Question 1

If the Fed purchases government securities from Bank A,__________ in the banking system __________ and the money supply __________.

Accepted Answer

A)  reserves; fall; falls 
B)  reserves; rise; falls 
C)  reserves; rise; rises 
D)  excess reserves; fall; rises 
E)  excess reserves; rise; falls 
A)  reserves; fall; falls 
B)  reserves; rise; falls 
C)  reserves; rise; rises 
D)  excess reserves; fall; rises 
E)  excess reserves; rise; falls

Question 2

If Bank A borrows from Bank B,reserves in the banking system __________.If Bank A borrows from the Fed,reserves in the banking system __________.

Accepted Answer

A)  rise; fall 
B)  fall; remain unchanged 
C)  remain unchanged; remain unchanged 
D)  remain unchanged; rise 
E)  rise; remain unchanged 
A)  rise; fall 
B)  fall; remain unchanged 
C)  remain unchanged; remain unchanged 
D)  remain unchanged; rise 
E)  rise; remain unchanged

Question 3

Which of the following is not a monetary policy tool of the Fed?

Accepted Answer

A)  open market operations 
B)  the required reserve ratio 
C)  the discount rate 
D)  income tax rates 
A)  open market operations 
B)  the required reserve ratio 
C)  the discount rate 
D)  income tax rates

Question 4

When the Federal Reserve system was being created,some people thought that there should be as few district banks as possible to enhance efficiency and for ease of operation.

Accepted Answer

A) True 
 B)False

Question 5

William Jennings Bryan,Secretary of State at the time of the passage of the Federal Reserve Act,argued in favor of having ______ district banks.

Accepted Answer

A)  six 
B)  not less than eight nor more than twelve 
C)  twelve 
D)  fifty 
A)  six 
B)  not less than eight nor more than twelve 
C)  twelve 
D)  fifty

Question 6

Which of the following will cause the money supply to decline?

Accepted Answer

A)  lowering the discount rate 
B)  raising the required reserve ratio 
C)  an open market purchase 
D)  an open market sale 
E)  b and d 
A)  lowering the discount rate 
B)  raising the required reserve ratio 
C)  an open market purchase 
D)  an open market sale 
E)  b and d

Question 7

If the Fed lowers the required reserve ratio,__________ in the banking system will remain unchanged but __________ will rise.This will (likely)lead to an increase in new loans and checkable deposits and a(n)__________ in the money supply.

Accepted Answer

A)  excess reserves; vault cash; increase 
B)  reserves; vault cash; decrease 
C)  reserves; excess reserves; increase 
D)  reserves; required reserves; increase 
E)  none of the above 
A)  excess reserves; vault cash; increase 
B)  reserves; vault cash; decrease 
C)  reserves; excess reserves; increase 
D)  reserves; required reserves; increase 
E)  none of the above

Question 8

When the Fed was created,its governing body was called the Federal Reserve Board,but it was later officially renamed the Board of Governors of the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 9

If a bank has zero excess reserves and one of its creditworthy customers applies for a loan,the bank may be able to grant the loan if it can

Accepted Answer

A)  apply some of its loan repayments to obtain the funds for the new loan. 
B)  obtain extra funds in the federal funds market. 
C)  obtain extra funds by borrowing from the Fed. 
D)  any of the above 
E)  b or c 
A)  apply some of its loan repayments to obtain the funds for the new loan. 
B)  obtain extra funds in the federal funds market. 
C)  obtain extra funds by borrowing from the Fed. 
D)  any of the above 
E)  b or c

Question 10

A decrease in the required reserve ratio __________ the money supply; an open market purchase __________ the money supply.

Accepted Answer

A)  decreases; decreases 
B)  decreases; increases 
C)  increases; increases 
D)  increases; decreases 
A)  decreases; decreases 
B)  decreases; increases 
C)  increases; increases 
D)  increases; decreases

Question 11

Suppose the Fed forecasts a reduction in excess reserve holdings by banks.It might offset the effect of this on the money supply by

Accepted Answer

A)  buying government securities. 
B)  lowering the required reserve ratio. 
C)  lowering the discount rate. 
D)  selling government securities. 
E)  a,b,and c 
A)  buying government securities. 
B)  lowering the required reserve ratio. 
C)  lowering the discount rate. 
D)  selling government securities. 
E)  a,b,and c

Question 12

When the federal government incurs a budget deficit,it will

Accepted Answer

A)  mint more coins and spend them. 
B)  create money out of thin air. 
C)  impose a special tax on all income earners. 
D)  borrow money from the Federal Reserve System by issuing securities. 
E)  borrow money from the public by issuing government securities. 
A)  mint more coins and spend them. 
B)  create money out of thin air. 
C)  impose a special tax on all income earners. 
D)  borrow money from the Federal Reserve System by issuing securities. 
E)  borrow money from the public by issuing government securities.

Question 13

The boundaries of the Federal Reserve districts were determined based on trade patterns between cities.

