Question 1

If the Fed reduces the required reserve ratio,

Accepted Answer

A)  excess reserves will increase. 
B)  excess reserves will decrease. 
C)  total reserves will increase. 
D)  total reserves will decrease. 
A)  excess reserves will increase. 
B)  excess reserves will decrease. 
C)  total reserves will increase. 
D)  total reserves will decrease.

Question 2

What will happen to the demand for reserves if real GDP increases?

Accepted Answer

A)  It will shift outward. 
B)  It will shift inward. 
C)  It will remain unchanged. 
D)  It depends on what happens to interest rates. 
A)  It will shift outward. 
B)  It will shift inward. 
C)  It will remain unchanged. 
D)  It depends on what happens to interest rates.

Question 3

Open market operations affect the supply of reserves.

Accepted Answer

A) True 
 B)False

Question 4

Members of the Board of Governors of the Federal Reserve System are

Accepted Answer

A)  elected by member banks to serve four-year terms. 
B)  appointed by Congress for 14-year terms. 
C)  appointed by the president for 14-year terms. 
D)  appointed by the Supreme Court for lifetime terms. 
A)  elected by member banks to serve four-year terms. 
B)  appointed by Congress for 14-year terms. 
C)  appointed by the president for 14-year terms. 
D)  appointed by the Supreme Court for lifetime terms.

Question 5

Which of the following is correct?

Accepted Answer

A)  The Fed has very good control over the money supply and bank reserves. 
B)  The Fed has very poor control over the money supply and bank reserves. 
C)  The Fed has very good control over bank reserves but not over the money supply. 
D)  The Fed has very good control over the money supply but not over bank reserves. 
A)  The Fed has very good control over the money supply and bank reserves. 
B)  The Fed has very poor control over the money supply and bank reserves. 
C)  The Fed has very good control over bank reserves but not over the money supply. 
D)  The Fed has very good control over the money supply but not over bank reserves.

Question 6

An increase in the average price level will lead to a decrease in the demand for reserves.

Accepted Answer

A) True 
 B)False

Question 7

The Fed has control over bank reserves and complete control over the money supply.

Accepted Answer

A) True 
 B)False

Question 8

Money supply is to income as

Accepted Answer

A)  real is to ideal. 
B)  stock is to flow. 
C)  real is to nominal. 
D)  flow is to stock. 
A)  real is to ideal. 
B)  stock is to flow. 
C)  real is to nominal. 
D)  flow is to stock.

Question 9

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 10

The Federal Reserve System was established

Accepted Answer

A)  at the request of farmers to keep down interest rates. 
B)  because Americans believe in centralization of authority. 
C)  after four severe bank panics between 1873 and 1907. 
D)  as part of the Treasury Department. 
A)  at the request of farmers to keep down interest rates. 
B)  because Americans believe in centralization of authority. 
C)  after four severe bank panics between 1873 and 1907. 
D)  as part of the Treasury Department.

Question 11

Recessions are typically associated with increases on interest rates on risky securities coupled with increases on interest rates on Treasury securities.

Accepted Answer

A) True 
 B)False

Question 12

The central bank in the United States is known as the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 13

An open market sale of T-bonds by the Fed causes the money supply to

Accepted Answer

A)  fall and bond prices to fall. 
B)  rise and bond prices to fall. 
C)  rise and bond prices to rise. 
D)  fall and bond prices to rise. 
A)  fall and bond prices to fall. 
B)  rise and bond prices to fall. 
C)  rise and bond prices to rise. 
D)  fall and bond prices to rise.

Question 14

If the FOMC orders a purchase of government securities from member banks,where does the FOMC get the money to pay for the securities?

Accepted Answer

A)  It creates money to pay for the securities by adding the purchase amount to the banks' reserves. 
B)  It pays for the securities with new Federal Reserve notes. 
C)  It borrows the necessary funds from the Treasury. 
D)  It auctions off part of the securities it already owns. 
A)  It creates money to pay for the securities by adding the purchase amount to the banks' reserves. 
B)  It pays for the securities with new Federal Reserve notes. 
C)  It borrows the necessary funds from the Treasury. 
D)  It auctions off part of the securities it already owns.

