Question 1

Which of the following statements is false?

Accepted Answer

A)  The Fed serves as the lender of last resort for banks. 
B)  The Fed serves as a fiscal agent for the U.S. Treasury. 
C)  A major responsibility of the Fed is to control the nation's money supply. 
D)  The federal government is the Fed's banker.

Question 2

Exhibit 13-1
 
-Refer to Exhibit 13-1. Suppose that the Federal Reserve conducts open market operations by purchasing $1,000 worth of government securities from Bank A. At the end of this process of money creation depicted in the exhibit,what equation would be used to determine the total amount of new checkable deposits,blank (G)?

Accepted Answer

A)  simple deposit multiplier x change in reserves resulting from the initial injection of funds 
B)  1/r x change in reserves resulting from the initial injection of funds 
C)  r x change in reserves resulting from the initial injection of funds 
D)  1/r 
E)  a and b

Question 3

Explain the difference between the discount rate and the federal funds rate. If the Fed wants to lower one of these rates,which one can the Fed change by issuing an order? Describe in detail how the Fed helps to lower the other rate.

Accepted Answer

The answer of Explain the difference between the discount rate...

Question 4

List and describe the three major monetary policy tools the Federal Reserve can use to increase the money supply. Be specific in your response regarding which direction the tool would need to change in order for the money supply to grow.

Accepted Answer

The answer of List and describe the three major monetary...

Question 5

Suppose that the current federal funds rate is below the federal funds target rate. In order to raise the federal funds rate the Fed will ________________ securities on the open market which will ________________ the supply of reserves in the market for reserves,pushing the rate closer to the target rate.

Accepted Answer

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

Question 6

The Board of Governors of the Federal Reserve is part of a larger policy-making group called the

Accepted Answer

A)  Senate Banking Committee. 
B)  Federal Deposit Insurance Corporation. 
C)  American Banking Association. 
D)  Federal Open Market Committee.

Question 7

The Federal Reserve System

Accepted Answer

A)  is the central bank of the United States. 
B)  controls the money supply. 
C)  is the lender of last resort. 
D)  is the fiscal agent for the Treasury. 
E)  all of the above

Question 8

The Federal Reserve Bank of Minneapolis once chartered a small airplane to deliver money to a commercial bank that was experiencing a "mad run" on the bank.

Accepted Answer

A) True 
 B)False

Question 9

What is the name and make-up of the policymaking group that has the authority to conduct open market operations? Describe how the use of open market operations helps to increase or decrease the money supply.

Accepted Answer

The answer of What is the name and make-up of...

Question 10

If the Fed purchases government securities from commercial banks,the reserves of the banking system will immediately

Accepted Answer

A)  increase by the amount of the purchase. 
B)  increase by more than the amount of the purchase. 
C)  remain constant. 
D)  decrease by the amount of the purchase. 
E)  decrease by more than the amount of the purchase.

Question 11

The corridor is the ________________ section of the ______________________ curve of reserves in the federal funds market.

Accepted Answer

A)  vertical; demand 
B)  horizontal; demand 
C)  horizontal; supply 
D)  vertical; supply

Question 12

Raising the required reserve ratio __________ the simple deposit multiplier which will __________ the economy's money supply.

Accepted Answer

A)  raises; increase 
B)  raises; decrease 
C)  lowers; increase 
D)  lowers; decrease

Question 13

Open market purchases of government securities

Accepted Answer

A)  are designed to increase trading on the stock exchange. 
B)  generally decrease the money supply. 
C)  always decrease the money supply. 
D)  cause bank reserves to increase. 
E)  all of the above

Question 14

The required reserve ratio is set by the

Accepted Answer

A)  U.S. Congress. 
B)  President of the United States. 
C)  Secretary of the Treasury. 
D)  Federal Reserve. 
E)  Director of Monetary Affairs.

Question 15

A required reserve ratio of 12 percent gives rise to a simple deposit multiplier of

Accepted Answer

A)  12. 
B)  83.33. 
C)  6.67. 
D)  8.33.

Question 16

The discount rate is the interest rate

Accepted Answer

A)  banks pay on certificates of deposit. 
B)  the Fed pays on reserves held by banks. 
C)  the Fed charges when it lends reserves to banks. 
D)  banks charge their loan customers. 
E)  on short-term Treasury securities.

Question 17

If the Fed wants to increase the money supply through an open market operation,it will

Accepted Answer

A)  purchase government securities. 
B)  sell government securities. 
C)  first purchase, then sell, government securities. 
D)  lend more reserves to commercial banks.

