Question 1

If the Fed buys a T-bill from an individual rather than from a bank,the effect on the money supply is

Accepted Answer

A)  smaller because there is no multiplier process. 
B)  larger because of the multiplier process. 
C)  the same. 
D)  impossible to predict without knowing the value of the multiplier. 
A)  smaller because there is no multiplier process. 
B)  larger because of the multiplier process. 
C)  the same. 
D)  impossible to predict without knowing the value of the multiplier.

Question 2

If the Fed decides to sell T-bills,it increases the supply of T-bills.How will this affect the price of T-bills and the interest rate?

Accepted Answer

A)  T-bill prices fall and interest rates fall. 
B)  T-bill prices rise and interest rates rise. 
C)  T-bill prices rise and interest rates fall. 
D)  T-bill prices fall and interest rates rise. 
A)  T-bill prices fall and interest rates fall. 
B)  T-bill prices rise and interest rates rise. 
C)  T-bill prices rise and interest rates fall. 
D)  T-bill prices fall and interest rates rise.

Question 3

If the Fed raises the discount rate,what will be the effect on the money supply?

Accepted Answer

A)  It will decrease the money supply. 
B)  It will increase the money supply. 
C)  No change in the money supply. 
D)  Not enough data to give an answer. 
A)  It will decrease the money supply. 
B)  It will increase the money supply. 
C)  No change in the money supply. 
D)  Not enough data to give an answer.

Question 4

The demand for reserves will increase at lower levels of GDP.

Accepted Answer

A) True 
 B)False

Question 5

Assume that the Fed lowers the required reserve ratio.How will this affect 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.

Question 6

The Federal Reserve System is

Accepted Answer

A)  controlled by the Department of the Treasury. 
B)  the central bank for the United States. 
C)  completely similar to the Bank of England. 
D)  All of the above are correct. 
A)  controlled by the Department of the Treasury. 
B)  the central bank for the United States. 
C)  completely similar to the Bank of England. 
D)  All of the above are correct.

Question 7

When the Fed wishes to decrease the money supply it can

Accepted Answer

A)  ask people to buy more bonds. 
B)  turn additional funds over to the Treasury. 
C)  increase the required reserve ratio. 
D)  decrease the required reserve ratio. 
A)  ask people to buy more bonds. 
B)  turn additional funds over to the Treasury. 
C)  increase the required reserve ratio. 
D)  decrease the required reserve ratio.

Question 8

After the transaction in Table 13-1 is completed,what happens to actual reserves,required reserves,and excess reserves? Assume the required reserve ratio is 25 percent.

Accepted Answer

A)  Actual reserves increase by $10 million, required reserves increase $2.5 million, and excess reserves increase by $7.5 million. 
B)  Actual reserves decrease by $10 million, required reserves decrease $2.5 million, and excess reserves decrease by $7.5 million. 
C)  Actual reserves increase by $10 million, required reserves are unchanged, and excess reserves increase by $10 million. 
D)  Actual reserves decrease by $10 million, required reserves decrease by $10 million, and excess reserves are unchanged. 
A)  Actual reserves increase by $10 million, required reserves increase $2.5 million, and excess reserves increase by $7.5 million. 
B)  Actual reserves decrease by $10 million, required reserves decrease $2.5 million, and excess reserves decrease by $7.5 million. 
C)  Actual reserves increase by $10 million, required reserves are unchanged, and excess reserves increase by $10 million. 
D)  Actual reserves decrease by $10 million, required reserves decrease by $10 million, and excess reserves are unchanged.

Question 9

The Fed is unlike other central banks in that it

Accepted Answer

A)  has 12 branches. 
B)  is completely centralized. 
C)  has no real powers. 
D)  also has control over fiscal policy. 
A)  has 12 branches. 
B)  is completely centralized. 
C)  has no real powers. 
D)  also has control over fiscal policy.

Question 10

Some form of financial distress can become a full-blown recession if risk lead to ____ interest rates and ____ aggregate demand.

Accepted Answer

A)  higher; increased 
B)  higher; decreased 
C)  lower; increased 
D)  lower; decreased 
A)  higher; increased 
B)  higher; decreased 
C)  lower; increased 
D)  lower; decreased

Question 11

Why does the economy's aggregate demand curve have a negative slope?

Accepted Answer

At higher price levels,the quantity of b

Question 12

Which of the following will lower interest rates in the short run?

Accepted Answer

A)  an increase in reserve requirements 
B)  open market sales by the Fed 
C)  a decrease in real GDP 
D)  an increase in the price level 
A)  an increase in reserve requirements 
B)  open market sales by the Fed 
C)  a decrease in real GDP 
D)  an increase in the price level

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

The quantity of reserves supplied increases as interest rates rise because

Accepted Answer

A)  the Treasury borrows more at higher interest rates. 
B)  consumers don't want to borrow as much so more money is left in banks. 
C)  as interest rates rise, banks fear losses so they decrease lending. 
D)  banks find it more profitable to loan out excess reserves to other banks. 
A)  the Treasury borrows more at higher interest rates. 
B)  consumers don't want to borrow as much so more money is left in banks. 
C)  as interest rates rise, banks fear losses so they decrease lending. 
D)  banks find it more profitable to loan out excess reserves to other banks.

