Question 1

When the U.S. Treasury purchases gold and then replenishes its deposit in the Fed the effect is that __________ and __________.

Accepted Answer

A)  reserves increase; gold certificates increase 
B)  reserves decrease; gold certificates increase 
C)  gold certificates increase; Treasury deposits increase 
D)  gold owned by the Fed increases; Treasury deposits increase 
A)  reserves increase; gold certificates increase 
B)  reserves decrease; gold certificates increase 
C)  gold certificates increase; Treasury deposits increase 
D)  gold owned by the Fed increases; Treasury deposits increase

Question 2

Currency in circulation is currency that meets all of the following criteria except for currency

Accepted Answer

A)  outside the Treasury. 
B)  outside the Federal Reserve. 
C)  held as vault cash in banks. 
D)  held by the non-bank public. 
A)  outside the Treasury. 
B)  outside the Federal Reserve. 
C)  held as vault cash in banks. 
D)  held by the non-bank public.

Question 3

If reserves are __________ because of a temporary __________ in the Treasury's balance at the Fed, open market __________ may be used to offset such influences.

Accepted Answer

A)  falling; decline; sales 
B)  rising; increase; sales 
C)  rising; decline; sales 
D)  rising; decline; purchases 
A)  falling; decline; sales 
B)  rising; increase; sales 
C)  rising; decline; sales 
D)  rising; decline; purchases

Question 4

Assume the deposit expansion multiplier is 3.0. If the Treasury borrows $5 billion from the Non-bank public and spends it on the public, bank reserves will

Accepted Answer

A)  rise by $5 billion. 
B)  fall by $5 billion. 
C)  rise by $15 billion. 
D)  not change. 
A)  rise by $5 billion. 
B)  fall by $5 billion. 
C)  rise by $15 billion. 
D)  not change.

Question 5

Which of the following appears as an asset on the Federal Reserve's balance sheet?

Accepted Answer

A)  Capital accounts 
B)  U.S. Treasury deposits 
C)  U.S. government securities held under repurchase agreements 
D)  Federal Reserve notes outstanding 
A)  Capital accounts 
B)  U.S. Treasury deposits 
C)  U.S. government securities held under repurchase agreements 
D)  Federal Reserve notes outstanding

Question 6

Which of the following is a correct statement regarding the balance sheet of the Federal Reserve?

Accepted Answer

A)  Fed assets = Fed liabilities + Federal Reserve notes 
B)  Fed assets = Fed liabilities + Fed capital accounts 
C)  Fed assets = Fed liabilities + bank reserves 
D)  Fed assets = bank reserves + Federal Reserve notes outstanding 
A)  Fed assets = Fed liabilities + Federal Reserve notes 
B)  Fed assets = Fed liabilities + Fed capital accounts 
C)  Fed assets = Fed liabilities + bank reserves 
D)  Fed assets = bank reserves + Federal Reserve notes outstanding

Question 7

U)S. government purchases of gold are officially carried out by the

Accepted Answer

A)  New York Federal Reserve Bank. 
B)  Federal Open Market Committee. 
C)  Federal Deposit Insurance Corporation. 
D)  U.S. Treasury. 
A)  New York Federal Reserve Bank. 
B)  Federal Open Market Committee. 
C)  Federal Deposit Insurance Corporation. 
D)  U.S. Treasury.

Question 8

The money supply is certain to increase if the Treasury finances expenditures by borrowing from the

Accepted Answer

A)  Federal Reserve. 
B)  banking system. 
C)  non-bank financial system. 
D)  general public. 
A)  Federal Reserve. 
B)  banking system. 
C)  non-bank financial system. 
D)  general public.

Question 9

If a Fed __________ other than bank reserves falls and there are no offsetting entries elsewhere on the Fed's balance sheet, then bank reserves must __________.

Accepted Answer

A)  asset; fall 
B)  asset; rise 
C)  liability; fall 
D)  liability; rise 
A)  asset; fall 
B)  asset; rise 
C)  liability; fall 
D)  liability; rise

Question 10

When taxes paid by a check are deposited in tax and loan accounts,

Accepted Answer

A)  bank reserves and the money supply are unaffected. 
B)  bank reserves fall but the money supply is unaffected. 
C)  bank reserves are unaffected but the money supply falls. 
D)  bank reserves and the money supply fall. 
A)  bank reserves and the money supply are unaffected. 
B)  bank reserves fall but the money supply is unaffected. 
C)  bank reserves are unaffected but the money supply falls. 
D)  bank reserves and the money supply fall.

Question 11

If the Treasury finances an expenditure by borrowing from the Fed, the money supply

Accepted Answer

A)  and bank reserves fall. 
B)  and bank reserves rise. 
C)  rises while bank reserves remain unchanged. 
D)  remains unchanged as bank reserves rise. 
A)  and bank reserves fall. 
B)  and bank reserves rise. 
C)  rises while bank reserves remain unchanged. 
D)  remains unchanged as bank reserves rise.

Question 12

Bank reserves will increase if which of the following changes occurs, assuming that there are no offsetting changes elsewhere on the Fed's balance sheet?

