Question 1

Refer to Exhibit 13-2.What word (up or down) should go in the place of blank (5) and blank (6) ,respectively?

Accepted Answer

A)   up; up
B)   up; down
C)   down; up
D)   down; downE) A) and B)
F) B) and C)

Question 2

Which of the following statements is false?

Accepted Answer

A)   The Fed has the legal authority to create money out of thin air.
B)   There is a direct relationship between the money supply and the required reserve ratio.
C)   The Fed can cause money to disappear into thin air.
D)   The federal funds market is a market in which banks can borrow money from other banks.E) A) and B)
F) A) and C)

Question 3

Suppose the Fed sells a $50,000 U.S.Treasury security to Martha,a member of the public.If Martha writes a check to the Fed in order to buy this security,the money in her checking account will be transferred to

Accepted Answer

A)   the Fed,and now the Fed will have $50,000 more in reserves than it had before.
B)   her bank,and now her bank will have $50,000 more in reserves than it had before.
C)   the Fed,and now it is as if the money doesn't exist.
D)   the Treasury,and now the Treasury will have $50,000 more in reserves than it had before.E) B) and D)
F) A) and C)

Question 4

Lowering 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; decreaseE) A) and C)
F) A) and B)

Question 5

Which of the following Fed actions will decrease the money supply?

Accepted Answer

A)   an open market purchase of Treasury bills
B)   an increase in the required reserve ratio
C)   a decrease in the discount rate relative to the federal funds rate
D)   all of the above
E)   none of the aboveF) A) and E)
G) A) and D)

Question 6

The Fed has been called "the lender of last resort" because it

Accepted Answer

A)   is the biggest bank in the country.
B)   is the only lender to the federal government.
C)   serves as the last place to acquire loans for banks suffering cash management,or liquidity,problems.
D)   a and b
E)   all of the aboveF) C) and D)
G) C) and E)

Question 7

The Board of Governors of the Federal Reserve serves on a larger policy-making group called the House Banking Committee.

Accepted Answer

A) True 
 B)False

Question 8

The Banking Act of 1935 changed the name of the _______________ to the Board of Governors of the Federal Reserve System.

Accepted Answer

A)   Federal Open Market Committee
B)   Board of Monetary Affairs
C)   Central Bank Board
D)   Federal Reserve BoardE) A) and B)
F) A) and C)

Question 9

If reserves increase by $50 billion and the required reserve ratio is 8%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

Accepted Answer

A)   $40 billion
B)   $400 billion
C)   $62.5 billion
D)   $625 billionE) A) and D)
F) All of the above

Question 10

If the federal funds rate falls below the discount rate,banks will decrease their borrowings from __________ and __________ their borrowings from __________.It follows that when one bank borrows from __________,reserves in the banking system __________.

Accepted Answer

A)   other banks; increase; the Fed; another bank; remain unchanged
B)   the Fed; decrease; other banks; another bank; remain unchanged
C)   other banks; increase; the U.S.Treasury; the Treasury; increase
D)   the Fed; increase; other banks; another bank; remain unchanged
E)   none of the aboveF) B) and E)
G) A) and D)

Question 11

An "open market operation" is said to occur when the Fed

Accepted Answer

A)   arranges for the merger of two banks.
B)   changes the interest rate at which it lends reserves.
C)   transfers reserves between banks.
D)   buys or sells government securities.E) B) and C)
F) None of the above

Question 12

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.As a result,Bank A finds itself with $1,000 in excess reserves that it lends out and those funds end up in Bank B.The loan made by Bank B ends up in Bank C,and the loan made by bank C ends up in Bank D.What dollar value goes in blanks (E) and (F) ,respectively?.

Accepted Answer

A)   $729; $81
B)   $81; $729
C)   $10; $800
D)   $700; $110E) B) and C)
F) A) and C)

Question 13

The discount rate is sometimes also known as the primary credit rate.

Accepted Answer

A) True 
 B)False

Question 14

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,what equation would be used to determine the total amount of new checkable deposits?

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 or bF) A) and E)
G) B) and C)

Question 15

Which of the following is not a function of the Fed?

Accepted Answer

A)   to provide check-clearing services
B)   to hold depository institutions' reserves
C)   to serve as the government's banker
D)   to serve as the borrower of last resort
E)   none of the aboveF) A) and C)
G) C) and D)

Question 16

The Federal Reserve System came into existence with the Federal Reserve Act of

Accepted Answer

A)   1877.
B)   1933.
C)   1965.
D)   1913.
E)   1922.F) A) and D)
G) A) and E)

Question 17

Here is how an open market purchase works: The Fed __________ government securities to (from) a commercial bank,which raises the bank's deposits at the __________ and increases the bank's __________.

Accepted Answer

A)   sells; Fed; reserves
B)   buys; Fed; reserves
C)   buys; Treasury; discount loans
D)   sells; Treasury; required reserve ratio
E)   buys; Fed; liabilitiesF) B) and E)
G) A) and D)

Question 18

The Fed can change the money supply by changing

Accepted Answer

A)   the required reserve ratio.
B)   marginal income tax rates.
C)   federal excise taxes.
D)   unemployment benefits.E) A) and B)
F) B) and D)

Question 19

The president of the Federal Reserve District Bank of New York holds a permanent seat on the Federal Open Market Committee.

