Question 1

When the Federal Reserve System was first established,its founders intended the Fed to

Accepted Answer

A)  assist the Treasury in collecting taxes. 
B)  be primarily responsible for government regulations. 
C)  pursue an active monetary policy to stabilize the economy. 
D)  provide protection against financial panics by acting as the lender of last resort. 
A)  assist the Treasury in collecting taxes. 
B)  be primarily responsible for government regulations. 
C)  pursue an active monetary policy to stabilize the economy. 
D)  provide protection against financial panics by acting as the lender of last resort.

Question 2

The Fed conducts an open market sale of Treasury bills of $5 million.If the required reserve ratio is 0.20,what change in the money supply can be expected using the oversimplified money multiplier?

Accepted Answer

A)  $25 million 
B)  $5 million 
C)  0 
D)  −$5 million 
E)  −$25 million 
A)  $25 million 
B)  $5 million 
C)  0 
D)  −$5 million 
E)  −$25 million

Question 3

An increase in the interest rate is associated with an increase in bond prices.

Accepted Answer

A) True 
 B)False

Question 4

In reality,commercial banks function most like ____ of the district Federal Reserve Banks.

Accepted Answer

A)  stockholders 
B)  regulators 
C)  customers 
D)  competitors 
A)  stockholders 
B)  regulators 
C)  customers 
D)  competitors

Question 5

Assume that the banking system has $200 billion in reserves.There are no excess reserves in the system.If the reserve requirement is decreased from 10 percent to 8 percent,what will happen to the level of excess reserves in the system?

Accepted Answer

A)  There will be a deficiency of $40 billion in reserves. 
B)  There will be a deficiency of $20 billion in reserves. 
C)  There will be $20 billion in excess reserves. 
D)  There will be $40 billion in excess reserves. 
A)  There will be a deficiency of $40 billion in reserves. 
B)  There will be a deficiency of $20 billion in reserves. 
C)  There will be $20 billion in excess reserves. 
D)  There will be $40 billion in excess reserves.

Question 6

If the Fed buys a T-bill from a commercial bank,how will it pay for the T-bill?

Accepted Answer

A)  It will give the bank new reserves. 
B)  It will write the bank a check. 
C)  It will transfer cash to the bank's vault. 
D)  It will take reserves from another bank. 
A)  It will give the bank new reserves. 
B)  It will write the bank a check. 
C)  It will transfer cash to the bank's vault. 
D)  It will take reserves from another bank.

Question 7

Why do economists insist on emphasizing the difference between money and income? Why is this difference important in macroeconomics?

Accepted Answer

Money is a stock variable that has a val

Question 8

The United States was among the first of the modern industrial nations to establish a central banking system.

Accepted Answer

A) True 
 B)False

Question 9

The reserve demand schedule is drawn on a graph that has the quantity of reserves on the horizontal axis and

Accepted Answer

A)  the price level is on the vertical axis. 
B)  the federal funds rate is on the vertical axis. 
C)  the price of bonds is on the vertical axis. 
D)  income is on the vertical axis. 
A)  the price level is on the vertical axis. 
B)  the federal funds rate is on the vertical axis. 
C)  the price of bonds is on the vertical axis. 
D)  income is on the vertical axis.

Question 10

Individual banks always respond quickly and significantly to changes in the discount rate.

Accepted Answer

A) True 
 B)False

Question 11

How are Treasury bond prices affected when the interest rate rises?

Accepted Answer

A)  The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year,so the price of the bond must decrease. 
B)  The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year,so the price of the bond must increase. 
C)  The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year,so the price of the bond must decrease. 
D)  The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year,so the price of the bond must increase. 
A)  The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year,so the price of the bond must decrease. 
B)  The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year,so the price of the bond must increase. 
C)  The purchaser of the bond needs to spend more money to obtain a given number of dollars of interest per year,so the price of the bond must decrease. 
D)  The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year,so the price of the bond must increase.

Question 12

How does a central bank influence the lending capacity of the banks?

Accepted Answer

A central bank can influence the lending

Question 13

At higher interest rates,banks will want to hold more reserves.

Accepted Answer

A) True 
 B)False

Question 14

In its original role as "lender of last resort" the Fed was supposed to

Accepted Answer

A)  lend money to people in regions without banks. 
B)  lend money to developing nations. 
C)  keep the money supply from drying up during financial panics. 
D)  provide mortgage lending to returning soldiers. 
A)  lend money to people in regions without banks. 
B)  lend money to developing nations. 
C)  keep the money supply from drying up during financial panics. 
D)  provide mortgage lending to returning soldiers.

Question 15

The rate of interest that the Fed charges banks on loans is called the reserve rate.

Accepted Answer

A) True 
 B)False

Question 16

What is the federal funds rate? What are the main determinants of the federal funds rate?

Accepted Answer

The federal funds rate is the interest r

Question 17

If the Fed buys a U.S.Treasury bill from a member of the public,the banking system has

Accepted Answer

A)  less reserves and the money supply tends to fall. 
B)  more reserves and the money supply tends to fall. 
C)  less reserves and the money supply tends to grow. 
D)  more reserves and the money supply tends to grow. 
A)  less reserves and the money supply tends to fall. 
B)  more reserves and the money supply tends to fall. 
C)  less reserves and the money supply tends to grow. 
D)  more reserves and the money supply tends to grow.

