Question 1

When the European System of Central Banks uses long-term refinancing operations,it is similar to the Federal Reserve using

Accepted Answer

A) dynamic open market operations. 
B) defensive open market operations. 
C) discount policy. 
D) reserve requirements.

Question 2

In the market for reserves,when the federal funds interest rate is below the discount rate,the supply curve of reserves is

Accepted Answer

A) vertical. 
B) horizontal. 
C) positively sloped. 
D) negatively sloped.

Question 3

Everything else held constant,in the market for reserves,when the supply for federal funds intersects the reserve demand curve along the horizontal section of the demand curve,lowering the interest rate paid on excess reserves

Accepted Answer

A) increases the federal funds rate. 
B) lowers the federal funds rate. 
C) has no effect on the federal funds rate. 
D) has an indeterminate effect of the federal funds rate.

Question 4

When the European System of Central Banks uses main refinancing operations,it is similar to the Federal Reserve using

Accepted Answer

A) dynamic open market operations. 
B) defensive open market operations. 
C) discount policy. 
D) reserve requirements.

Question 5

Everything else held constant,when the federal funds rate is ________ the interest rate paid on reserves,the quantity of reserves demanded rises when the federal funds rate ________.

Accepted Answer

A) above,rises 
B) above,falls 
C) below,rises 
D) below,falls

Question 6

In the market for reserves,if the federal funds rate is between the discount rate and the interest rate paid on excess reserves,a ________ in the reserve requirement decreases the demand for reserves,________ the federal funds interest rate,everything else held constant.

Accepted Answer

A) rise; lowering 
B) decline; raising 
C) decline; lowering 
D) rise; raising

Question 7

The Federal Reserve will engage in a repurchase agreement when it wants to ________ reserves ________ in the banking system.

Accepted Answer

A) increase; permanently 
B) increase; temporarily 
C) decrease; temporarily 
D) decrease; permanently

Question 8

Explain dynamic and defensive open market operations.What is the purpose of each type? Describe two situations when defensive open market operations are used.How are defensive open market operations typically conducted?

Accepted Answer

The answer of Explain dynamic and defensive open market operations.What...

Question 9

Suppose on any given day the prevailing equilibrium federal funds rate is above the Federal Reserve's federal funds target rate.If the Federal Reserve wishes for the federal funds rate to be at their target level,then the appropriate action for the Federal Reserve to take is a ________ open market ________,everything else held constant.

Accepted Answer

A) defensive; sale 
B) defensive; purchase 
C) dynamic; sale 
D) dynamic; purchase

Question 10

The two types of open market operations are

Accepted Answer

A) offensive and defensive. 
B) dynamic and reactionary. 
C) active and passive. 
D) dynamic and defensive.

Question 11

The quantity of reserves supplied equals

Accepted Answer

A) nonborrowed reserves minus borrowed reserves. 
B) nonborrowed reserves plus borrowed reserves. 
C) required reserves plus borrowed reserves. 
D) total reserves minus required reserves.

Question 12

When bad storms slow the check-clearing process,float tends to ________ causing the Fed to initiate defensive open market ________.

Accepted Answer

A) decrease; sales 
B) decrease; purchases 
C) increase; sales 
D) increase; purchases

Question 13

Suppose on any given day there is an excess demand of reserves in the federal funds market.If the Federal Reserve wishes to keep the federal funds rate at its current level,then the appropriate action for the Federal Reserve to take is a ________ open market ________,everything else held constant.

Accepted Answer

A) defensive; sale 
B) defensive; purchase 
C) dynamic; sale 
D) dynamic; purchase

Question 14

Everything else held constant,in the market for reserves,increases in the discount rate affect the federal funds rate

Accepted Answer

A) when the funds rate is below the discount rate. 
B) when the funds rate equals the discount rate. 
C) when the demand for federal funds intersects the vertical section of the reserve supply curve. 
D) when the demand for federal funds equals zero.

Question 15

In the market for reserves,if the federal funds rate is between the discount rate and the interest rate paid on excess reserves,a ________ in the reserve requirement increases the demand for reserves,________ the federal funds interest rate,everything else held constant.

Accepted Answer

A) rise; lowering 
B) decline; raising 
C) decline; lowering 
D) rise; raising

Question 16

The policy tool of changing reserve requirements is

Accepted Answer

A) the most widely used. 
B) the preferred tool from the bank's perspective. 
C) no longer used. 
D) still used,even with its disadvantages.

Question 17

Everything else held constant,in the market for reserves,when the federal funds rate equals the interest rate paid on excess reserves,raising the interest rate paid on excess reserves

Accepted Answer

A) increases the federal funds rate. 
B) lowers the federal funds rate. 
C) has no effect on the federal funds rate. 
D) has an indeterminate effect of the federal funds rate.

Question 18

At its inception,the Federal Reserve was intended to be

Accepted Answer

A) the Treasury's banker. 
B) the issuer of government debt. 
C) a lender-of-last-resort. 
D) a regulator of bank holding companies.

Question 19

The facility that was created in December of 2007 that banks can use to borrow from the Fed that has less of a stigma for banks compared to borrowing from the discount window is the

Accepted Answer

A) Term Securities Lending Facility. 
B) Term Auction Facility. 
C) Primary Dealer Credit Facility. 
D) Commercial Paper Funding Facility.

Question 20

In the market for reserves,when the federal funds rate is above the interest rate paid on excess reserves,the demand curve for reserves is

Accepted Answer

A) vertical. 
B) horizontal. 
C) positively sloped. 
D) negatively sloped.

Exam 15: Tools of Monetary Policy

When the European System of Central Banks uses long-term refinancing operations,it is similar to the Federal Reserve using

In the market for reserves,when the federal funds interest rate is below the discount rate,the supply curve of reserves is

Everything else held constant,in the market for reserves,when the supply for federal funds intersects the reserve demand curve along the horizontal section of the demand curve,lowering the interest rate paid on excess reserves

When the European System of Central Banks uses main refinancing operations,it is similar to the Federal Reserve using

Everything else held constant,when the federal funds rate is the interest rate paid on reserves,the quantity of reserves demanded rises when the federal funds rate .

In the market for reserves,if the federal funds rate is between the discount rate and the interest rate paid on excess reserves,a in the reserve requirement decreases the demand for reserves, the federal funds interest rate,everything else held constant.

The Federal Reserve will engage in a repurchase agreement when it wants to reserves in the banking system.