D)  down the price of bonds,thus lowering the interest rate. 
A)  up the price of bonds,thus raising the interest rate. 
B)  up the price of bonds,thus lowering the interest rate. 
C)  down the price of bonds,thus raising the interest rate. 
D)  down the price of bonds,thus lowering the interest rate.

Exam 15: The Federal Reserve System

Money is:

The Fed will be most effective at changing the money supply when:

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

The major tools that the Fed uses to control the money supply include:

Systemic risk is present when:

The Fed has the greatest influence over _____ interest rates.Investment spending depends on _____ interest rates.

In what ways is the Federal Reserve System independent of the political process in the United States?

We often think of the Fed as controlling the money supply.Explain how the Fed,in reality,controls only a small part of the money supply.

Which is NOT a widely used means of payment in the United States today?

When the Fed sells government bonds in the open market:

If the Fed was concerned about the economy falling into recession,it might try to stimulate the economy by:

Quantitative easing occurs when the Fed sells longer-term government bonds or other securities.

If the Fed wants to decrease the money supply,it will:

The Fed has direct control over the M1 supply of money,but only indirect control over M2.

How are credit cards related to the money supply?

Bank notes are issued by:

Withdrawing which asset will incur a penalty before a certain period has passed?

The extra lending by the Fed during the 2007-2009 recession was done primarily to:

Banks might not borrow at the discount window for fear that such borrowing will be viewed as a sign of weakness.

When the Fed buys bonds,it increases the demand for bonds,which pushes:

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

The Fed has the greatest influence over _ interest rates.Investment spending depends on _ interest rates.