Question 1

During the maintenance period, the actual average amount of reserves held must be

Accepted Answer

A) more than the average required reserves determined in the computation period. 
B) equal to the average required reserves determined in the computation period. 
C) less than the average required reserves determined in the computation period. 
D) substantially less than the average required reserves determined in the computation period. 
A) more than the average required reserves determined in the computation period. 
B) equal to the average required reserves determined in the computation period. 
C) less than the average required reserves determined in the computation period. 
D) substantially less than the average required reserves determined in the computation period.

Question 2

Which of the following is true?

Accepted Answer

A) Primary dealers can now borrow overnight from the Fed. 
B) The Fed auctions government securities to primary dealers for a 28-day or long period in exchange for less liquid and less credit-worth securities. 
C) The Commercial Paper Funding Facility (CPFF) supports the commercial paper market by purchasing commercial paper. 
D) All of the above are true. 
A) Primary dealers can now borrow overnight from the Fed. 
B) The Fed auctions government securities to primary dealers for a 28-day or long period in exchange for less liquid and less credit-worth securities. 
C) The Commercial Paper Funding Facility (CPFF) supports the commercial paper market by purchasing commercial paper. 
D) All of the above are true.

Question 3

The __________________________ supported a private plan to provide liquidity to U.S. money markets by funding the purchase of short-term CDs and commercial paper from money market mutual funds and money market investors.

Accepted Answer

A) Money Market Investor Funding Facility (MMIFF) 
B) Commercial Paper Funding Facility (CPFF) 
C) Term Asset-backed Securities Loan Facility (TALF) 
D) Temporary Auction Facility (TAF) 
A) Money Market Investor Funding Facility (MMIFF) 
B) Commercial Paper Funding Facility (CPFF) 
C) Term Asset-backed Securities Loan Facility (TALF) 
D) Temporary Auction Facility (TAF)

Question 4

The __________________________ supported a private plan to provide liquidity to U.S. money markets by funding the purchase of short-term CDs and commercial paper from money market mutual funds and money market investors.

Accepted Answer

A) Money Market Investor Funding Facility (MMIFF) 
B) Commercial Paper Funding Facility (CPFF) 
C) Term Asset-backed Securities Loan Facility (TALF) 
D) Temporary Auction Facility (TAF) 
A) Money Market Investor Funding Facility (MMIFF) 
B) Commercial Paper Funding Facility (CPFF) 
C) Term Asset-backed Securities Loan Facility (TALF) 
D) Temporary Auction Facility (TAF)

Question 5

What is the name of a repurchase agreement used by the Fed for the purpose of supplying reserves on a temporary basis?

Accepted Answer

A) temporary repurchase agreement 
B) outright repurchase agreement 
C) Fed repurchase agreement 
D) system repurchase agreement 
A) temporary repurchase agreement 
B) outright repurchase agreement 
C) Fed repurchase agreement 
D) system repurchase agreement

Question 6

If the federal funds rate rises above the targeted rate, the Trading Desk ____ the amount of reserves available to depository institutions in order to bring the fed funds rate back to the targeted level.

Accepted Answer

A) reverses 
B) increases 
C) decreases 
D) leaves the same 
A) reverses 
B) increases 
C) decreases 
D) leaves the same

Question 7

Contemporaneous reserve accounting is a system of reserve accounting in which the maintenance period more or less corresponds to the _______ period.

Accepted Answer

A) computation 
B) inflation 
C) reserve 
D) lagged 
A) computation 
B) inflation 
C) reserve 
D) lagged

Question 8

Which of the following statements is true?

Accepted Answer

A) The assets of the Fed decreased dramatically as a result of the financial crisis of 2007 and 2008. 
B) A series of special lending facilities were created by the Fed in response to the financial crisis of 2007 and 2008 to provide support for the financial system. 
C) Under the Term Securities Lending Facility (TSLF), the Fed auctions government securities to primary dealers for a 28 day or longer period in exchange for less liquid and less credit-worthy securities such as mortgage-backed securities thereby increasing reserves to the financial system. 
D) Under the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), the AMLF can loan funds to banks to sell asset-backed commercial paper to money market mutual funds. 
A) The assets of the Fed decreased dramatically as a result of the financial crisis of 2007 and 2008. 
B) A series of special lending facilities were created by the Fed in response to the financial crisis of 2007 and 2008 to provide support for the financial system. 
C) Under the Term Securities Lending Facility (TSLF), the Fed auctions government securities to primary dealers for a 28 day or longer period in exchange for less liquid and less credit-worthy securities such as mortgage-backed securities thereby increasing reserves to the financial system. 
D) Under the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF), the AMLF can loan funds to banks to sell asset-backed commercial paper to money market mutual funds.