Question 18

If the Fed lowers the required reserve ratio,__________ in the banking system will remain unchanged but __________ will rise.This will (likely)lead to an increase in new loans and checkable deposits and a(n)__________ in the money supply.

Accepted Answer

A)  excess reserves; vault cash; increase 
B)  reserves; vault cash; decrease 
C)  reserves; excess reserves; increase 
D)  reserves; required reserves; increase 
E)  none of the above

Question 19

In the United States,paper currency is printed at the

Accepted Answer

A)  Bureau of Engraving and Printing. 
B)  Federal Reserve District banks. 
C)  U.S. Mint. 
D)  U.S. Treasury.

Question 20

To deal with the financial crisis of 2007-2009,the Fed extended its lender of last resort function to include institutions other than banks.

Accepted Answer

A) True 
 B)False

Exam 13: The Federal Reserve System

Which of the following statements is false?

Explain the difference between the discount rate and the federal funds rate. If the Fed wants to lower one of these rates,which one can the Fed change by issuing an order? Describe in detail how the Fed helps to lower the other rate.

List and describe the three major monetary policy tools the Federal Reserve can use to increase the money supply. Be specific in your response regarding which direction the tool would need to change in order for the money supply to grow.

Suppose that the current federal funds rate is below the federal funds target rate. In order to raise the federal funds rate the Fed will securities on the open market which will the supply of reserves in the market for reserves,pushing the rate closer to the target rate.

The Board of Governors of the Federal Reserve is part of a larger policy-making group called the

The Federal Reserve System

The Federal Reserve Bank of Minneapolis once chartered a small airplane to deliver money to a commercial bank that was experiencing a "mad run" on the bank.

What is the name and make-up of the policymaking group that has the authority to conduct open market operations? Describe how the use of open market operations helps to increase or decrease the money supply.

If the Fed purchases government securities from commercial banks,the reserves of the banking system will immediately

The corridor is the section of the ______ curve of reserves in the federal funds market.

Raising the required reserve ratio the simple deposit multiplier which will the economy's money supply.

Open market purchases of government securities

The required reserve ratio is set by the

A required reserve ratio of 12 percent gives rise to a simple deposit multiplier of

The discount rate is the interest rate

If the Fed wants to increase the money supply through an open market operation,it will

If the Fed lowers the required reserve ratio, in the banking system will remain unchanged but will rise.This will (likely) lead to an increase in new loans and checkable deposits and a(n) __ in the money supply.

In the United States,paper currency is printed at the

To deal with the financial crisis of 2007-2009,the Fed extended its lender of last resort function to include institutions other than banks.

Exam 13: The Federal Reserve System

Which of the following statements is false?

Explain the difference between the discount rate and the federal funds rate. If the Fed wants to lower one of these rates,which one can the Fed change by issuing an order? Describe in detail how the Fed helps to lower the other rate.

List and describe the three major monetary policy tools the Federal Reserve can use to increase the money supply. Be specific in your response regarding which direction the tool would need to change in order for the money supply to grow.

The Board of Governors of the Federal Reserve is part of a larger policy-making group called the

The Federal Reserve System

The Federal Reserve Bank of Minneapolis once chartered a small airplane to deliver money to a commercial bank that was experiencing a "mad run" on the bank.

What is the name and make-up of the policymaking group that has the authority to conduct open market operations? Describe how the use of open market operations helps to increase or decrease the money supply.

If the Fed purchases government securities from commercial banks,the reserves of the banking system will immediately

The corridor is the ________________ section of the ______________________ curve of reserves in the federal funds market.

Raising the required reserve ratio __________ the simple deposit multiplier which will __________ the economy's money supply.

Open market purchases of government securities

The required reserve ratio is set by the

A required reserve ratio of 12 percent gives rise to a simple deposit multiplier of

The discount rate is the interest rate

If the Fed wants to increase the money supply through an open market operation,it will

If the Fed lowers the required reserve ratio,__________ in the banking system will remain unchanged but __________ will rise.This will (likely) lead to an increase in new loans and checkable deposits and a(n) __________ in the money supply.

In the United States,paper currency is printed at the

To deal with the financial crisis of 2007-2009,the Fed extended its lender of last resort function to include institutions other than banks.

The corridor is the section of the ______ curve of reserves in the federal funds market.

Raising the required reserve ratio the simple deposit multiplier which will the economy's money supply.

If the Fed lowers the required reserve ratio, in the banking system will remain unchanged but will rise.This will (likely) lead to an increase in new loans and checkable deposits and a(n) __ in the money supply.