Question 1

_______________ 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 2

The statement that emerges from the FOMC Meeting and is used by the New York Fed to gauge monetary policy is called the

Accepted Answer

A) monetary policy report. 
B) Fed monetary directive. 
C) uniform directive. 
D) policy directive. 
A) monetary policy report. 
B) Fed monetary directive. 
C) uniform directive. 
D) policy directive.

Question 3

Which of the following statements is false?

Accepted Answer

A) The demand for reserve balances has decreased significantly in recent years due to the growth of retail sweep accounts. 
B) The FOMC releases a statement following every meeting announcing any shifts in its view of upcoming economic developments. 
C) The Fed can make an intermeeting policy change if the situation warrants it. 
D) Intermeeting changes have been very frequent historically. 
A) The demand for reserve balances has decreased significantly in recent years due to the growth of retail sweep accounts. 
B) The FOMC releases a statement following every meeting announcing any shifts in its view of upcoming economic developments. 
C) The Fed can make an intermeeting policy change if the situation warrants it. 
D) Intermeeting changes have been very frequent historically.

Question 4

Economic projections and expected performance for the next year are announced in which of these reports?

Accepted Answer

A) The Monetary Policy Report to the President 
B) The Monetary Policy Report to the Congress 
C) The Monetary Policy Report to the Senate 
D) The Monetary Policy Report to the Fed 
A) The Monetary Policy Report to the President 
B) The Monetary Policy Report to the Congress 
C) The Monetary Policy Report to the Senate 
D) The Monetary Policy Report to the Fed

Question 5

The Trading Desk derives the reserve need, which is the difference, if any, between actual reserves and those projected to be need to keep the ________ at the desired level.

Accepted Answer

A) federal funds rate 
B) prime interest rate 
C) discount rate 
D) inflation rate 
A) federal funds rate 
B) prime interest rate 
C) discount rate 
D) inflation rate

Question 6

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

Accepted Answer

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

Question 7

Ceteris paribus, if the quantity demanded of reserves exceeds the quantity supplied of reserves, the Fed funds rates will

Accepted Answer

A) decrease. 
B) remain the same. 
C) increase. 
D) decrease significantly. 
A) decrease. 
B) remain the same. 
C) increase. 
D) decrease significantly.

Question 8

Which of the following is a system of reserve accounting in which the maintenance period more or less corresponds to the computation period?

Accepted Answer

A) Required reserve period 
B) Fiscal period 
C) Computation period 
D) Contemporaneous reserve accounting 
A) Required reserve period 
B) Fiscal period 
C) Computation period 
D) Contemporaneous reserve accounting

Question 9

In 1994, the Fed began to announce the decisions made at the FOMC meetings _______________________. This policy was formally adopted in 1995.

Accepted Answer

A) a week after the meetings. 
B) in the published minutes. 
C) immediately following the meetings. 
D) 10 days after the meetings. 
A) a week after the meetings. 
B) in the published minutes. 
C) immediately following the meetings. 
D) 10 days after the meetings.

Question 10

Once the long-term policy stance is set, the focus of the FOMC shifts to the ______ period.

Accepted Answer

A) immediate 
B) previous 
C) lagged 
D) final 
A) immediate 
B) previous 
C) lagged 
D) final

Question 11

The period in which banks are required to hold an amount of reserve assets that was determined in the computation period is called which of the following?

Accepted Answer

A) the fiscal period 
B) the cyclical period 
C) the maintenance period 
D) the band period 
A) the fiscal period 
B) the cyclical period 
C) the maintenance period 
D) the band period

Question 12

Which of the following can be used to decrease banking system reserves?

Accepted Answer

A) a system repurchase agreement 
B) open market purchases 
C) decrease reserve requirements 
D) a reverse repurchase agreement 
A) a system repurchase agreement 
B) open market purchases 
C) decrease reserve requirements 
D) a reverse repurchase agreement

Question 13

The FOMC issues a statement that indicates the risks are weighted mainly towards conditions that may generate heightened inflationary pressures. This means

Accepted Answer

A) the Fed is more worried about unemployment than inflation in the near future. 
B) the Fed is more worried about inflation than unemployment in the near future. 
C) the Fed is worried about both unemployment and inflation. 
D) the Fed is worried about the potential security of the economy. 
A) the Fed is more worried about unemployment than inflation in the near future. 
B) the Fed is more worried about inflation than unemployment in the near future. 
C) the Fed is worried about both unemployment and inflation. 
D) the Fed is worried about the potential security of the economy.

Question 14

Which of the following is false?

