Question 1

Money is destroyed when

Accepted Answer

A)  loans are made.
B)  checks written on one bank are deposited in another bank.
C)  loans are repaid.
D)  the net worth of the banking system declines.E) B) and D)
F) A) and B)

Question 2

According to the concept of the liquidity trap,

Accepted Answer

A)  at very low interest rates people would put their money in the bank.
B)  at very low interest rates people would simply hold their money.
C)  at very high interest rates people would simply hold their money.
D)  people will lend out their money no matter what the interest rate happens to be.E) A) and D)
F) All of the above

Question 3

If the Fed wants to lower interest rates,it should

Accepted Answer

A)  increase the discount rate.
B)  increase the reserve ratio.
C)  buy government securities in the open market.
D)  sell government securities in the open market.E) All of the above
F) A) and C)

Question 4

The Federal Reserve System

Accepted Answer

A)  has regional Federal Reserve Banks that make most of the decisions.
B)  makes decisions subject to the approval of the President.
C)  makes its major policy decisions in its Open Market Committee.
D)  makes decisions subject to the approval of Congress.E) A) and B)
F) A) and C) C

Question 5

A bank's total reserves consist of

Accepted Answer

A)  liquid assets such as private commercial paper and Treasury bills.
B)  vault cash and Treasury bills.
C)  vault cash only.
D)  all assets.
E)  vault cash and reserve deposits held at a regional Federal Reserve Bank.F) B) and E)
G) A) and C) E

Question 6

Members of the Board of Governors of the Federal Reserve serve one _____ year term.

Accepted Answer

The answer of Members of the Board of Governors of...

Question 7

Statement I: When the Federal Reserve Bank issues currency,this increases our money supply.
Statement II: Most of our currency is printed by the United States Treasury.

Accepted Answer

A)  Statement I is true and statement II is false.
B)  Statement II is true and statement I is false.
C)  Both statements are true.
D)  Both statements are false.E) A) and D)
F) A) and C)

Question 8

The amount of reserves remaining after reserve requirements have been satisfied is called

Accepted Answer

A)  the required reserve ratio.
B)  legal reserves.
C)  federal reserves.
D)  excess reserves.E) None of the above
F) A) and B)

Question 9

If the Fed buys government bonds in the open market,

Accepted Answer

A)  interest rates will rise and investment spending will decrease.
B)  interest rates and investment spending will remain unchanged but inflation will increase.
C)  interest rates will fall and investment spending will increase.
D)  banks' excess reserves will be reduced and loans will be called in,leading to an increase in bankruptcies.
E)  interest rates will fall and investment spending will decrease.F) B) and C)
G) A) and D)

Question 10

Fiscal and monetary policy are conducted by _____ people to attain ______ goals.

Accepted Answer

A)  the same;the same
B)  different;different
C)  the same;different
D)  different;the sameE) None of the above
F) B) and C) D

Question 11

When the reserve requirement is increased,

Accepted Answer

A)  required reserves are reduced.
B)  required reserves are converted to excess reserves.
C)  the discount rate will increase.
D)  excess reserves of depository institutions are reduceD.
E)  depository institutions that are loaned up will have more reserves to loan.F) D) and E)
G) A) and B)

Question 12

Even though the monetary policy is very quick recognize and respond to the coming of a recession than fiscal policy,it has proven in the 2000's to be less affective in avoiding or bring the economy out of the recession because

Accepted Answer

A)  Increased investment by the private sector has not been forthcoming in response to the reduction in interest rates.
B)  Consumers have tended to increase saving and decrease consumption.
C)  Our economy has increased imports during recessions.
D)  The government has imposed fiscal policy to counteract the monetary policy.E) C) and D)
F) All of the above

Question 13

The Federal Reserve System could increase the money supply by

Accepted Answer

A)  selling United States bonds.
B)  reducing reserve requirements and lowering discount rates.
C)  increasing marginal tax rates.
D)  raising discount rates.
E)  rationing consumer credit.F) B) and D)
G) A) and C)

Question 14

Which of the following Federal Reserve Banks is most instrumental in carrying out the policy directives of the Board of Governors?

