Question 1

Under a free banking arrangement,when people increase the demand for money a process would begin which would end with a(n)_________________ in the supply of money,______________ government intervention.

Accepted Answer

A)  increase; with some 
B)  decrease; with some 
C)  decrease; without the need for 
D)  increase; without the need for

Question 2

If the Fed wants to decrease the money supply,it can __________ the required reserve ratio,conduct an open market __________,or __________ the discount rate.

Accepted Answer

A)  raise; purchase; lower 
B)  lower; purchase; lower 
C)  raise; sale; raise 
D)  lower; sale; lower 
E)  none of the above

Question 3

The required reserve ratio is set by the

Accepted Answer

A)  U.S.Congress. 
B)  President of the United States. 
C)  Secretary of the Treasury. 
D)  Federal Reserve. 
E)  Director of Monetary Affairs.

Question 4

Which of the following will increase the money supply?

Accepted Answer

A)  an increase in the discount rate (relative to the federal funds rate) 
B)  a decrease in the required reserve ratio 
C)  an open market sale by the Fed 
D)  a and c 
E)  b and c

Question 5

Which of the following statements is false?

Accepted Answer

A)  The Fed serves as the lender of last resort for banks. 
B)  The Fed serves as a fiscal agent for the U.S.Treasury. 
C)  A major responsibility of the Fed is to control the nation's money supply. 
D)  The federal government is the Fed's banker.

Question 6

Federal Reserve Notes held by the Fed are considered part of the

Accepted Answer

A)  money supply. 
B)  bank reserves. 
C)  both of the above 
D)  none of the above

Question 7

The lower the required reserve ratio,

Accepted Answer

A)  the less money that can be loaned at each round of the lending process. 
B)  the larger the simple deposit multiplier. 
C)  the smaller the simple deposit multiplier. 
D)  the fewer excess reserves there are at each round of the simple deposit multiplier process. 
E)  a,c,and d

Question 8

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

Accepted Answer

A)  raises the discount rate relative to the federal funds rate; decrease 
B)  lowers the discount rate relative to the federal funds rate; increase 
C)  lowers the discount rate relative to the federal funds rate; decrease 
D)  raises the discount rate relative to the federal funds rate; increase 
E)  a and b

Question 9

The larger the simple deposit multiplier,

Accepted Answer

A)  the higher the required reserve ratio. 
B)  the higher the discount rate. 
C)  the larger the change in the money supply for a given change in deposits. 
D)  the less likely the Fed will be to use its monetary policy tools.

Question 10

The Federal Open Market Committee (FOMC)meets on the first Tuesday of each month.

Accepted Answer

A) True 
 B)False

Question 11

The interest rate that the Fed charges when it lends reserves to banks is called the federal funds rate.

Accepted Answer

A) True 
 B)False

Question 12

If there are no excess reserves in the banking system and the Fed lowers the required reserve ratio,it follows that banks will now have __________,which they can use to extend loans and create new __________.

Accepted Answer

A)  positive excess reserves; checkable deposits 
B)  negative excess reserves; currency 
C)  positive excess reserves; currency 
D)  more vault cash; checkable deposits 
E)  none of the above

Question 13

When the Fed increases the required reserve ratio,a bank's

Accepted Answer

A)  required reserves are unaffected. 
B)  required reserves are increased. 
C)  required reserves are decreased. 
D)  excess reserves are decreased. 
E)  b and d

Question 14

The Federal Reserve System is the

Accepted Answer

A)  federal government agency that collects taxes and spends these receipts on tanks,bridges,government employees' salaries,etc. 
B)  company that delivers packages to your front door. 
C)  central bank of the United States. 
D)  federal government agency that collects and disseminates all the economic data that economists are interested in.

Question 15

If banks are currently holding zero excess reserves and the Fed raises the required reserve ratio,which of the following will happen?

Accepted Answer

A)  Banks will have a reserve deficiency. 
B)  Banks will have positive excess reserves. 
C)  Banks will begin to extend more loans. 
D)  Banks will begin to extend more credit. 
E)  b and d

Question 16

The __________ rate is the interest rate one bank pays another bank for a loan.