Accepted Answer

A)  Fed loans decrease 
B)  Currency held by the public increases 
C)  Treasury deposits increase 
D)  The float decreases 
A)  Fed loans decrease 
B)  Currency held by the public increases 
C)  Treasury deposits increase 
D)  The float decreases

Question 13

A gold purchase by the U.S. Treasury

Accepted Answer

A)  reduces bank reserves. 
B)  increases bank reserves. 
C)  increases Federal Reserve equity. 
D)  leaves bank reserves unaffected. 
A)  reduces bank reserves. 
B)  increases bank reserves. 
C)  increases Federal Reserve equity. 
D)  leaves bank reserves unaffected.

Question 14

If the Treasury borrows from the public and makes an expenditure of an equal amount, it will affect

Accepted Answer

A)  the supply of currency. 
B)  the money supply. 
C)  the supply of government securities. 
D)  bank reserves. 
A)  the supply of currency. 
B)  the money supply. 
C)  the supply of government securities. 
D)  bank reserves.

Question 15

Assume a money multiplier of 3. If the Treasury finances a $30 million expenditure by selling securities to the Fed, the money supply could ultimately

Accepted Answer

A)  rise by $3 million. 
B)  rise by $10 million. 
C)  rise by $30 million. 
D)  rise by $90 million. 
A)  rise by $3 million. 
B)  rise by $10 million. 
C)  rise by $30 million. 
D)  rise by $90 million.

Question 16

Assuming a fully loaned-up banking system and a deposit expansion multiplier of 2, a $10 million government expenditure financed by sales of securities to the banking system will cause the money supply to

Accepted Answer

A)  remain unchanged. 
B)  rise by $5 million. 
C)  rise by $10 million. 
D)  rise by $20 million. 
A)  remain unchanged. 
B)  rise by $5 million. 
C)  rise by $10 million. 
D)  rise by $20 million.

Question 17

According to the bank reserve equation, the largest factor supplying reserves to the banking system is

Accepted Answer

A)  Federal Reserve purchases of government securities. 
B)  Treasury currency outstanding. 
C)  float. 
D)  currency in circulation. 
A)  Federal Reserve purchases of government securities. 
B)  Treasury currency outstanding. 
C)  float. 
D)  currency in circulation.

Question 18

The largest item on the asset side of the Federal Reserve balance sheet is

Accepted Answer

A)  Federal Reserve notes. 
B)  U.S. government securities. 
C)  gold. 
D)  U.S. Treasury deposits. 
A)  Federal Reserve notes. 
B)  U.S. government securities. 
C)  gold. 
D)  U.S. Treasury deposits.

Question 19

The Treasury runs the greatest risk of inflation when expenditures are financed by borrowing from

Accepted Answer

A)  foreign nations. 
B)  the Federal Reserve. 
C)  the banking system. 
D)  the non-bank public. 
A)  foreign nations. 
B)  the Federal Reserve. 
C)  the banking system. 
D)  the non-bank public.

Question 20

Assume a demand deposit multiplier of 2 and a government expenditure of $10 million. If the Treasury borrows that much from the banking system, bank reserves will

Accepted Answer

A)  rise by $2 million. 
B)  rise by $10 million. 
C)  rise by $20 million. 
D)  remain unchanged. 
A)  rise by $2 million. 
B)  rise by $10 million. 
C)  rise by $20 million. 
D)  remain unchanged.

Exam 20: Understanding Movements in Bank Reserves

When the U.S. Treasury purchases gold and then replenishes its deposit in the Fed the effect is that __________ and __________.

Currency in circulation is currency that meets all of the following criteria except for currency

If reserves are __________ because of a temporary __________ in the Treasury's balance at the Fed, open market __________ may be used to offset such influences.

Assume the deposit expansion multiplier is 3.0. If the Treasury borrows $5 billion from the Non-bank public and spends it on the public, bank reserves will

Which of the following appears as an asset on the Federal Reserve's balance sheet?

Which of the following is a correct statement regarding the balance sheet of the Federal Reserve?

U)S. government purchases of gold are officially carried out by the

The money supply is certain to increase if the Treasury finances expenditures by borrowing from the

If a Fed __________ other than bank reserves falls and there are no offsetting entries elsewhere on the Fed's balance sheet, then bank reserves must __________.

When taxes paid by a check are deposited in tax and loan accounts,

If the Treasury finances an expenditure by borrowing from the Fed, the money supply

Bank reserves will increase if which of the following changes occurs, assuming that there are no offsetting changes elsewhere on the Fed's balance sheet?

A gold purchase by the U.S. Treasury

If the Treasury borrows from the public and makes an expenditure of an equal amount, it will affect

Assume a money multiplier of 3. If the Treasury finances a $30 million expenditure by selling securities to the Fed, the money supply could ultimately

Assuming a fully loaned-up banking system and a deposit expansion multiplier of 2, a $10 million government expenditure financed by sales of securities to the banking system will cause the money supply to

According to the bank reserve equation, the largest factor supplying reserves to the banking system is

The largest item on the asset side of the Federal Reserve balance sheet is

The Treasury runs the greatest risk of inflation when expenditures are financed by borrowing from

Assume a demand deposit multiplier of 2 and a government expenditure of $10 million. If the Treasury borrows that much from the banking system, bank reserves will

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

The Instruments of Central Bankin

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

When the U.S. Treasury purchases gold and then replenishes its deposit in the Fed the effect is that and .

If reserves are because of a temporary in the Treasury's balance at the Fed, open market __ may be used to offset such influences.

If a Fed other than bank reserves falls and there are no offsetting entries elsewhere on the Fed's balance sheet, then bank reserves must .