Question 1

An open market purchase 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 2

To limit political influence on Fed policy,the terms of the Fed Board of Governors are staggered so that one new appointment is made every four years to coincide with the presidential elections.

Accepted Answer

A) True 
 B)False

Question 3

The most important responsibility of the Fed is to

Accepted Answer

A)  clear checks. 
B)  supervise member banks. 
C)  serve as fiscal agent for the U.S.Treasury. 
D)  control the money supply. 
A)  clear checks. 
B)  supervise member banks. 
C)  serve as fiscal agent for the U.S.Treasury. 
D)  control the money supply.

Question 4

The three members of the commission that originally drew up the boundaries of the Federal Reserve Districts and the locations of the district banks were the

Accepted Answer

A)  Comptroller of the Currency,the Secretary of the Treasury,and the Secretary of Agriculture. 
B)  Secretary of State,the Secretary of the Treasury,and the Speaker of the House of Representatives. 
C)  Secretary of State,the Secretary of Commerce,and the Vice President. 
D)  Secretary of the Treasury,the Secretary of Commerce,and the Vice President. 
A)  Comptroller of the Currency,the Secretary of the Treasury,and the Secretary of Agriculture. 
B)  Secretary of State,the Secretary of the Treasury,and the Speaker of the House of Representatives. 
C)  Secretary of State,the Secretary of Commerce,and the Vice President. 
D)  Secretary of the Treasury,the Secretary of Commerce,and the Vice President.

Question 5

An open market __________ by the Fed increases the money supply; a(n)__________ in the required reserve ratio increases the money supply.

Accepted Answer

A)  sale; decrease 
B)  purchase; increase 
C)  sale; increase 
D)  purchase; decrease 
A)  sale; decrease 
B)  purchase; increase 
C)  sale; increase 
D)  purchase; decrease

Question 6

Suppose that the current federal funds rate is above the federal funds target rate.In order to lower the federal funds rate the Fed will ________________ securities on the open market which will ________________ the supply of reserves in the market for reserves,pushing the rate closer to the target rate.

Accepted Answer

A)  sell; increase 
B)  purchase; increase 
C)  purchase; decrease 
D)  sell; decrease 
A)  sell; increase 
B)  purchase; increase 
C)  purchase; decrease 
D)  sell; decrease

Question 7

Which of the following actions is most likely to lead to an increase in the money supply?

Accepted Answer

A)  Fed purchases of government securities 
B)  an increase in the required reserve ratio 
C)  an increase in the discount rate 
D)  none of the above 
A)  Fed purchases of government securities 
B)  an increase in the required reserve ratio 
C)  an increase in the discount rate 
D)  none of the above

Question 8

Suppose that the Fed undertakes an open market purchase of $15 million worth of securities from a bank.If the required reserve ratio is 12%,what is the resulting change in checkable deposits (or the money supply),assuming that there are no cash leakages and that banks hold zero excess reserves?

Accepted Answer

A)  $180 million 
B)  $12.5 million 
C)  $18 million 
D)  $125 million 
A)  $180 million 
B)  $12.5 million 
C)  $18 million 
D)  $125 million

Question 9

Each of the governors of the Federal Reserve System is appointed for a term of __________ years.The Board of Governors is comprised of _____________ members and the FOMC is comprised of __________ members.

Accepted Answer

A)  12; 7; 19 
B)  14; 6; 22 
C)  6; 5; 14 
D)  14; 7; 12 
E)  12; 6; 12 
A)  12; 7; 19 
B)  14; 6; 22 
C)  6; 5; 14 
D)  14; 7; 12 
E)  12; 6; 12

Question 10

Suppose the Fed forecasts a reduction in cash leakages.It might offset the effect of this on the money supply by

Accepted Answer

A)  buying government securities. 
B)  selling government securities. 
C)  lowering the required reserve ratio. 
D)  lowering the discount rate. 
A)  buying government securities. 
B)  selling government securities. 
C)  lowering the required reserve ratio. 
D)  lowering the discount rate.

Question 11

The Federal Open Market Committee (FOMC)

Accepted Answer

A)  has six members. 
B)  conducts open market operations. 
C)  is the policy-making body within the Treasury. 
D)  is the governing body of the Federal Reserve System. 
E)  a,b,and c 
A)  has six members. 
B)  conducts open market operations. 
C)  is the policy-making body within the Treasury. 
D)  is the governing body of the Federal Reserve System. 
E)  a,b,and c

Question 12

The United States is divided into __________ Federal Reserve districts,each with a district bank.

Accepted Answer

A)  three 
B)  eight 
C)  twelve 
D)  twenty 
E)  fifty 
A)  three 
B)  eight 
C)  twelve 
D)  twenty 
E)  fifty

Question 13

The Board of Governors of the Federal Reserve

Accepted Answer

A)  is made up of seven members. 
B)  is a group of advisers reporting to the President. 
C)  is located in New York City. 
D)  members are appointed to four-year terms by the President and confirmed by the Senate. 
E)  all of the above 
A)  is made up of seven members. 
B)  is a group of advisers reporting to the President. 
C)  is located in New York City. 
D)  members are appointed to four-year terms by the President and confirmed by the Senate. 
E)  all of the above

Question 14

When a check is written on an account at Bank A and deposited in Bank B,the reserve account of __________ will rise and reserves of the entire banking system will __________.