Accepted Answer

A)  discount 
B)  mortgage 
C)  reserve requirement 
D)  federal funds 
E)  bank-borrowing

Question 17

A commercial bank can receive a loan from another commercial bank in the

Accepted Answer

A)  federal funds market. 
B)  bank loan market. 
C)  Fed market. 
D)  discount market.

Question 18

In the United States,paper currency is printed at the

Accepted Answer

A)  Bureau of Engraving and Printing. 
B)  Federal Reserve District banks. 
C)  U.S.Mint. 
D)  U.S.Treasury.

Question 19

The lower the discount rate relative to the federal funds rate,the more likely a commercial bank will borrow from

Accepted Answer

A)  another commercial bank instead of the Fed. 
B)  the Fed instead of another commercial bank. 
C)  the U.S.Treasury instead of either the Fed or another commercial bank. 
D)  the public.

Question 20

Refer to Exhibit 13-2.What word (up or down)should go in the place of blank (1)and blank (2),respectively?

Accepted Answer

A)  up; up 
B)  up; down 
C)  down; up 
D)  down; down

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

Under a free banking arrangement,when people increase the demand for money a process would begin which would end with a(n) ___ in the supply of money, government intervention.

If the Fed wants to decrease the money supply,it can the required reserve ratio,conduct an open market ,or __ the discount rate.

The required reserve ratio is set by the

Which of the following will increase the money supply?

Which of the following statements is false?

Federal Reserve Notes held by the Fed are considered part of the

The lower the required reserve ratio,

If the Fed ___________,the money supply will ultimately .

The larger the simple deposit multiplier,

The Federal Open Market Committee (FOMC)meets on the first Tuesday of each month.

The interest rate that the Fed charges when it lends reserves to banks is called the federal funds rate.

If there are no excess reserves in the banking system and the Fed lowers the required reserve ratio,it follows that banks will now have ,which they can use to extend loans and create new .

When the Fed increases the required reserve ratio,a bank's

The Federal Reserve System is the

If banks are currently holding zero excess reserves and the Fed raises the required reserve ratio,which of the following will happen?

The __________ rate is the interest rate one bank pays another bank for a loan.

A commercial bank can receive a loan from another commercial bank in the

In the United States,paper currency is printed at the

The lower the discount rate relative to the federal funds rate,the more likely a commercial bank will borrow from

Refer to Exhibit 13-2.What word (up or down) should go in the place of blank (1) and blank (2) ,respectively?

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

Under a free banking arrangement,when people increase the demand for money a process would begin which would end with a(n) _________________ in the supply of money,______________ government intervention.

If the Fed wants to decrease the money supply,it can __________ the required reserve ratio,conduct an open market __________,or __________ the discount rate.

The required reserve ratio is set by the

Which of the following will increase the money supply?

Which of the following statements is false?

Federal Reserve Notes held by the Fed are considered part of the

The lower the required reserve ratio,

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

The larger the simple deposit multiplier,

The Federal Open Market Committee (FOMC)meets on the first Tuesday of each month.

The interest rate that the Fed charges when it lends reserves to banks is called the federal funds rate.

If there are no excess reserves in the banking system and the Fed lowers the required reserve ratio,it follows that banks will now have __________,which they can use to extend loans and create new __________.

When the Fed increases the required reserve ratio,a bank's

The Federal Reserve System is the

If banks are currently holding zero excess reserves and the Fed raises the required reserve ratio,which of the following will happen?

The __________ rate is the interest rate one bank pays another bank for a loan.

A commercial bank can receive a loan from another commercial bank in the

In the United States,paper currency is printed at the

The lower the discount rate relative to the federal funds rate,the more likely a commercial bank will borrow from

Refer to Exhibit 13-2.What word (up or down) should go in the place of blank (1) and blank (2) ,respectively?

Under a free banking arrangement,when people increase the demand for money a process would begin which would end with a(n) ___ in the supply of money, government intervention.

If the Fed wants to decrease the money supply,it can the required reserve ratio,conduct an open market ,or __ the discount rate.

If the Fed ___________,the money supply will ultimately .

If there are no excess reserves in the banking system and the Fed lowers the required reserve ratio,it follows that banks will now have ,which they can use to extend loans and create new .