Accepted Answer

A) True 
 B)False

Question 20

If the Fed wants to increase the money supply,it can __________ the required reserve ratio,conduct an open market __________,or __________the discount rate.

Accepted Answer

A)   lower; sale; raise
B)   lower; purchase; raise
C)   lower; purchase; lower
D)   raise; sale; lower
E)   raise; purchase; raiseF) B) and D)
G) None of the above

Exam 13: Factor Markets: With Emphasis on the Labor Market

The Federal Reserve System came into existence with the Federal Reserve Act of

Correct Answer
verified

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

Correct Answer
verified

If the Fed wants to increase the money supply,it can the required reserve ratio,conduct an open market ,or __the discount rate.

Correct Answer
verified

If reserves increase by $50 billion and the required reserve ratio is 8%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

Correct Answer
verified

Correct Answer
verified

The president of the Federal Reserve District Bank of New York holds a permanent seat on the Federal Open Market Committee.

Correct Answer
verified

If the federal funds rate falls below the discount rate,banks will decrease their borrowings from and their borrowings from .It follows that when one bank borrows from ,reserves in the banking system __.

Correct Answer
verified

Which of the following Fed actions will decrease the money supply?

Correct Answer
verified

Here is how an open market purchase works: The Fed government securities to (from) a commercial bank,which raises the bank's deposits at the and increases the bank's __.

Correct Answer
verified

An "open market operation" is said to occur when the Fed

Correct Answer
verified

Refer to Exhibit 13-2.What word (up or down) should go in the place of blank (5) and blank (6) ,respectively?

Correct Answer
verified

The Fed has been called "the lender of last resort" because it

Correct Answer
verified

The Banking Act of 1935 changed the name of the _______________ to the Board of Governors of the Federal Reserve System.

Correct Answer
verified

Suppose the Fed sells a $50,000 U.S.Treasury security to Martha,a member of the public.If Martha writes a check to the Fed in order to buy this security,the money in her checking account will be transferred to

Correct Answer
verified

Which of the following statements is false?

Correct Answer
verified

The discount rate is sometimes also known as the primary credit rate.

Correct Answer
verified

The Board of Governors of the Federal Reserve serves on a larger policy-making group called the House Banking Committee.

Correct Answer
verified

The Fed can change the money supply by changing

Correct Answer
verified

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,what equation would be used to determine the total amount of new checkable deposits?

Correct Answer
verified

Which of the following is not a function of the Fed?

Correct Answer
verified

Exam 13: Factor Markets: With Emphasis on the Labor Market

The Federal Reserve System came into existence with the Federal Reserve Act of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If the Fed wants to increase the money supply,it can __________ the required reserve ratio,conduct an open market __________,or __________the discount rate.

Correct AnswerverifiedShow Answer

If reserves increase by $50 billion and the required reserve ratio is 8%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The president of the Federal Reserve District Bank of New York holds a permanent seat on the Federal Open Market Committee.

Correct AnswerverifiedShow Answer

If the federal funds rate falls below the discount rate,banks will decrease their borrowings from __________ and __________ their borrowings from __________.It follows that when one bank borrows from __________,reserves in the banking system __________.

Correct AnswerverifiedShow Answer

Which of the following Fed actions will decrease the money supply?

Correct AnswerverifiedShow Answer

Here is how an open market purchase works: The Fed __________ government securities to (from) a commercial bank,which raises the bank's deposits at the __________ and increases the bank's __________.

Correct AnswerverifiedShow Answer

An "open market operation" is said to occur when the Fed

Correct AnswerverifiedShow Answer

Refer to Exhibit 13-2.What word (up or down) should go in the place of blank (5) and blank (6) ,respectively?

Correct AnswerverifiedShow Answer

The Fed has been called "the lender of last resort" because it

Correct AnswerverifiedShow Answer

The Banking Act of 1935 changed the name of the _______________ to the Board of Governors of the Federal Reserve System.

Correct AnswerverifiedShow Answer

Suppose the Fed sells a $50,000 U.S.Treasury security to Martha,a member of the public.If Martha writes a check to the Fed in order to buy this security,the money in her checking account will be transferred to

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

The discount rate is sometimes also known as the primary credit rate.

Correct AnswerverifiedShow Answer

The Board of Governors of the Federal Reserve serves on a larger policy-making group called the House Banking Committee.

Correct AnswerverifiedShow Answer

The Fed can change the money supply by changing

Correct AnswerverifiedShow Answer

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,what equation would be used to determine the total amount of new checkable deposits?

Correct AnswerverifiedShow Answer

Which of the following is not a function of the Fed?

Correct AnswerverifiedShow Answer

Correct Answer
verified

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

Correct Answer
verified

If the Fed wants to increase the money supply,it can the required reserve ratio,conduct an open market ,or __the discount rate.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

If the federal funds rate falls below the discount rate,banks will decrease their borrowings from and their borrowings from .It follows that when one bank borrows from ,reserves in the banking system __.

Correct Answer
verified

Correct Answer
verified

Here is how an open market purchase works: The Fed government securities to (from) a commercial bank,which raises the bank's deposits at the and increases the bank's __.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified