Question 1

An outright sale of government securities by the Fed

Accepted Answer

A)  permanently increases bank reserves. 
B)  temporarily increases bank reserves. 
C)  permanently reduces bank reserves. 
D)  temporarily reduces bank reserves. 
A)  permanently increases bank reserves. 
B)  temporarily increases bank reserves. 
C)  permanently reduces bank reserves. 
D)  temporarily reduces bank reserves. D

Question 2

Which of the following institutions is not eligible to borrow from the Federal Reserve at the discount rate?

Accepted Answer

A)  Federal government 
B)  Commercial banks 
C)  Credit unions 
D)  Mutual savings banks 
A)  Federal government 
B)  Commercial banks 
C)  Credit unions 
D)  Mutual savings banks A

Question 3

Recently, new discount window lending procedures set a penalty rate that is normally __________ short-term market interest rates.

Accepted Answer

A)  just below 
B)  above 
C)  approximately equal to 
D)  None of the above. 
A)  just below 
B)  above 
C)  approximately equal to 
D)  None of the above. B

Question 4

A good example of using the discount rate to serve the lender of last resort role for the financial system occurred during the

Accepted Answer

A)  savings and loan crisis of the 1980s. 
B)  stock market crash of 1987. 
C)  sharp rise in government deficits during the 1980s. 
D)  developing-country debt crisis of the 1980s. 
A)  savings and loan crisis of the 1980s. 
B)  stock market crash of 1987. 
C)  sharp rise in government deficits during the 1980s. 
D)  developing-country debt crisis of the 1980s.

Question 5

Which of the following institutions is eligible to borrow from the Federal Reserve at the discount rate?

Accepted Answer

A)  Property and casualty insurance companies 
B)  Money market mutual funds 
C)  Credit unions 
D)  Investment banks 
A)  Property and casualty insurance companies 
B)  Money market mutual funds 
C)  Credit unions 
D)  Investment banks

Question 6

The deposit expansion multiplier is increased if the Federal Reserve

Accepted Answer

A)  buys government securities. 
B)  sells government securities. 
C)  lowers reserve requirements. 
D)  raises reserve requirements. 
A)  buys government securities. 
B)  sells government securities. 
C)  lowers reserve requirements. 
D)  raises reserve requirements.

Question 7

When the Federal Reserve buys $200 worth of government securities, the money supply

Accepted Answer

A)  rises by $200. 
B)  rises by more than $200. 
C)  falls by $200. 
D)  falls by more than $200. 
A)  rises by $200. 
B)  rises by more than $200. 
C)  falls by $200. 
D)  falls by more than $200.

Question 8

Which of the following institutions can not borrow from the Federal Reserve at the discount window?

Accepted Answer

A)  Thrift institutions 
B)  Member banks 
C)  Nonmember banks 
D)  Life insurance companies 
A)  Thrift institutions 
B)  Member banks 
C)  Nonmember banks 
D)  Life insurance companies

Question 9

Which of the following is an interest rate determined by the supply and demand for loans among commercial banks?

Accepted Answer

A)  The discount rate 
B)  The federal funds rate 
C)  The prime rate 
D)  The commercial paper rate 
A)  The discount rate 
B)  The federal funds rate 
C)  The prime rate 
D)  The commercial paper rate

Question 10

A repurchase agreement of government securities by the Fed

Accepted Answer

A)  permanently increases bank reserves. 
B)  temporarily increases bank reserves. 
C)  permanently reduces bank reserves. 
D)  temporarily reduces bank reserves. 
A)  permanently increases bank reserves. 
B)  temporarily increases bank reserves. 
C)  permanently reduces bank reserves. 
D)  temporarily reduces bank reserves.

Question 11

An outright purchase of government securities by the Fed

Accepted Answer

A)  permanently increases bank reserves. 
B)  temporarily increase bank reserves. 
C)  permanently reduces bank reserves. 
D)  temporarily reduces bank reserves. 
A)  permanently increases bank reserves. 
B)  temporarily increase bank reserves. 
C)  permanently reduces bank reserves. 
D)  temporarily reduces bank reserves.

Question 12

The Federal Reserve views commercial bank use of the discount window as

Accepted Answer

A)  something to be used only by commercial banks. 
B)  completely up to the borrower. 
C)  a privilege, not a right for eligible borrowers. 
D)  something to be used only in financial panics. 
A)  something to be used only by commercial banks. 
B)  completely up to the borrower. 
C)  a privilege, not a right for eligible borrowers. 
D)  something to be used only in financial panics.

Question 13

Which of the following interest rates is usually below other money market rates?

