Exam 15: The Federal Reserve System and Open Market Operations

If the Fed wants to increase the money supply, it will typically:

What is the overnight lending rate from one bank to another?

Which is NOT a function of the Federal Reserve?

Why are banks reluctant to borrow at the discount window?

When the Fed wants to increase interest rates, it:

If the reserve ratio is 4%, the money multiplier is:

The Fed recapitalizes banks:

When the Federal Reserve makes an open market purchase, the reserves of the banking system will:

The money multiplier equals one:

Which is the MOST liquid asset?

In a fractional reserve banking system, banks hold only a fraction of their:

When the Fed wants to change the money supply, it usually buys or sells money market mutual funds.

Quantitative easing occurs when the Fed sells longer-term government bonds or other securities.

The discount rate is the interest rate charged on a(n):

Which is NOT a major tool used by the Fed to control the money supply?

If the Fed buys bonds in the open market, which of the following will likely NOT happen?

Use the following to answer questions: For this table, assume that all banks observe the same required reserve ratio requirement. Also assume that the banks are listed in sequential order (thus the loans from the First National Bank become the deposits for the Second National Bank, and the loans from the Second National Bank become the deposits for the Third National Bank, and so on.) Also, the bank's balance sheets must always be balanced. Table: Multiple Deposit Expansion First National Bank ASSETS LIABILITIES Required reserves Deposits \ 400,000 Loans \ 368,000 TOTAL TOTAL Second National Bank ASSETS LIABILITIES Required reserves Deposits Loans TOTAL TOTAL $\text { Third National Bank }$ ASSETS LIABILITIES Required reserves Deposits Loans TOTAL TOTAL -(Table: Multiple Deposit Expansion) Refer to the table. For the multiple deposit expansion process described in this table, what is the required reserve ratio in this banking system?

When the U.S. Treasury borrows, the borrowing is managed by the:

If the reserve ratio is 20%, the money multiplier equals:

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