Accepted Answer

A)  The Federal Reserve Bank of Richmond
B)  The Federal Reserve Bank of St.Louis
C)  The Federal Reserve Bank of San Francisco
D)  The Federal Reserve Bank of New YorkE) B) and D)
F) All of the above

Question 15

Open market operations is conducted by the _______,which is part of the Fed.

Accepted Answer

Federal Op...

Question 16

The process of transferring Federal Reserve deposits among banks as paid checks is called

Accepted Answer

A)  savings.
B)  check clearing.
C)  lending.
D)  reconciliation.E) B) and C)
F) All of the above

Question 17

Demand deposits multiplied by the required reserve ratio equal the amount of reserves

Accepted Answer

A)  the Federal Reserve is required to hold.
B)  business firms are required to hold.
C)  a bank is required to hold.
D)  foreign investors are required to holD.E) None of the above
F) B) and D)

Question 18

During a depression,the best strategy of the Federal Reserve is to

Accepted Answer

A)  sell government bonds,to make low-risk,sound assets available for commercial banks to buy.
B)  sell government bonds,in order to reduce the size of the government's deficits.
C)  sell government bonds,in order to increase aggregate demand.
D)  buy government securities.E) None of the above
F) B) and C)

Question 19

Which of the following statements is NOT true?

Accepted Answer

A)  The supply of money decreases when the Federal Reserve Banks buy government securities from households or businesses.
B)  Excess reserves are the amount by which actual reserves exceed required reserves.
C)  Commercial banks increase the supply of money when they purchase government bonds from households or businesses.
D)  Commercial bank reserves are an asset to commercial banks but a liability to the Federal Reserve Banks.E) None of the above
F) A) and B)

Question 20

When the Fed buys government bonds on the open market,

Accepted Answer

A)  the market rate of interest on government bonds are lowered AND the market rate of interest on corporate bonds are lowered.
B)  the market rate of interest on corporate bonds are increased.
C)  government yields drop but corporate yields rise.
D)  government and corporate yields rise.E) A) and C)
F) All of the above

Exam 14: The Federal Reserve and Monetary Policy

Money is destroyed when

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According to the concept of the liquidity trap,

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If the Fed wants to lower interest rates,it should

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The Federal Reserve System

Correct AnswerverifiedC

A bank's total reserves consist of

Correct AnswerverifiedE

Members of the Board of Governors of the Federal Reserve serve one _____ year term.

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Statement I: When the Federal Reserve Bank issues currency,this increases our money supply. Statement II: Most of our currency is printed by the United States Treasury.

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The amount of reserves remaining after reserve requirements have been satisfied is called

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If the Fed buys government bonds in the open market,

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Fiscal and monetary policy are conducted by _____ people to attain ______ goals.

Correct AnswerverifiedD

When the reserve requirement is increased,

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Even though the monetary policy is very quick recognize and respond to the coming of a recession than fiscal policy,it has proven in the 2000's to be less affective in avoiding or bring the economy out of the recession because

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The Federal Reserve System could increase the money supply by

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Which of the following Federal Reserve Banks is most instrumental in carrying out the policy directives of the Board of Governors?

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Open market operations is conducted by the _______,which is part of the Fed.

Correct AnswerverifiedFederal Op...View AnswerShow Answer

The process of transferring Federal Reserve deposits among banks as paid checks is called

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Demand deposits multiplied by the required reserve ratio equal the amount of reserves

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During a depression,the best strategy of the Federal Reserve is to

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Which of the following statements is NOT true?

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When the Fed buys government bonds on the open market,

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C

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E

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Fiscal and monetary policy are conducted by _ people to attain __ goals.

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D

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Federal Op...
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