Question 1

The reason that the Fed does not actively use discount rate policy to control the money supply is because the Fed

Accepted Answer

A) acts when a majority of member banks agree on policy and the banks rarely agree. 
B) earns interest on discounting and cannot afford to lose the revenue. 
C) does not know how banks will respond to discount rate changes. 
D) has been directed by Congress to set the discount rate at a permanent level. 
A) acts when a majority of member banks agree on policy and the banks rarely agree. 
B) earns interest on discounting and cannot afford to lose the revenue. 
C) does not know how banks will respond to discount rate changes. 
D) has been directed by Congress to set the discount rate at a permanent level.

Question 2

The creation of new bank reserves could lead to a multiple increase in the money supply.

Accepted Answer

A) True 
 B)False

Question 3

If the Fed sells a U.S.Treasury bill to a member of the public, the banking system has

Accepted Answer

A) less reserves and the money supply tends to fall. 
B) more reserves and the money supply tends to fall. 
C) less reserves and the money supply tends to grow. 
D) more reserves and the money supply tends to grow. 
A) less reserves and the money supply tends to fall. 
B) more reserves and the money supply tends to fall. 
C) less reserves and the money supply tends to grow. 
D) more reserves and the money supply tends to grow.

Question 4

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 5

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 6

There is a positive relationship between the quantity of reserves supplied and the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 7

Explain the linkages in the causal chain when the Fed conducts a contractionary monetary policy.What will be the ultimate effect on GDP?

Accepted Answer

Contractionary monetary policy will requ

Question 8

Open market operations generally involve the purchase and sales of

Accepted Answer

A) government securities. 
B) stocks and bonds. 
C) coins and currency. 
D) Federal Reserve notes. 
A) government securities. 
B) stocks and bonds. 
C) coins and currency. 
D) Federal Reserve notes.

Question 9

If the Fed buys a U.S.Treasury bill from a member of the public, the banking system has

Accepted Answer

A) less reserves and the money supply tends to fall. 
B) more reserves and the money supply tends to fall. 
C) less reserves and the money supply tends to grow. 
D) more reserves and the money supply tends to grow. 
A) less reserves and the money supply tends to fall. 
B) more reserves and the money supply tends to fall. 
C) less reserves and the money supply tends to grow. 
D) more reserves and the money supply tends to grow.

Question 10

If the Fed wants to reduce banks' reserves, it can

Accepted Answer

A) buy securities in the open market. 
B) lower the reserve ratio. 
C) lower the federal funds rate. 
D) raise the discount rate. 
A) buy securities in the open market. 
B) lower the reserve ratio. 
C) lower the federal funds rate. 
D) raise the discount rate.

Question 11

Money and income are used interchangeably by noneconomists but mean different things.

Accepted Answer

A) True 
 B)False

Question 12

Open market operations refer to the purchase and sales of stocks listed on the New York Stock Exchange.

Accepted Answer

A) True 
 B)False

Question 13

The monetary policies carried out by the Fed

Accepted Answer

A) must be ratified by Congress. 
B) must be consistent with fiscal policies passed by Congress. 
C) are sometimes inconsistent with fiscal policy. 
D) must be approved by the president. 
A) must be ratified by Congress. 
B) must be consistent with fiscal policies passed by Congress. 
C) are sometimes inconsistent with fiscal policy. 
D) must be approved by the president.

Question 14

The United States was among the first of the modern industrial nations to establish a central banking system.

Accepted Answer

A) True 
 B)False

Question 15

The reserves supply schedule has a positive slope because

Accepted Answer

A) the Fed lowers the discount rate as interest rates rise. 
B) the Fed makes more money available at higher interest rates. 
C) as interest rates rise, banks will find loans more profitable. 
D) as interest rates rise, people will demand more loans. 
A) the Fed lowers the discount rate as interest rates rise. 
B) the Fed makes more money available at higher interest rates. 
C) as interest rates rise, banks will find loans more profitable. 
D) as interest rates rise, people will demand more loans.

Question 16

If the Fed raises the reserve requirement on deposits from 15 percent to 20 percent, what would happen to 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 17

When someone asks how much money you made this year, they are using the term "money" correctly.

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

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 20

Assume the required reserve ratio is 10 percent and the FOMC orders an open market sale of $50 million in government securities from member banks.If the oversimplified money multiplier is assumed, then the money supply will

Accepted Answer

A) increase by $500 million. 
B) increase by $100 million. 
C) decrease by $100 million. 
D) decrease by $500 million. 
A) increase by $500 million. 
B) increase by $100 million. 
C) decrease by $100 million. 
D) decrease by $500 million.

Exam 30: Monetary Policy: Conventional and Unconventional

The reason that the Fed does not actively use discount rate policy to control the money supply is because the Fed

The creation of new bank reserves could lead to a multiple increase in the money supply.

If the Fed sells a U.S.Treasury bill to a member of the public, the banking system has

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

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

There is a positive relationship between the quantity of reserves supplied and the federal funds rate.

Explain the linkages in the causal chain when the Fed conducts a contractionary monetary policy.What will be the ultimate effect on GDP?

Open market operations generally involve the purchase and sales of

If the Fed buys a U.S.Treasury bill from a member of the public, the banking system has

If the Fed wants to reduce banks' reserves, it can

Money and income are used interchangeably by noneconomists but mean different things.

Open market operations refer to the purchase and sales of stocks listed on the New York Stock Exchange.

The monetary policies carried out by the Fed

The United States was among the first of the modern industrial nations to establish a central banking system.

The reserves supply schedule has a positive slope because

If the Fed raises the reserve requirement on deposits from 15 percent to 20 percent, what would happen to the money supply?

When someone asks how much money you made this year, they are using the term "money" correctly.

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

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

Assume the required reserve ratio is 10 percent and the FOMC orders an open market sale of $50 million in government securities from member banks.If the oversimplified money multiplier is assumed, then the money supply will

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

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

He 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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