Question 9

_______________ is a system of reserve accounting in which the maintenance period occurs after the computation period is over.

Accepted Answer

A) Maintenance period accounting 
B) Double-entry accounting 
C) Lagged reserve accounting 
D) Contemporaneous reserve accounting 
A) Maintenance period accounting 
B) Double-entry accounting 
C) Lagged reserve accounting 
D) Contemporaneous reserve accounting

Question 10

Which of the following is most likely to occur if the quantity demanded of reserves is greater than the quantity supplied of reserves?

Accepted Answer

A) The fed funds rate will fall. 
B) The fed funds rate will rise. 
C) Discount borrowing will decrease. 
D) Both the fed funds rate will rise and discount borrowing will decrease. 
A) The fed funds rate will fall. 
B) The fed funds rate will rise. 
C) Discount borrowing will decrease. 
D) Both the fed funds rate will rise and discount borrowing will decrease.

Question 11

Which of the following statements is false?

Accepted Answer

A) Under the Temporary Auction Facility (TAF), the Fed auctions funds to depository institutions for 28 or 84 days. 
B) The Temporary Auction Facility (TAF) is designed to provide liquidity to short-term markets such as the fed funds market. 
C) Discount loans are usually made for longer terms than loans from the Temporary Auction Facility. 
D) When loans from the Temporary Auction Facility (TAF) are repaid, reserves fall. 
A) Under the Temporary Auction Facility (TAF), the Fed auctions funds to depository institutions for 28 or 84 days. 
B) The Temporary Auction Facility (TAF) is designed to provide liquidity to short-term markets such as the fed funds market. 
C) Discount loans are usually made for longer terms than loans from the Temporary Auction Facility. 
D) When loans from the Temporary Auction Facility (TAF) are repaid, reserves fall.

Question 12

Under the __________________________, the Fed auctions government securities to primary dealers for 28 days or longer in exchange for less liquid and less credit-worthy securities.

Accepted Answer

A) Money Market Investor Funding Facility (MMIFF) 
B) Commercial Paper Funding Facility (CPFF) 
C) Term Securities Lending Facility (TSLF) 
D) Temporary Auction Facility (TAF) 
A) Money Market Investor Funding Facility (MMIFF) 
B) Commercial Paper Funding Facility (CPFF) 
C) Term Securities Lending Facility (TSLF) 
D) Temporary Auction Facility (TAF)

Question 13

A repurchase agreement used to supply reserves on a temporary basis is called a

Accepted Answer

A) discount loan. 
B) special drawing right. 
C) system repurchase agreement. 
D) policy directive. 
A) discount loan. 
B) special drawing right. 
C) system repurchase agreement. 
D) policy directive.

Question 14

If the federal funds rate falls below the targeted rate, the Trading Desk ____ the amount of reserves available to depository institutions in order to bring the fed funds rate back to the targeted level.

Accepted Answer

A) reverses 
B) increases 
C) decreases 
D) leaves the same 
A) reverses 
B) increases 
C) decreases 
D) leaves the same

Question 15

What kind of Fed activity is likely to be evident when a reserve drain is required, but the Fed does not want to signal a policy move toward restraint?

Accepted Answer

A) No Fed buying or selling is likely to occur. 
B) The Fed is likely to engage in reverse repurchase agreements. 
C) The Fed is likely to engage in system repurchase agreements. 
D) The Fed is likely to engage in outright sales. 
A) No Fed buying or selling is likely to occur. 
B) The Fed is likely to engage in reverse repurchase agreements. 
C) The Fed is likely to engage in system repurchase agreements. 
D) The Fed is likely to engage in outright sales.

Question 16

The Trading Desk has determined that a positive reserve need exists but expects the need to be temporary. What can the manager do to temporarily increase the amount of reserves in the system?

Accepted Answer

A) engage in open market outright purchases 
B) engage in open market outright sales 
C) engage in a system repurchase agreement 
D) engage in a reverse repurchase agreement 
A) engage in open market outright purchases 
B) engage in open market outright sales 
C) engage in a system repurchase agreement 
D) engage in a reverse repurchase agreement

Question 17

The FOMC issues a Policy Directive that

Accepted Answer

A) specifies an exact numerical value for the fed funds rate. 
B) communicates whether the rate is likely to go up or down in the future but does not specify a numerical target value. 
C) targets the growth range for the money supply until the next FOMC meeting. 
D) is kept secret from the public until the minutes have been approved at the next FOMC meeting. 
A) specifies an exact numerical value for the fed funds rate. 
B) communicates whether the rate is likely to go up or down in the future but does not specify a numerical target value. 
C) targets the growth range for the money supply until the next FOMC meeting. 
D) is kept secret from the public until the minutes have been approved at the next FOMC meeting.

