Question 1

Here is how an open market purchase works: The Fed __________ government securities to (from)  a commercial bank, which raises the bank's deposits at the __________ and increases the bank's __________.

Accepted Answer

A)  sells; Fed; reserves
B)  buys; Fed; reserves
C)  buys; Treasury; discount loans
D)  sells; Treasury; required reserve ratio
E)  buys; Fed; liabilities

Question 2

When one commercial bank borrows from another commercial bank, it pays the __________ rate.

Accepted Answer

A)  discount
B)  bank interest
C)  federal funds
D)  prime
E)  none of the above

Question 3

When the Fed purchases securities from a bank, it __________ reserves and ____________ the money supply.

Accepted Answer

A)  decreases; decreases
B)  increases; increases
C)  decreases; increases
D)  increases; decreases
E)  has no impact on; has no impact on

Question 4

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 5

Raising the required reserve ratio __________ the simple deposit multiplier which will __________ the economy's money supply.

Accepted Answer

A)  raises; increase
B)  raises; decrease
C)  lowers; increase
D)  lowers; decrease

Question 6

Which of the following Fed actions will increase the money supply?

Accepted Answer

A)  open market purchases of Treasury notes
B)  an increase in the required reserve ratio
C)  an increase in the discount rate
D)  all of the above
E)  none of the above

Question 7

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

Question 8

Which of the following is not a function of the Federal Reserve System?

Accepted Answer

A)  to clear checks
B)  to supervise member banks
C)  to serve as the lender of last resort
D)  to handle the sale of U.S.Treasury securities
E)  to serve as the government's tax collector

Question 9

The major policy-making group within the Fed is the __________ Committee.

Accepted Answer

A)  Federal Reserve Tax
B)  Federal Reserve Banking
C)  Federal Open Market
D)  Federal Reserve Decision-Making
E)  Regional Bank

Question 10

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

Question 11

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 12

Controlling the nation's money supply is the most important duty of the Federal Reserve.

Accepted Answer

A) True 
 B)False

Question 13

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

Question 14

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

Question 15

Exhibit 13-1
  ​
Assume that the required reserve ratio is 10%, that there are no cash leakages, and that banks hold zero excess reserves.
-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. The loan made by Bank B ends up in Bank C. What dollar value goes in blanks (C)  and (D) , respectively?.

Accepted Answer

A)  $900; $810
B)  $90; $810
C)  $110; $700
D)  $700; $110

Question 16

Open market purchases of government securities

Accepted Answer

A)  are designed to increase trading on the stock exchange.
B)  generally decrease the money supply.
C)  always decrease the money supply.
D)  cause bank reserves to increase.
E)  all of the above

Question 17

Which of the following will increase the money supply?

Accepted Answer

A)  increasing the required reserve ratio
B)  an open market sale
C)  raising the discount rate relative to the federal funds rate
D)  none of the above

Question 18

The Banking Act of 1935 changed the name of the _______________ to the Board of Governors of the Federal Reserve System.

Accepted Answer

A)  Federal Open Market Committee
B)  Board of Monetary Affairs
C)  Central Bank Board
D)  Federal Reserve Board

Question 19

Open market operations are the

Accepted Answer

A)  buying and selling of Federal Reserve Notes in the open market.
B)  means by which the Fed supplies the economy with currency.
C)  means by which the Fed acts as the government's banker.
D)  buying and selling of government securities by the Fed.
E)  buying and selling of government securities by the Treasury.

Question 20

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

Exam 13: The Federal Reserve System

Which of the following is not a function of the Federal Reserve System?

Correct Answer
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Open market purchases of government securities

Correct Answer
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Correct Answer
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Raising the required reserve ratio the simple deposit multiplier which will the economy's money supply.

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

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

Correct Answer
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The major policy-making group within the Fed is the __________ Committee.

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

Correct Answer
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Controlling the nation's money supply is the most important duty of the Federal Reserve.

Correct Answer
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When the Fed purchases securities from a bank, it reserves and __ the money supply.

Correct Answer
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The lower the required reserve ratio,

Correct Answer
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The Banking Act of 1935 changed the name of the _______________ to the Board of Governors of the Federal Reserve System.

Correct Answer
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If the Fed ____________, the money supply will ultimately .

Correct Answer
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When one commercial bank borrows from another commercial bank, it pays the __________ rate.

Correct Answer
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Which of the following will increase the money supply?

Correct Answer
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Open market operations are the

Correct Answer
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Which of the following Fed actions will increase the money supply?

Correct Answer
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Here is how an open market purchase works: The Fed government securities to (from) a commercial bank, which raises the bank's deposits at the and increases the bank's __.

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

Correct Answer
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The Federal Open Market Committee (FOMC)

Correct Answer
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Exam 13: The Federal Reserve System

Which of the following is not a function of the Federal Reserve System?

Correct AnswerverifiedShow Answer

Open market purchases of government securities

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Raising the required reserve ratio __________ the simple deposit multiplier which will __________ the economy's money supply.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The major policy-making group within the Fed is the __________ Committee.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Controlling the nation's money supply is the most important duty of the Federal Reserve.

Correct AnswerverifiedShow Answer

When the Fed purchases securities from a bank, it __________ reserves and ____________ the money supply.

Correct AnswerverifiedShow Answer

The lower the required reserve ratio,

Correct AnswerverifiedShow Answer

The Banking Act of 1935 changed the name of the _______________ to the Board of Governors of the Federal Reserve System.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When one commercial bank borrows from another commercial bank, it pays the __________ rate.

Correct AnswerverifiedShow Answer

Which of the following will increase the money supply?

Correct AnswerverifiedShow Answer

Open market operations are the

Correct AnswerverifiedShow Answer

Which of the following Fed actions will increase the money supply?

Correct AnswerverifiedShow Answer

Here is how an open market purchase works: The Fed __________ government securities to (from) a commercial bank, which raises the bank's deposits at the __________ and increases the bank's __________.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The Federal Open Market Committee (FOMC)

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Raising the required reserve ratio the simple deposit multiplier which will the economy's money supply.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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When the Fed purchases securities from a bank, it reserves and __ the money supply.

Correct Answer
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Correct Answer
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Correct Answer
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If the Fed ____________, the money supply will ultimately .

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Here is how an open market purchase works: The Fed government securities to (from) a commercial bank, which raises the bank's deposits at the and increases the bank's __.

Correct Answer
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Correct Answer
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Correct Answer
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