Accepted Answer

A)  Bank A; rise 
B)  Bank A; remain constant 
C)  Bank B; rise 
D)  Bank B; remain constant 
A)  Bank A; rise 
B)  Bank A; remain constant 
C)  Bank B; rise 
D)  Bank B; remain constant

Question 15

If the Fed ______________________,the money supply will ultimately __________.

Accepted Answer

A)  raises the required reserve ratio from 8 percent to 10 percent; decrease 
B)  lowers the required reserve ratio from 10 percent to 8 percent; increase 
C)  lowers the required reserve ratio from 10 percent to 8 percent; decrease 
D)  raises the required reserve ratio from 8 percent to 10 percent; increase 
E)  a and b 
A)  raises the required reserve ratio from 8 percent to 10 percent; decrease 
B)  lowers the required reserve ratio from 10 percent to 8 percent; increase 
C)  lowers the required reserve ratio from 10 percent to 8 percent; decrease 
D)  raises the required reserve ratio from 8 percent to 10 percent; increase 
E)  a and b

Question 16

To expand the money supply the Fed could lower the required reserve ratio,lower the discount rate,or purchase government securities.

Accepted Answer

A) True 
 B)False

Question 17

When the Federal Open Market Committee (FOMC)votes on policy,they do so

Accepted Answer

A)  in the following order: the chair,the vice chair,the remaining FOMC members in alphabetical order. 
B)  in order based on seniority at the Fed. 
C)  in the following order: the chair,the vice chair,the remaining FOMC members by seniority at the Fed. 
D)  in alphabetical order. 
A)  in the following order: the chair,the vice chair,the remaining FOMC members in alphabetical order. 
B)  in order based on seniority at the Fed. 
C)  in the following order: the chair,the vice chair,the remaining FOMC members by seniority at the Fed. 
D)  in alphabetical order.

Question 18

A Federal Reserve Bank is located in which of the following cities?

Accepted Answer

A)  St.Louis,Missouri 
B)  Richmond,Virginia 
C)  Atlanta,Georgia 
D)  San Francisco,California 
E)  all of the above 
A)  St.Louis,Missouri 
B)  Richmond,Virginia 
C)  Atlanta,Georgia 
D)  San Francisco,California 
E)  all of the above

Question 19

Refer to Exhibit 13-1.Suppose that the Federal Reserve conducts open market operations by purchasing $1,000 worth of government securities from Bank A.As a result,Bank A finds itself with $1,000 in excess reserves that it lends out and those funds end up in Bank B.What dollar value goes in blanks (A)and (B),respectively?.

Accepted Answer

A)  $100; $90 
B)  $10; $90 
C)  $10; $990 
D)  $100; $900 
A)  $100; $90 
B)  $10; $90 
C)  $10; $990 
D)  $100; $900

Question 20

To deal with the financial crisis of 2007-2009,the Fed extended its lender of last resort function to include institutions other than banks.

Accepted Answer

A) True 
 B)False

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

An open market purchase by the Fed

To limit political influence on Fed policy,the terms of the Fed Board of Governors are staggered so that one new appointment is made every four years to coincide with the presidential elections.

The most important responsibility of the Fed is to

The three members of the commission that originally drew up the boundaries of the Federal Reserve Districts and the locations of the district banks were the

An open market __________ by the Fed increases the money supply; a(n)__________ in the required reserve ratio increases the money supply.

Which of the following actions is most likely to lead to an increase in the money supply?

Suppose that the Fed undertakes an open market purchase of $15 million worth of securities from a bank.If the required reserve ratio is 12%,what is the resulting change in checkable deposits (or the money supply),assuming that there are no cash leakages and that banks hold zero excess reserves?

Each of the governors of the Federal Reserve System is appointed for a term of __________ years.The Board of Governors is comprised of _____________ members and the FOMC is comprised of __________ members.

Suppose the Fed forecasts a reduction in cash leakages.It might offset the effect of this on the money supply by

The Federal Open Market Committee (FOMC)

The United States is divided into __________ Federal Reserve districts,each with a district bank.

The Board of Governors of the Federal Reserve

When a check is written on an account at Bank A and deposited in Bank B,the reserve account of __________ will rise and reserves of the entire banking system will __________.

If the Fed ______________________,the money supply will ultimately __________.

To expand the money supply the Fed could lower the required reserve ratio,lower the discount rate,or purchase government securities.

When the Federal Open Market Committee (FOMC)votes on policy,they do so

A Federal Reserve Bank is located in which of the following cities?

To deal with the financial crisis of 2007-2009,the Fed extended its lender of last resort function to include institutions other than banks.

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

An open market by the Fed increases the money supply; a(n) in the required reserve ratio increases the money supply.

Each of the governors of the Federal Reserve System is appointed for a term of ____ years.The Board of Governors is comprised of _ members and the FOMC is comprised of ____ members.

When a check is written on an account at Bank A and deposited in Bank B,the reserve account of will rise and reserves of the entire banking system will .

If the Fed ____________,the money supply will ultimately .