Exam 32: Inflation and the Quantity Theory of Money

The Fed has the most control over

What was the rationale for the Fed lending billions of dollars to the insurance company American International Group (AIG)?

Most of the time, a majority of banks borrow from the Federal Reserve.

If banks did not hold reserves, ATMs would not function.

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

If the Fed wants short-term interest rates to rise, it could

Suppose the Fed carries out an open market purchase and credits the account of a bank by $160,000. Further suppose that RR is 10 percent. By how much is the money supply expected to change?

If the Fed buys government bonds, then all of the following will likely increase EXCEPT

An open market operation occurs when

The possibility that the failure of one bank affects the performance of other banks is called

The Fed has the greatest influence over ____ interest rates. Investment spending depends on _____ interest rates.

Explain why the existence of the Federal Deposit Insurance Corporation may reduce bank panics.

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

Reference: Ref 15-2 (Table: Multiple Deposit Expansion) For the multiple deposit expansion process described in this table, what is the maximum amount of loans that the Third National Bank can make if it decides to hold 1 percent of deposits as excess reserves?

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

When the Fed buys U.S. government bonds to affect the money supply, it is conducting

The U.S. Treasury borrows by issuing currency.

The monetary base (MB) refers to

An insolvent bank has greater liabilities than assets.

The Fed's Term Auction Facility is designed to encourage borrowing by banks.