Accepted Answer

A) Retail sweep accounts "sweep" balances out of transactions accounts that are subject to reserve requirements and into other accounts that are not. 
B) Retail sweep accounts have experienced enormous growth since they were introduced in 1994. 
C) Because of retail sweep accounts, required reserves have fallen significantly. 
D) The decline in required reserves due to retail sweep accounts gives the Fed more precise control over the fed funds rate and the implementation of monetary policy. 
A) Retail sweep accounts "sweep" balances out of transactions accounts that are subject to reserve requirements and into other accounts that are not. 
B) Retail sweep accounts have experienced enormous growth since they were introduced in 1994. 
C) Because of retail sweep accounts, required reserves have fallen significantly. 
D) The decline in required reserves due to retail sweep accounts gives the Fed more precise control over the fed funds rate and the implementation of monetary policy.

Question 15

Primary dealers are_____________ that deal directly with the Fed.

Accepted Answer

A) 5 large insurance companies 
B) 18 large banks and securities firms 
C) the 12 regional Federal Reserve banks 
D) both a and c are correct. 
A) 5 large insurance companies 
B) 18 large banks and securities firms 
C) the 12 regional Federal Reserve banks 
D) both a and c are correct.

Question 16

A statement that accurately reflects Fed behavior in recent years is which of the following?

Accepted Answer

A) The Fed has become much more open in recent years. 
B) The Fed prefers to operate in secrecy so that it can execute its policies before they are made public. 
C) The Fed continues it long-term policies of secrecy. 
D) The Fed is much more open with Congress now but not with the public. 
A) The Fed has become much more open in recent years. 
B) The Fed prefers to operate in secrecy so that it can execute its policies before they are made public. 
C) The Fed continues it long-term policies of secrecy. 
D) The Fed is much more open with Congress now but not with the public.

Question 17

Under the __________________________, the Fed auctions funds to depository institutions for 28 or 84 day in order to provide liquidity to the financial system.

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 18

Which of the following is true?

Accepted Answer

A) If the fed funds rate rises above the targeted rate, the Trading Desk should increase the amount of reserves available to depository institutions to bring the rate back to the targeted level. 
B) Retail sweep accounts have jeopardized the implementation of monetary policy because required reserves have fallen to very low levels. 
C) The funds available for required reserves have increased significantly in recent years due to the growth of retail sweep accounts. 
D) All of the above are correct. 
A) If the fed funds rate rises above the targeted rate, the Trading Desk should increase the amount of reserves available to depository institutions to bring the rate back to the targeted level. 
B) Retail sweep accounts have jeopardized the implementation of monetary policy because required reserves have fallen to very low levels. 
C) The funds available for required reserves have increased significantly in recent years due to the growth of retail sweep accounts. 
D) All of the above are correct.

Question 19

The demand for reserves is

Accepted Answer

A) less than required plus desired excess reserves. 
B) more than required plus desired excess reserves. 
C) equal to the demand for required plus desired excess reserves. 
D) equal to required minus desired excess reserves. 
A) less than required plus desired excess reserves. 
B) more than required plus desired excess reserves. 
C) equal to the demand for required plus desired excess reserves. 
D) equal to required minus desired excess reserves.

Question 20

The Fed's ____________ contains the Fed's dollar denominated assets acquired through open market operations.

Accepted Answer

A) System Open Market Account (SOM
A)  
B) Fedwire 
C) the Exchange Stabilization Fund (ESF) 
D) Discount window 
A) System Open Market Account (SOM
A)  
B) Fedwire 
C) the Exchange Stabilization Fund (ESF) 
D) Discount window

Exam 25: Policy Implementation

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

The statement that emerges from the FOMC Meeting and is used by the New York Fed to gauge monetary policy is called the

Which of the following statements is false?

Economic projections and expected performance for the next year are announced in which of these reports?

The Trading Desk derives the reserve need, which is the difference, if any, between actual reserves and those projected to be need to keep the ________ at the desired level.

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

Ceteris paribus, if the quantity demanded of reserves exceeds the quantity supplied of reserves, the Fed funds rates will

Which of the following is a system of reserve accounting in which the maintenance period more or less corresponds to the computation period?

In 1994, the Fed began to announce the decisions made at the FOMC meetings _______________________. This policy was formally adopted in 1995.

Once the long-term policy stance is set, the focus of the FOMC shifts to the ______ period.

The period in which banks are required to hold an amount of reserve assets that was determined in the computation period is called which of the following?

Which of the following can be used to decrease banking system reserves?

The FOMC issues a statement that indicates the risks are weighted mainly towards conditions that may generate heightened inflationary pressures. This means

Which of the following is false?

Primary dealers are_____________ that deal directly with the Fed.

A statement that accurately reflects Fed behavior in recent years is which of the following?

Under the __________________________, the Fed auctions funds to depository institutions for 28 or 84 day in order to provide liquidity to the financial system.

Which of the following is true?

The demand for reserves is

The Fed's ____________ contains the Fed's dollar denominated assets acquired through open market operations.

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

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