Question 1

The reserve requirement ratio is equal to

Accepted Answer

A)  required reserves divided by excess reserves.
B)  legal required reserves times the deposit multiplier.
C)  total checkable deposits times the deposit multiplier.
D)  total checkable deposits times the excess reserve ratio.
E)  legal required reserves divided by total checkable deposits.

Question 2

The most frequently used tool of monetary policy is

Accepted Answer

A)  the discount rate.
B)  reserve requirements.
C)  open market operations.
D)  moral suasion.
E)  credit controls.

Question 3

The Fed's mostly used tool for changing the size of the money supply is

Accepted Answer

A)  its power to change the discount rate.
B)  its power to change legal minimum reserve requirements.
C)  open market operations.
D)  changing the size of the government budget deficit.

Question 4

An individual bank can create deposits to the extent of its

Accepted Answer

A)  excess reserves.
B)  required reserves.
C)  total reserves.
D)  deposits.
E)  net worth.

Question 5

If a bank has reserves of $150 million and demand deposits of $1.2 billion,how much are the bank's (a)required reserves and (b)excess reserves?

Accepted Answer

The answer of If a bank has reserves of $150...

Question 6

The Depository Institutions Deregulation and Monetary Control Act of 1980 accomplished which one of the following reforms?

Accepted Answer

A)  Established a uniform set of reserve requirements for all depository institutions.
B)  Established maximum and minimum interest rates which depository institutions were permitted to pay on checkable deposits.
C)  Shifted to the United States Treasury the responsibility for setting the discount rate.
D)  Provided presidential veto power over setting reserve requirements.

Question 7

By mid-2010 _______ percent of the TARP funds had been repaid to the U.S.Treasury.

Accepted Answer

A)  10
B)  25
C)  60
D)  90

Question 8

Primary reserves and secondary reserves

Accepted Answer

A)  are identical.
B)  are nearly identical.
C)  have some overlap.
D)  have completely different components.

Question 9

A bank's reserves include its

Accepted Answer

A)  vault cash and deposits with the Federal Reserve.
B)  holdings of government bonds and corporate stocks.
C)  checkable deposits and holdings of government bonds.
D)  tellers who are ready and able to work if there is a strike by the regular tellers.
E)  accounts receivable.

Question 10

During a period of hyperinflation the Fed would probably be doing each of the following except

Accepted Answer

A)  raising the discount rate.
B)  lowering reserve requirements.
C)  raising interest rates.
D)  selling securities on the open market.

Question 11

Money is created when

Accepted Answer

A)  Congress enacts legislation providing for increased bank reserves.
B)  depository institutions make loans.
C)  the Federal Reserve Board of Governors increases the discount rate.
D)  Congress reduces taxes.
E)  Congress increases spending.

Question 12

Which of the following policy actions by the Fed is likely to cause the money supply to decrease?

Accepted Answer

A)  An open market purchase
B)  A decrease in required reserve ratios
C)  A decrease in the discount rate
D)  An open market sale

Question 13

Which of the following was a result of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) ?

Accepted Answer

A)  All checkable deposits,whether at commercial banks,savings banks,savings and loan associations,or credit unions will have the same reserve requirements.
B)  The Fed has the power to change the reserve requirement on checkable deposits at commercial banks but not credit unions.
C)  The Fed has the power to set the reserve requirement on checkable deposits at credit unions,but once set,the reserve requirement cannot be changed for two years.
D)  Commercial and savings banks are regulated by the Fed,but credit unions and state banks are not subject to regulations,but must pay dues to the FeD.
E)  Credit unions and state banks must abide by Fed reserve requirements,but are denied access to borrowing at the discount window.

Question 14

Statement I: When a businessman repays his bank loan,money is,destroyed.
Statement II: Treasury bills,notes,certificates,and bonds (that will mature in less than a year) are generally considered a bank's secondary reserves.

Accepted Answer

A)  Statement I is true and statement II is false.
B)  Statement II is true and statement I is false.
C)  Both statements are true.
D)  Both statements are false.

Question 15

A decrease in the discount rate ____ both total and excess reserves and ____ the money supply.

Accepted Answer

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

Question 16

All of the nation's financial institutions came under the jurisdiction of the Federal Reserve in

Accepted Answer

A)  1913.
B)  1933.
C)  1948.
D)  1980.

Question 17

When actual reserves = required reserves,excess reserves = _____;when required reserves are greater than actual reserves,excess reserves are _____.

Accepted Answer

The answer of When actual reserves = required reserves,excess reserves...

Question 18

If a bank subject to a 20% required reserve ratio has $10,000 in excess reserves,it can extend,at a maximum,which quantity of new loans?

Accepted Answer

A)  $2,000
B)  $8,000
C)  $10,000
D)  $100,000

Question 19

If Mike McCulley puts $500 worth of traveler's checks left over from a vacation back into his checking account

Accepted Answer

A)  M1 decreases.
B)  M1 increases.
C)  M1 does not change.

Question 20

The difference between actual and required reserves is known as

Accepted Answer

A)  the required reserve ratio.
B)  fractional reserves.
C)  extra reserves.
D)  excess reserves.

Exam 14: The Federal Reserve and Monetary Policy

Money is created when

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During a period of hyperinflation the Fed would probably be doing each of the following except

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The most frequently used tool of monetary policy is

Correct AnswerverifiedShow Answer

A decrease in the discount rate ____ both total and excess reserves and ____ the money supply.

Correct AnswerverifiedShow Answer

An individual bank can create deposits to the extent of its

Correct AnswerverifiedShow Answer

Statement I: When a businessman repays his bank loan,money is,destroyed. Statement II: Treasury bills,notes,certificates,and bonds (that will mature in less than a year) are generally considered a bank's secondary reserves.

Correct AnswerverifiedShow Answer

The Depository Institutions Deregulation and Monetary Control Act of 1980 accomplished which one of the following reforms?

Correct AnswerverifiedShow Answer

If a bank has reserves of $150 million and demand deposits of $1.2 billion,how much are the bank's (a)required reserves and (b)excess reserves?

Correct AnswerverifiedShow Answer

All of the nation's financial institutions came under the jurisdiction of the Federal Reserve in

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A bank's reserves include its

Correct AnswerverifiedShow Answer

If Mike McCulley puts $500 worth of traveler's checks left over from a vacation back into his checking account

Correct AnswerverifiedShow Answer

If a bank subject to a 20% required reserve ratio has $10,000 in excess reserves,it can extend,at a maximum,which quantity of new loans?

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Which of the following policy actions by the Fed is likely to cause the money supply to decrease?

Correct AnswerverifiedShow Answer

The difference between actual and required reserves is known as

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The reserve requirement ratio is equal to

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The Fed's mostly used tool for changing the size of the money supply is

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By mid-2010 _______ percent of the TARP funds had been repaid to the U.S.Treasury.

Correct AnswerverifiedShow Answer

Which of the following was a result of the Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) ?

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Primary reserves and secondary reserves

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When actual reserves = required reserves,excess reserves = _____;when required reserves are greater than actual reserves,excess reserves are _____.

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A decrease in the discount rate both total and excess reserves and the money supply.

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When actual reserves = required reserves,excess reserves = _;when required reserves are greater than actual reserves,excess reserves are _.

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