Accepted Answer

A)  Discount rate 
B)  Prime rate 
C)  Federal funds rate 
D)  Treasury note rate 
A)  Discount rate 
B)  Prime rate 
C)  Federal funds rate 
D)  Treasury note rate

Question 14

The money market rate observed most closely by the Open Market Account Manager is the

Accepted Answer

A)  Treasury bill rate. 
B)  commercial paper rate. 
C)  discount rate. 
D)  federal funds rate. 
A)  Treasury bill rate. 
B)  commercial paper rate. 
C)  discount rate. 
D)  federal funds rate.

Question 15

Since being originally set in 1913, bank reserve requirements have

Accepted Answer

A)  not been changed. 
B)  been changed only once. 
C)  been changed on numerous occasions. 
D)  been changed on a daily basis. 
A)  not been changed. 
B)  been changed only once. 
C)  been changed on numerous occasions. 
D)  been changed on a daily basis.

Question 16

When the Federal Reserve sells $100 worth of government securities, bank reserves

Accepted Answer

A)  rise by $100. 
B)  rise by $100 times the deposit expansion multiplier. 
C)  fall by $100. 
D)  fall by $100 times the deposit expansion multiplier. 
A)  rise by $100. 
B)  rise by $100 times the deposit expansion multiplier. 
C)  fall by $100. 
D)  fall by $100 times the deposit expansion multiplier.

Question 17

Excess reserves immediately decrease if

Accepted Answer

A)  reserve requirements increase. 
B)  reserve requirements decrease. 
C)  the discount rate increases. 
D)  the discount rate decreases. 
A)  reserve requirements increase. 
B)  reserve requirements decrease. 
C)  the discount rate increases. 
D)  the discount rate decreases.

Question 18

Reserve requirements are highest for

Accepted Answer

A)  transactions deposits. 
B)  bank borrowings from foreign branches. 
C)  federal funds. 
D)  business time deposits. 
A)  transactions deposits. 
B)  bank borrowings from foreign branches. 
C)  federal funds. 
D)  business time deposits.

Question 19

An indication to the Open Market Account Manager that commercial banks are experiencing a liquidity surplus would be a

Accepted Answer

A)  falling federal funds rate. 
B)  rising federal funds rate. 
C)  falling discount rate. 
D)  rising discount rate. 
A)  falling federal funds rate. 
B)  rising federal funds rate. 
C)  falling discount rate. 
D)  rising discount rate.

Question 20

Reserve requirements apply to

Accepted Answer

A)  demand deposits. 
B)  business-owned time deposits. 
C)  business-owned savings deposits. 
D)  Reserve requirements apply to all of the above. 
A)  demand deposits. 
B)  business-owned time deposits. 
C)  business-owned savings deposits. 
D)  Reserve requirements apply to all of the above.

Exam 19: The Instruments of Central Bankin

An outright sale of government securities by the Fed

Which of the following institutions is not eligible to borrow from the Federal Reserve at the discount rate?

Recently, new discount window lending procedures set a penalty rate that is normally __________ short-term market interest rates.

A good example of using the discount rate to serve the lender of last resort role for the financial system occurred during the

Which of the following institutions is eligible to borrow from the Federal Reserve at the discount rate?

The deposit expansion multiplier is increased if the Federal Reserve

When the Federal Reserve buys $200 worth of government securities, the money supply

Which of the following institutions can not borrow from the Federal Reserve at the discount window?

Which of the following is an interest rate determined by the supply and demand for loans among commercial banks?

A repurchase agreement of government securities by the Fed

An outright purchase of government securities by the Fed

The Federal Reserve views commercial bank use of the discount window as

Which of the following interest rates is usually below other money market rates?

The money market rate observed most closely by the Open Market Account Manager is the

Since being originally set in 1913, bank reserve requirements have

When the Federal Reserve sells $100 worth of government securities, bank reserves

Excess reserves immediately decrease if

Reserve requirements are highest for

An indication to the Open Market Account Manager that commercial banks are experiencing a liquidity surplus would be a

Reserve requirements apply to

Introducing Money, Banking, and Financial Markets

The Role of Money in the Macroeconomy

Financial Instruments, Markets, and Institutions

Interest Rate Measurement and Behavior

The Term and Risk Structure of Interest Rates

The Structure and Performance of Securities Markets

The Pricing of Risky Financial Assets

Money and Capital Markets

Demystifying Derivatives

Understanding Foreign Exchange

The Nature of Financial Intermediation

Depository Financial Institutions

Nondepository Financial Institutions

Understanding Financial Contracts

The Regulation of Markets and Institutions

Financial System Design

Who's in Charge Here?

Bank Reserves and the Money Supply

Understanding Movements in Bank Reserves

Monetary Policy Strategy

The Classical Foundations

The Keynesian Framework

The ISLM World

Money and Economic Stability in the ISLM World

An Aggregate Supply and Demand Perspective on Money and Economic Stability

Rational Expectations: Theory and Policy Implications

Empirical Evidence on the Effectiveness of Monetary Policy

Tying It All Together

Filters