Question 15

If the Fed buys more bonds from the public,and increases the price it is willing to pay for the bonds,what will happen to interest rates?

Accepted Answer

A)  They will rise. 
B)  They will fall. 
C)  They will remain unchanged. 
D)  The relationship between bond prices and interest rates is unclear. 
A)  They will rise. 
B)  They will fall. 
C)  They will remain unchanged. 
D)  The relationship between bond prices and interest rates is unclear.

Question 16

Part of the reason that people confuse money and income is because

Accepted Answer

A)  money is tangible, but income is intangible. 
B)  money serves as the unit of account. 
C)  money is abstract, but income is concrete. 
D)  income is almost impossible to measure. 
A)  money is tangible, but income is intangible. 
B)  money serves as the unit of account. 
C)  money is abstract, but income is concrete. 
D)  income is almost impossible to measure.

Question 17

The Fed's founders viewed the Fed as a means of maintaining the money supply during economic contractions and as a lender of last resort.

Accepted Answer

A) True 
 B)False

Question 18

In the Keynesian causal chain,changes in GDP cause changes in the level of interest rates.

Accepted Answer

A) True 
 B)False

Question 19

If the Fed lends to member banks,what happens to reserves and the money supply?

Accepted Answer

A)  Reserves increase and the money supply decreases. 
B)  Both increase. 
C)  Reserves decrease and the money supply increases. 
D)  Both decrease. 
A)  Reserves increase and the money supply decreases. 
B)  Both increase. 
C)  Reserves decrease and the money supply increases. 
D)  Both decrease.

Question 20

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

If the Fed reduces the required reserve ratio,

What will happen to the demand for reserves if real GDP increases?

Open market operations affect the supply of reserves.

Members of the Board of Governors of the Federal Reserve System are

Which of the following is correct?

An increase in the average price level will lead to a decrease in the demand for reserves.

The Fed has control over bank reserves and complete control over the money supply.

Money supply is to income as

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

The Federal Reserve System was established

Recessions are typically associated with increases on interest rates on risky securities coupled with increases on interest rates on Treasury securities.

The central bank in the United States is known as the Federal Reserve System.

An open market sale of T-bonds by the Fed causes the money supply to

If the FOMC orders a purchase of government securities from member banks,where does the FOMC get the money to pay for the securities?

If the Fed buys more bonds from the public,and increases the price it is willing to pay for the bonds,what will happen to interest rates?

Part of the reason that people confuse money and income is because

The Fed's founders viewed the Fed as a means of maintaining the money supply during economic contractions and as a lender of last resort.

In the Keynesian causal chain,changes in GDP cause changes in the level of interest rates.

If the Fed lends to member banks,what happens to reserves and the money supply?

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?

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

If the Fed reduces the required reserve ratio,

What will happen to the demand for reserves if real GDP increases?

Open market operations affect the supply of reserves.

Members of the Board of Governors of the Federal Reserve System are

Which of the following is correct?

An increase in the average price level will lead to a decrease in the demand for reserves.

The Fed has control over bank reserves and complete control over the money supply.

Money supply is to income as

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

The Federal Reserve System was established

Recessions are typically associated with increases on interest rates on risky securities coupled with increases on interest rates on Treasury securities.

The central bank in the United States is known as the Federal Reserve System.

An open market sale of T-bonds by the Fed causes the money supply to

If the FOMC orders a purchase of government securities from member banks,where does the FOMC get the money to pay for the securities?

If the Fed buys more bonds from the public,and increases the price it is willing to pay for the bonds,what will happen to interest rates?

Part of the reason that people confuse money and income is because

The Fed's founders viewed the Fed as a means of maintaining the money supply during economic contractions and as a lender of last resort.

In the Keynesian causal chain,changes in GDP cause changes in the level of interest rates.

If the Fed lends to member banks,what happens to reserves and the money supply?

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?

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