Question 1

The monetary base is equal to currency plus:

Accepted Answer

A)  checkable deposits. 
B)  total reserves held at the Federal Reserve. 
C)  savings deposits. 
D)  small-time deposits. 
A)  checkable deposits. 
B)  total reserves held at the Federal Reserve. 
C)  savings deposits. 
D)  small-time deposits.

Question 2

If the Fed wishes to implement a policy to influence aggregate demand, what are some of the important variables that it monitors and predicts in order to fine-tune its actions?

Accepted Answer

If the Fed is injecting more reserves in

Question 3

Banks retain only a small portion of their deposits as reserves in:

Accepted Answer

A)  a partial demand deposit arrangement. 
B)  a fractional reserve banking system. 
C)  a banking and reserve lending system. 
D)  a replacement reserve agreement. 
A)  a partial demand deposit arrangement. 
B)  a fractional reserve banking system. 
C)  a banking and reserve lending system. 
D)  a replacement reserve agreement.

Question 4

A decrease in the money supply reduces aggregate demand and real GDP growth in the short run.

Accepted Answer

A) True 
 B)False

Question 5

Currently, the Federal Deposit Insurance Corporation (FDIC) guarantees bank deposits up to:

Accepted Answer

A)  $325,000. 
B)  $100,000. 
C)  $125,000. 
D)  $250,000. 
A)  $325,000. 
B)  $100,000. 
C)  $125,000. 
D)  $250,000.

Question 6

If the Fed sells $200 million in government bonds, the total money supply will:

Accepted Answer

A)  decrease by more than $200 million. 
B)  decrease by less than $200 million but more than $0 million. 
C)  decrease by exactly $200 million. 
D)  not change. 
A)  decrease by more than $200 million. 
B)  decrease by less than $200 million but more than $0 million. 
C)  decrease by exactly $200 million. 
D)  not change.

Question 7

Explain how an open market purchase of bonds by the Federal Reserve will increase the money supply.

Accepted Answer

When the Federal Reserve purchases bonds

Question 8

Systemic risk is:

Accepted Answer

A)  the risk of contagion that occurs when a failing financial institution owes significant sums of money to other financial institutions. 
B)  a risk that is limited to a specific sector only. 
C)  the risk of a bubble in the entire asset pricing system. 
D)  the risk that, when a financial institution fails, its depositors will not only lose their money but also their trust in the monetary system. 
A)  the risk of contagion that occurs when a failing financial institution owes significant sums of money to other financial institutions. 
B)  a risk that is limited to a specific sector only. 
C)  the risk of a bubble in the entire asset pricing system. 
D)  the risk that, when a financial institution fails, its depositors will not only lose their money but also their trust in the monetary system.

Question 9

Explain how the Federal Reserve controls the money supply.

Accepted Answer

The Fed uses three major tools: (1) open

Question 10

When the Federal Reserve makes an open market purchase, the Federal Reserve buys reserves from the banking system.

Accepted Answer

A) True 
 B)False

Question 11

To increase the money supply in the economy, the Fed would:

Accepted Answer

A)  increase the discount rate. 
B)  carry out open market sales and/or raise the reserve ratio. 
C)  carry out open market sales. 
D)  carry out open market purchases and/or lower the discount rate. 
A)  increase the discount rate. 
B)  carry out open market sales and/or raise the reserve ratio. 
C)  carry out open market sales. 
D)  carry out open market purchases and/or lower the discount rate.

Question 12

Withdrawing which asset will incur a penalty before a certain period has passed?

Accepted Answer

A)  checkable deposits 
B)  savings deposits 
C)  small-time deposits 
D)  traveler's checks 
A)  checkable deposits 
B)  savings deposits 
C)  small-time deposits 
D)  traveler's checks

Question 13

The size of the money multiplier is not fixed, but instead depends on how much of their assets banks wish to hold as reserves.

Accepted Answer

A) True 
 B)False

The monetary base is equal to currency plus:

If the Fed wishes to implement a policy to influence aggregate demand, what are some of the important variables that it monitors and predicts in order to fine-tune its actions?

Banks retain only a small portion of their deposits as reserves in:

A decrease in the money supply reduces aggregate demand and real GDP growth in the short run.

Currently, the Federal Deposit Insurance Corporation (FDIC) guarantees bank deposits up to:

If the Fed sells $200 million in government bonds, the total money supply will:

Explain how an open market purchase of bonds by the Federal Reserve will increase the money supply.

Systemic risk is:

Explain how the Federal Reserve controls the money supply.

When the Federal Reserve makes an open market purchase, the Federal Reserve buys reserves from the banking system.

To increase the money supply in the economy, the Fed would:

Withdrawing which asset will incur a penalty before a certain period has passed?

The size of the money multiplier is not fixed, but instead depends on how much of their assets banks wish to hold as reserves.

The Big Ideas

The Power of Trade and Comparative Advantage

Supply and Demand

Equilibrium: How Supply and Demand Determine Prices

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations: Aggregate Demand and Supply

Transmission and Amplification Mechanisms

Monetary Policy

The Federal Budget: Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters

Exam 15: The Federal Reserve System and Open Market Operations

The monetary base is equal to currency plus:

If the Fed wishes to implement a policy to influence aggregate demand, what are some of the important variables that it monitors and predicts in order to fine-tune its actions?

Banks retain only a small portion of their deposits as reserves in:

A decrease in the money supply reduces aggregate demand and real GDP growth in the short run.

Currently, the Federal Deposit Insurance Corporation (FDIC) guarantees bank deposits up to:

If the Fed sells $200 million in government bonds, the total money supply will:

Explain how an open market purchase of bonds by the Federal Reserve will increase the money supply.

Systemic risk is:

Explain how the Federal Reserve controls the money supply.

When the Federal Reserve makes an open market purchase, the Federal Reserve buys reserves from the banking system.

To increase the money supply in the economy, the Fed would:

Withdrawing which asset will incur a penalty before a certain period has passed?

The size of the money multiplier is not fixed, but instead depends on how much of their assets banks wish to hold as reserves.

The Big Ideas

The Power of Trade and Comparative Advantage

Supply and Demand

Equilibrium: How Supply and Demand Determine Prices

Price Ceilings and Floors

GDP and the Measurement of Progress

The Wealth of Nations and Economic Growth

Growth, Capital Accumulation and the Economics of Ideas: Catching up Vs the Cutting Edge

Saving, Investment, and the Financial System

Stock Markets and Personal Finance

Unemployment and Labor Force Participation

Inflation and the Quantity Theory of Money

Business Fluctuations: Aggregate Demand and Supply

Transmission and Amplification Mechanisms

Monetary Policy

The Federal Budget: Taxes and Spending

Fiscal Policy

International Trade

International Finance

Political Economy and Public Choice

Filters