Accepted Answer

A) True 
 B)False

Question 14

If the Fed purchases government securities from commercial banks,the reserves of the banking system will immediately

Accepted Answer

A)  increase by the amount of the purchase. 
B)  increase by more than the amount of the purchase. 
C)  remain constant. 
D)  decrease by the amount of the purchase. 
E)  decrease by more than the amount of the purchase. 
A)  increase by the amount of the purchase. 
B)  increase by more than the amount of the purchase. 
C)  remain constant. 
D)  decrease by the amount of the purchase. 
E)  decrease by more than the amount of the purchase.

Question 15

Which of the following will not increase the money supply in the United States?

Accepted Answer

A)  lowering the required reserve ratio 
B)  Fed purchases of government securities on the open market 
C)  lowering the discount rate relative to the federal funds rate 
D)  Fed sales of government securities on the open market 
E)  none of the above 
A)  lowering the required reserve ratio 
B)  Fed purchases of government securities on the open market 
C)  lowering the discount rate relative to the federal funds rate 
D)  Fed sales of government securities on the open market 
E)  none of the above

Question 16

Members of the Board of Governors of the Federal Reserve are appointed by the President and approved by the Senate to serve a 14-year term.

Accepted Answer

A) True 
 B)False

Question 17

Although the Fed can destroy money,it is impossible for the Fed to create money out of thin air.

Accepted Answer

A) True 
 B)False

Question 18

The sale of government securities by the Fed

Accepted Answer

A)  decreases the supply of money. 
B)  increases the supply of money. 
C)  decreases the demand for money. 
D)  increases the demand for money. 
A)  decreases the supply of money. 
B)  increases the supply of money. 
C)  decreases the demand for money. 
D)  increases the demand for money.

Question 19

The Fed

Accepted Answer

A)  clears checks. 
B)  holds depository institutions' reserves. 
C)  is the government's banker. 
D)  supplies Federal Reserve Notes. 
E)  all of the above 
A)  clears checks. 
B)  holds depository institutions' reserves. 
C)  is the government's banker. 
D)  supplies Federal Reserve Notes. 
E)  all of the above

Question 20

Which of the following is not a responsibility of the Fed?

Accepted Answer

A)  supervising member banks 
B)  serving as the lender of last resort 
C)  determining the level of government spending 
D)  providing check-clearing services 
E)  supplying the economy with Federal Reserve Notes 
A)  supervising member banks 
B)  serving as the lender of last resort 
C)  determining the level of government spending 
D)  providing check-clearing services 
E)  supplying the economy with Federal Reserve Notes

Exam 13: Factor Markets: With Emphasis on the Labor Market

If the Fed purchases government securities from Bank A,__________ in the banking system __________ and the money supply __________.

If Bank A borrows from Bank B,reserves in the banking system __________.If Bank A borrows from the Fed,reserves in the banking system __________.

Which of the following is not a monetary policy tool of the Fed?

When the Federal Reserve system was being created,some people thought that there should be as few district banks as possible to enhance efficiency and for ease of operation.

William Jennings Bryan,Secretary of State at the time of the passage of the Federal Reserve Act,argued in favor of having ______ district banks.

Which of the following will cause the money supply to decline?

If the Fed lowers the required reserve ratio,__________ in the banking system will remain unchanged but __________ will rise.This will (likely)lead to an increase in new loans and checkable deposits and a(n)__________ in the money supply.

When the Fed was created,its governing body was called the Federal Reserve Board,but it was later officially renamed the Board of Governors of the Federal Reserve System.

If a bank has zero excess reserves and one of its creditworthy customers applies for a loan,the bank may be able to grant the loan if it can

A decrease in the required reserve ratio __________ the money supply; an open market purchase __________ the money supply.

Suppose the Fed forecasts a reduction in excess reserve holdings by banks.It might offset the effect of this on the money supply by

When the federal government incurs a budget deficit,it will

The boundaries of the Federal Reserve districts were determined based on trade patterns between cities.

If the Fed purchases government securities from commercial banks,the reserves of the banking system will immediately

Which of the following will not increase the money supply in the United States?

Members of the Board of Governors of the Federal Reserve are appointed by the President and approved by the Senate to serve a 14-year term.

Although the Fed can destroy money,it is impossible for the Fed to create money out of thin air.

The sale of government securities by the Fed

The Fed

Which of the following is not a responsibility of the Fed?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free,controlled,and Relative

Supply,demand,and Price: Applications

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Wages,union,and Labor

The Distribution of Income and Poverty

Interest,rent,and Profit

Market Failure: Externalities, public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government: Five Topics Considered

Stocks,bonds,futures,and Options

Stocks,bonds,futures,and Options

Filters

If the Fed purchases government securities from Bank A, in the banking system and the money supply __.

If Bank A borrows from Bank B,reserves in the banking system .If Bank A borrows from the Fed,reserves in the banking system .

If the Fed lowers the required reserve ratio, in the banking system will remain unchanged but will rise.This will (likely)lead to an increase in new loans and checkable deposits and a(n)__ in the money supply.

A decrease in the required reserve ratio the money supply; an open market purchase the money supply.