Question 1

If the demand for reserves intersects the vertical portion of the supply for reserves, the equilibrium federal funds rate is less than or equal to the discount rate.

Accepted Answer

A) True 
 B)False  True

Question 2

There is a portion of the supply curve for reserves that is vertical, since the Fed controls the supply of reserves when the equilibrium Federal funds rate is sufficiently low.

Accepted Answer

A) True 
 B)False  True

Question 3

An increase in the reserve requirement shifts the demand for reserves to the right.

Accepted Answer

A) True 
 B)False  True

Question 4

The Federal Reserve began paying interest on reserves in what year?

Accepted Answer

A)  1791 
B)  1907 
C)  1945 
D)  2008 
A)  1791 
B)  1907 
C)  1945 
D)  2008

Question 5

Show a graph for supply and demand for reserves where there is discount lending. Show and explain the effect on equilibrium of raising the discount rate.

Accepted Answer

@#IMG-DLM& Raising the discount rate shifts the su

Question 6

An increase in which of the following would shift the supply of reserves up?

Accepted Answer

A)  discount lending 
B)  the reserve requirement 
C)  open market operations 
D)  none of the above 
A)  discount lending 
B)  the reserve requirement 
C)  open market operations 
D)  none of the above

Question 7

Only depository institutions can borrow from the Fed's discount window.

Accepted Answer

A) True 
 B)False

Question 8

On a graph of the supply and demand for reserves, if there is discount lending, what would the Fed have to do to raise the equilibrium federal funds rate?

Accepted Answer

A)  buy bonds 
B)  sell bonds 
C)  raise the reserve requirement 
D)  none of the above 
A)  buy bonds 
B)  sell bonds 
C)  raise the reserve requirement 
D)  none of the above

Question 9

Paying interest on reserves sets a maximum on the required reserve ratio.

Accepted Answer

A) True 
 B)False

Question 10

The ECB conducts open market operations by buying and selling bonds, just as the Fed does.

Accepted Answer

A) True 
 B)False

Question 11

For most central banks, the most commonly used tool to implement monetary policy is open market operations.

Accepted Answer

A) True 
 B)False

Question 12

On the graph of supply and demand for bonds, if there is a positive quantity of discount lending, open market operations cannot raise the equilibrium federal funds rate.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following central banks pays interest on reserves?

Accepted Answer

A)  Bank of Canada 
B)  Bank of England 
C)  ECB 
D)  all of the above 
A)  Bank of Canada 
B)  Bank of England 
C)  ECB 
D)  all of the above

Question 14

The Federal Reserve cannot consistently keep the federal funds rate below discount rate.

Accepted Answer

A) True 
 B)False

Question 15

Draw a graph of the supply and demand for reserves under the channel system where the equilibrium overnight rate strictly inside the channel (not at the max or min).

Accepted Answer

The answer of Draw a graph of the supply and...

Question 16

On a graph of the supply and demand for reserves, what would shift the supply curve down?

Accepted Answer

a decrease

Question 17

Which of these policy tools can a central bank use?

Accepted Answer

A)  QE 
B)  SPV 
C)  TSLF 
D)  FFR 
A)  QE 
B)  SPV 
C)  TSLF 
D)  FFR

Question 18

On a graph of the supply and demand for reserves, if there is discount lending, what would the Fed have to do to lower the equilibrium federal funds rate?

Accepted Answer

A)  buy bonds 
B)  sell bonds 
C)  lower the discount rate 
D)  none of the above 
A)  buy bonds 
B)  sell bonds 
C)  lower the discount rate 
D)  none of the above

Question 19

A change in which of the following tools shifts the demand for reserves?

Accepted Answer

A)  discount lending 
B)  the reserve requirement 
C)  open market operations 
D)  all of the above 
A)  discount lending 
B)  the reserve requirement 
C)  open market operations 
D)  all of the above

Question 20

Under the channel system, a shift in the demand for reserves can change the equilibrium overnight rate if that rate is

Accepted Answer

A)  equal to the discount rate. 
B)  equal to the interest rate on reserves. 
C)  between the discount rate and the interest rate on reserves. 
D)  all of the above. 
A)  equal to the discount rate. 
B)  equal to the interest rate on reserves. 
C)  between the discount rate and the interest rate on reserves. 
D)  all of the above.

Exam 16: Monetary Policy Tools

If the demand for reserves intersects the vertical portion of the supply for reserves, the equilibrium federal funds rate is less than or equal to the discount rate.

There is a portion of the supply curve for reserves that is vertical, since the Fed controls the supply of reserves when the equilibrium Federal funds rate is sufficiently low.

An increase in the reserve requirement shifts the demand for reserves to the right.

The Federal Reserve began paying interest on reserves in what year?

Show a graph for supply and demand for reserves where there is discount lending. Show and explain the effect on equilibrium of raising the discount rate.

An increase in which of the following would shift the supply of reserves up?

Only depository institutions can borrow from the Fed's discount window.

On a graph of the supply and demand for reserves, if there is discount lending, what would the Fed have to do to raise the equilibrium federal funds rate?

Paying interest on reserves sets a maximum on the required reserve ratio.

The ECB conducts open market operations by buying and selling bonds, just as the Fed does.

For most central banks, the most commonly used tool to implement monetary policy is open market operations.

On the graph of supply and demand for bonds, if there is a positive quantity of discount lending, open market operations cannot raise the equilibrium federal funds rate.

Which of the following central banks pays interest on reserves?

The Federal Reserve cannot consistently keep the federal funds rate below discount rate.

Draw a graph of the supply and demand for reserves under the channel system where the equilibrium overnight rate strictly inside the channel (not at the max or min).

On a graph of the supply and demand for reserves, what would shift the supply curve down?

Which of these policy tools can a central bank use?

On a graph of the supply and demand for reserves, if there is discount lending, what would the Fed have to do to lower the equilibrium federal funds rate?

A change in which of the following tools shifts the demand for reserves?

Under the channel system, a shift in the demand for reserves can change the equilibrium overnight rate if that rate is

The Financial System

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The Economics of Interest-Rate Fluctuations

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Rational Expectations, Efficient Markets, and the Valuation of Corporate Equities

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Innovation and Structure in Banking and Finance

The Economics of Financial Regulation

Financial Derivatives

Financial Crises: Causes and Consequences

Central Bank Form and Function

The Money Supply Process and the Money Multipliers

Monetary Policy Targets and Goals

Foreign Exchange

International Monetary Regimes

Money Demand

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Is-Lm in Action

Aggregate Supply and Demand and the Growth Diamond

Monetary Policy Transmission Mechanisms

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