Question 15

A system that requires banks to keep 100 percent reserves

Accepted Answer

A)  would reduce the Fed's ability to control the money supply. 
B)  would undermine the effectiveness of reserve requirement changes. 
C)  would increase the Fed's ability to control the money supply. 
D)  could be implemented with little change in bank policy. 
A)  would reduce the Fed's ability to control the money supply. 
B)  would undermine the effectiveness of reserve requirement changes. 
C)  would increase the Fed's ability to control the money supply. 
D)  could be implemented with little change in bank policy.

Question 16

During the stock market crash of October 1987,the Fed

Accepted Answer

A)  raised the discount rate. 
B)  raised reserve requirements. 
C)  increased lending to member banks. 
D)  sold government securities. 
A)  raised the discount rate. 
B)  raised reserve requirements. 
C)  increased lending to member banks. 
D)  sold government securities.

Question 17

Describe the origins of the Fed and the arguments about the independence of the Fed.

Accepted Answer

The Fed was established in 1914 as a res

Question 18

The demand for reserves increases as the price level rises because

Accepted Answer

A)  people want money to buy goods that will appreciate with inflation. 
B)  people need more money to finance transactions. 
C)  the opportunity cost of holding money increases. 
D)  higher prices reduce the value of dollar assets. 
A)  people want money to buy goods that will appreciate with inflation. 
B)  people need more money to finance transactions. 
C)  the opportunity cost of holding money increases. 
D)  higher prices reduce the value of dollar assets.

Question 19

Why is the Fed Reserve chairman considered by many to be the most powerful person in the economic world?

Accepted Answer

People in financial markets around the w

Question 20

The Federal Reserve's principal tool in the manipulation of aggregate demand is the personal income tax.

Accepted Answer

A) True 
 B)False

If the Fed buys a T-bill from an individual rather than from a bank,the effect on the money supply is

If the Fed decides to sell T-bills,it increases the supply of T-bills.How will this affect the price of T-bills and the interest rate?

If the Fed raises the discount rate,what will be the effect on the money supply?

The demand for reserves will increase at lower levels of GDP.

Assume that the Fed lowers the required reserve ratio.How will this affect the money supply?

The Federal Reserve System is

When the Fed wishes to decrease the money supply it can

After the transaction in Table 13-1 is completed,what happens to actual reserves,required reserves,and excess reserves? Assume the required reserve ratio is 25 percent.

The Fed is unlike other central banks in that it

Some form of financial distress can become a full-blown recession if risk lead to interest rates and aggregate demand.

Why does the economy's aggregate demand curve have a negative slope?

Which of the following will lower interest rates in the short run?

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

The quantity of reserves supplied increases as interest rates rise because

A system that requires banks to keep 100 percent reserves

During the stock market crash of October 1987,the Fed

Describe the origins of the Fed and the arguments about the independence of the Fed.

The demand for reserves increases as the price level rises because

Why is the Fed Reserve chairman considered by many to be the most powerful person in the economic world?

The Federal Reserve's principal tool in the manipulation of aggregate demand is the personal income tax.

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

Exam 13: Monetary Policy: Conventional and Unconventional

If the Fed buys a T-bill from an individual rather than from a bank,the effect on the money supply is

If the Fed decides to sell T-bills,it increases the supply of T-bills.How will this affect the price of T-bills and the interest rate?

If the Fed raises the discount rate,what will be the effect on the money supply?

The demand for reserves will increase at lower levels of GDP.

Assume that the Fed lowers the required reserve ratio.How will this affect the money supply?

The Federal Reserve System is

When the Fed wishes to decrease the money supply it can

After the transaction in Table 13-1 is completed,what happens to actual reserves,required reserves,and excess reserves? Assume the required reserve ratio is 25 percent.

The Fed is unlike other central banks in that it

Some form of financial distress can become a full-blown recession if risk lead to ____ interest rates and ____ aggregate demand.

Why does the economy's aggregate demand curve have a negative slope?

Which of the following will lower interest rates in the short run?

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

The quantity of reserves supplied increases as interest rates rise because

A system that requires banks to keep 100 percent reserves

During the stock market crash of October 1987,the Fed

Describe the origins of the Fed and the arguments about the independence of the Fed.

The demand for reserves increases as the price level rises because

Why is the Fed Reserve chairman considered by many to be the most powerful person in the economic world?

The Federal Reserve's principal tool in the manipulation of aggregate demand is the personal income tax.

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

Some form of financial distress can become a full-blown recession if risk lead to interest rates and aggregate demand.