Question 1

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.

Question 2

In practice,money supply and short-term interest rates are determined by the

Accepted Answer

A)  Treasury and Commerce departments. 
B)  Federal Open Market Committee. 
C)  Board of Governors. 
D)  House and Senate.

Question 3

How does a central bank influence the lending capacity of the banks?

Accepted Answer

The answer of How does a central bank influence the...

Question 4

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.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Stock prices fell throughout much of 2007 and 2008 and many investors decided to switch their funds into the bond market.What only about 30 percent of surveyed investors knew was that as bond prices rise,interest rates

Accepted Answer

A)  fall in reaction to the increased demand for bonds. 
B)  fall in reaction to the decreased demand for bonds. 
C)  rise in reaction to the increased demand for bonds. 
D)  rise in reaction to the decreased demand for bonds.

Question 7

The actual control of the Federal Reserve System resides in the

Accepted Answer

A)  Congress of the United States. 
B)  member banks. 
C)  Senate Banking Committee. 
D)  Board of Governors.

Question 8

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 9

As the federal funds rate rises,the banks' opportunity cost of holding excess reserves falls.

Accepted Answer

A) True 
 B)False

Question 10

If the Fed reduces the required reserve ratio,how will this affect excess reserves and the money supply?

Accepted Answer

A)  Both will increase. 
B)  Excess reserves increase and the money supply decreases. 
C)  Both will decrease. 
D)  Excess reserves decrease and the money supply increases.

Question 11

Contractionary monetary policy shifts the reserve supply schedule inward.

Accepted Answer

A) True 
 B)False

Question 12

Most power in the Federal Reserve System is held by the

Accepted Answer

A)  president and Congress. 
B)  Secretary of the Treasury, who appoints the members of the Board of Governors. 
C)  Board of Governors of the system. 
D)  member banks of the system.

Question 13

The Fed conducts an open market purchase of Treasury bills of $10 million.If the required reserve ratio is 0.10,what change in the money supply can be expected using the oversimplified money multiplier?

Accepted Answer

A)  $100 million 
B)  $10 million 
C)  0 
D)  −$10 million 
E)  −$100 million

Question 14

Which of the following is the most frequently used tool of monetary policy?

Accepted Answer

A)  changing the discount rate 
B)  changing reserve requirements 
C)  open market operations 
D)  interest rate changes

Question 15

The principal difference between income and money is that income is a ____ and money is a ____.

Accepted Answer

A)  schedule, curve 
B)  point, line 
C)  stock, flow 
D)  flow, stock

Question 16

If the Fed sells $5 million in government bonds,how much will the money supply change?

Accepted Answer

A)  It will increase by $5 million. 
B)  It will increase by more than $5 million. 
C)  It will decrease by $5 million. 
D)  It will decrease by more than $5 million.

Question 17

If the Fed raises the discount rate,what happens to reserves and the money supply?

Accepted Answer

A)  Reserves increase and the money supply decreases. 
B)  Both increase. 
C)  Reserves decrease and the money supply increases. 
D)  Both decrease.

Question 18

Which of the following observations is t?

Accepted Answer

A)  State governments are the shareholders of the Fed. 
B)  The Fed chairman is appointed for a ten year term. 
C)  FOMC decisions largely determine short-term interest rates. 
D)  Member banks proportionately share all of Federal Reserve's profits.

Question 19

The Fed frequently uses the discount rate and the required reserve ratio as instruments of monetary policy.

Accepted Answer

A) True 
 B)False

Question 20

If the Fed sells a T-bill to a commercial bank,how will this affect the money supply?

Accepted Answer

A)  It will increase the money supply. 
B)  It will increase bank reserves. 
C)  It will decrease the money supply. 
D)  It will have no effect on the money supply.

Exam 13: Monetary Policy: Conventional and Unconventional

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

In practice,money supply and short-term interest rates are determined by the

How does a central bank influence the lending capacity of the banks?

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

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

Stock prices fell throughout much of 2007 and 2008 and many investors decided to switch their funds into the bond market.What only about 30 percent of surveyed investors knew was that as bond prices rise,interest rates

The actual control of the Federal Reserve System resides in the

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

As the federal funds rate rises,the banks' opportunity cost of holding excess reserves falls.

If the Fed reduces the required reserve ratio,how will this affect excess reserves and the money supply?

Contractionary monetary policy shifts the reserve supply schedule inward.

Most power in the Federal Reserve System is held by the

The Fed conducts an open market purchase of Treasury bills of $10 million.If the required reserve ratio is 0.10,what change in the money supply can be expected using the oversimplified money multiplier?

Which of the following is the most frequently used tool of monetary policy?

The principal difference between income and money is that income is a and money is a .

If the Fed sells $5 million in government bonds,how much will the money supply change?

If the Fed raises the discount rate,what happens to reserves and the money supply?

Which of the following observations is t?

The Fed frequently uses the discount rate and the required reserve ratio as instruments of monetary policy.

If the Fed sells a T-bill to a commercial bank,how will this affect the money supply?