Question 18

The _______ implements the FOMC policy directive by using _____________.

Accepted Answer

A) Board of Governors, discount window operations 
B) Board of Governors, reserve requirements 
C) New York Fed, open market operations 
D) The U.S. Treasury, discount window 
A) Board of Governors, discount window operations 
B) Board of Governors, reserve requirements 
C) New York Fed, open market operations 
D) The U.S. Treasury, discount window

Question 19

The amount of reserves necessary to maintain the existing level of borrowing and the fed funds rate specified by the policy directive is called which of the following?

Accepted Answer

A) the reserve need 
B) open market operations 
C) the maintenance period reserves 
D) the reserve drain 
A) the reserve need 
B) open market operations 
C) the maintenance period reserves 
D) the reserve drain

Question 20

The period during which the actual amount of required reserve assets to be held during the maintenance period is determined is called the

Accepted Answer

A) maintenance period. 
B) cyclical period. 
C) required reserve period. 
D) computation period. 
A) maintenance period. 
B) cyclical period. 
C) required reserve period. 
D) computation period.

Exam 25: Policy Implementation

During the maintenance period, the actual average amount of reserves held must be

Which of the following is true?

The __________________________ supported a private plan to provide liquidity to U.S. money markets by funding the purchase of short-term CDs and commercial paper from money market mutual funds and money market investors.

The __________________________ supported a private plan to provide liquidity to U.S. money markets by funding the purchase of short-term CDs and commercial paper from money market mutual funds and money market investors.

What is the name of a repurchase agreement used by the Fed for the purpose of supplying reserves on a temporary basis?

If the federal funds rate rises above the targeted rate, the Trading Desk ____ the amount of reserves available to depository institutions in order to bring the fed funds rate back to the targeted level.

Contemporaneous reserve accounting is a system of reserve accounting in which the maintenance period more or less corresponds to the _______ period.

Which of the following statements is true?

_______________ is a system of reserve accounting in which the maintenance period occurs after the computation period is over.

Which of the following is most likely to occur if the quantity demanded of reserves is greater than the quantity supplied of reserves?

Which of the following statements is false?

Under the __________________________, the Fed auctions government securities to primary dealers for 28 days or longer in exchange for less liquid and less credit-worthy securities.

A repurchase agreement used to supply reserves on a temporary basis is called a

If the federal funds rate falls below the targeted rate, the Trading Desk ____ the amount of reserves available to depository institutions in order to bring the fed funds rate back to the targeted level.

What kind of Fed activity is likely to be evident when a reserve drain is required, but the Fed does not want to signal a policy move toward restraint?

The Trading Desk has determined that a positive reserve need exists but expects the need to be temporary. What can the manager do to temporarily increase the amount of reserves in the system?

The FOMC issues a Policy Directive that

The _______ implements the FOMC policy directive by using _____________.

The amount of reserves necessary to maintain the existing level of borrowing and the fed funds rate specified by the policy directive is called which of the following?

The period during which the actual amount of required reserve assets to be held during the maintenance period is determined is called the

Introduction and Overview

Money and Its Role in the Economy

The Overseer: the Federal Reserve System

Financial Markets, Instruments, and Market Makers

Interest Rates and Bond Prices

The Structure of Interest Rates

Market Efficiency and the Flow of Funds Among Sectors

An Introduction to Financial Intermediaries and Risk

Commercial Banking Structure, Regulation, and Performance

Financial Innovation

Financial Instability and Strains on the Financial System

Regulation of the Banking System and the Financial Services Industry

The Debt Markets

The Stock Market

Securities Firms, Mutual Funds, and Financial Conglomerates

How Exchange Rates Are Determined

Forward, Futures, and Options Agreements

The International Financial System

The Fed, Depository Institutions, and the Money Supply Process

The Demand for Real Money Balances and Market Equilibrium

Financial Aspects of the Household, Business, Government, and Rest-Of-The-World Sectors

Aggregate Demand and Aggregate Supply

The Challenges of Monetary Policy

The Process of Monetary Policy Formation

Monetary Policy in a Globalized Financial System

Filters

The _ implements the FOMC policy directive by using _______.