Question 18

Which of the following would indicate that the dollar amount being analyzed is money?

Accepted Answer

A)  M1 money stock of $1.4 trillion at the end of 2010 
B)  Microsoft profits of $500 billion in 2010 
C)  The first quarter of 2002 
D)  Nominal GDP in 2010 of $14.7 trillion 
A)  M1 money stock of $1.4 trillion at the end of 2010 
B)  Microsoft profits of $500 billion in 2010 
C)  The first quarter of 2002 
D)  Nominal GDP in 2010 of $14.7 trillion

Question 19

____ is the rate that applies when banks borrow and lend reserves to one another.

Accepted Answer

A)  The repo rate 
B)  The discount rate 
C)  The coupon rate 
D)  The federal fund rate 
A)  The repo rate 
B)  The discount rate 
C)  The coupon rate 
D)  The federal fund rate

Question 20

If the Fed raises the reserve requirement on deposits from 15 percent to 20 percent,what would happen to the money supply?

Accepted Answer

A)  It would decrease. 
B)  It would increase. 
C)  It would remain unchanged. 
D)  It depends on the value of interest rates. 
A)  It would decrease. 
B)  It would increase. 
C)  It would remain unchanged. 
D)  It depends on the value of interest rates.

When the Federal Reserve System was first established,its founders intended the Fed to

The Fed conducts an open market sale of Treasury bills of $5 million.If the required reserve ratio is 0.20,what change in the money supply can be expected using the oversimplified money multiplier?

An increase in the interest rate is associated with an increase in bond prices.

In reality,commercial banks function most like ____ of the district Federal Reserve Banks.

Assume that the banking system has $200 billion in reserves.There are no excess reserves in the system.If the reserve requirement is decreased from 10 percent to 8 percent,what will happen to the level of excess reserves in the system?

If the Fed buys a T-bill from a commercial bank,how will it pay for the T-bill?

Why do economists insist on emphasizing the difference between money and income? Why is this difference important in macroeconomics?

The United States was among the first of the modern industrial nations to establish a central banking system.

The reserve demand schedule is drawn on a graph that has the quantity of reserves on the horizontal axis and

Individual banks always respond quickly and significantly to changes in the discount rate.

How are Treasury bond prices affected when the interest rate rises?

How does a central bank influence the lending capacity of the banks?

At higher interest rates,banks will want to hold more reserves.

In its original role as "lender of last resort" the Fed was supposed to

The rate of interest that the Fed charges banks on loans is called the reserve rate.

What is the federal funds rate? What are the main determinants of the federal funds rate?

If the Fed buys a U.S.Treasury bill from a member of the public,the banking system has

Which of the following would indicate that the dollar amount being analyzed is money?

____ is the rate that applies when banks borrow and lend reserves to one another.

If the Fed raises the reserve requirement on deposits from 15 percent to 20 percent,what would happen to the money supply?

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

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Exam 13: Monetary Policy Conventional and Unconventional

When the Federal Reserve System was first established,its founders intended the Fed to

The Fed conducts an open market sale of Treasury bills of $5 million.If the required reserve ratio is 0.20,what change in the money supply can be expected using the oversimplified money multiplier?

An increase in the interest rate is associated with an increase in bond prices.

In reality,commercial banks function most like ____ of the district Federal Reserve Banks.

Assume that the banking system has $200 billion in reserves.There are no excess reserves in the system.If the reserve requirement is decreased from 10 percent to 8 percent,what will happen to the level of excess reserves in the system?

If the Fed buys a T-bill from a commercial bank,how will it pay for the T-bill?

Why do economists insist on emphasizing the difference between money and income? Why is this difference important in macroeconomics?

The United States was among the first of the modern industrial nations to establish a central banking system.

The reserve demand schedule is drawn on a graph that has the quantity of reserves on the horizontal axis and

Individual banks always respond quickly and significantly to changes in the discount rate.

How are Treasury bond prices affected when the interest rate rises?

How does a central bank influence the lending capacity of the banks?

At higher interest rates,banks will want to hold more reserves.

In its original role as "lender of last resort" the Fed was supposed to

The rate of interest that the Fed charges banks on loans is called the reserve rate.

What is the federal funds rate? What are the main determinants of the federal funds rate?

If the Fed buys a U.S.Treasury bill from a member of the public,the banking system has

Which of the following would indicate that the dollar amount being analyzed is money?

____ is the rate that applies when banks borrow and lend reserves to one another.

If the Fed raises the reserve requirement on deposits from 15 percent to 20 percent,what would happen to the money supply?

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand An Initial Look

An Introduction To Macroeconomics

The Goals Of Macroeconomic Policy

Economic Growth Theory And Policy

Aggregate Demand and The Powerful Consumer

Demand Side Equilibrium Unemployment Or Inflation

Bringing In The Supply Side Unemployment and Inflation

Managing Aggregate Demand Fiscal Policy

Money and The Banking System

The Financial Crisis and The Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits In The Short and Long Run

The Trade Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System Order Or Disorder

Exchange Rates and The Macroeconomy

Filters