Question 1

When the Fed issues currency

Accepted Answer

A)  this increases our money supply only if it replaces old,worn-out currency.
B)  this increases our money supply only if it is used to accommodate the public's desire to hold more currency.
C)  this increases our money supply either if it replaces old,worn currency,or if it is used to accommodate the public's desire to hold more currency.
D)  this does not increase our money supply.E) All of the above
F) C) and D)

Question 2

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;increasesE) A) and C)
F) All of the above

Question 3

How many members appointed by the president sit on the Federal Reserve Board?

Accepted Answer

A)  None
B)  Seven
C)  Nine
D)  TwelveE) C) and D)
F) A) and C)

Question 4

When the Fed purchases securities on the open market,the securities it buys are

Accepted Answer

A)  common stock of United States corporations.
B)  corporate bonds.
C)  securities issued by state governments.
D)  securities issued by the federal government.
E)  All of the choices are truE.F) A) and B)
G) A) and E)

Question 5

Kansas City,Minneapolis,St.Louis,and Atlanta are all locations of ______ banks.

Accepted Answer

Federal Re...

Question 6

Open market operations involve each of the following except

Accepted Answer

A)  the National Debt.
B)  interest rates.
C)  the President.
D)  the Board of Governors.
E)  the New York Federal Reserve District Bank.F) B) and E)
G) A) and D)

Question 7

Legal reserves are

Accepted Answer

A)  vault cash plus Treasury notes.
B)  funds that banks have on reserve with their district Federal Reserve Bank plus vault cash.
C)  Treasury notes,vault cash,and demand deposits.
D)  Treasury notes plus demand deposits.E) All of the above
F) B) and C)

Question 8

If Fifth Third Bank had actual reserves of $1 billion and required reserves of $1.1 billion,its excess reserves would be

Accepted Answer

A)  $1 billion.
B)  $100 million.
C)  0.
D)  -$100 million.
E)  -$1 billion.F) C) and D)
G) A) and B)

Question 9

If you wrote a check for $37.55 to pay your phone bill and sent it to Verizon,

Accepted Answer

A)  your bank's deposits will go down by $37.55 and its reserves would go up by $37.55.
B)  your bank's deposits would go up by $37.55 and its reserves would go down by $37.55.
C)  your bank's deposits would go down by $37.55 and its reserves would go down by $37.55.
D)  your bank's deposits would go up by $37.55 and its reserves would go up by $37.55.E) A) and B)
F) B) and D)

Question 10

Excess reserves are important to a banker because

Accepted Answer

A)  if they are not maintained,banking regulators may shut the bank down.
B)  they are the profits that are divided among the bank's owners.
C)  they represent the funds available to use to acquire income-producing assets such as loans and securities.
D)  they indicate profitable banking practices.
E)  they are typically deposited in special high-yielding investment accounts.F) A) and D)
G) A) and E)

Question 11

When a bank loan is repaid the supply of money

Accepted Answer

A)  is constant,but its composition will have changed.
B)  is decreased.
C)  is increased.
D)  may either increase or decrease.E) A) and B)
F) B) and C)

Question 12

The Federal Reserve System was NOT

Accepted Answer

A)  established with the 1913 passage of the Federal Reserve Act.
B)  the first attempt to have a United States central bank.
C)  intended to act as a "lender of last resort."
D)  designed to lend money to inherently sound banks so that they can survive financial panics.E) A) and B)
F) A) and C)

Question 13

Our currency is issued by

Accepted Answer

A)  the United States Treasury.
B)  the Federal Reserve.
C)  individual commercial banks.
D)  the Internal Revenue Service.E) B) and C)
F) A) and B)

Question 14

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.D) A) and B)
E) A) and C)

Question 15

The purpose of establishing the Federal Reserve System was to

Accepted Answer

A)  provide a lender of last resort.
B)  regulate commercial banking.
C)  provide for a more elastic currency.
D)  increase confidence in the nation's banks.
E)  All of the choices are correct.F) A) and B)
G) All of the above

Question 16

Which statement is false?

Accepted Answer

A)  Since some people choose to hold some of their currency,the deposit multiplier is lower than one divided by the reserve ratio.
B)  In times of inflation banks are quite likely to carry excess reserves.
C)  If banks choose to hold excess reserves;the deposit multiplier will be lower than expected.
D)  If there is a large drain of dollars to foreigners because of a large trade imbalance,the deposit multiplier will be lower than expecteD.E) B) and C)
F) C) and D)

Question 17

The agency directly responsible for monetary policy in the United States is

Accepted Answer

A)  the twelve Federal Reserve Banks.
B)  the Board of Governors of the Federal Reserve System.
C)  the Congress of the United States.
D)  the United States Treasury.E) B) and D)
F) A) and D)

Question 18

Reserves must be deposited in the Federal Reserve Banks by

Accepted Answer

A)  only commercial banks which are members of the Federal Reserve System.
B)  all depository institutions,that is,all commercial banks and thrift institutions.
C)  state chartered commercial banks only.
D)  federally chartered commercial banks only.E) C) and D)
F) A) and B)

Question 19

All else equal,an easy money policy in the United States tends to

Accepted Answer

A)  increase American imports.
B)  increase the international value of the dollar.
C)  reduce the foreign demand for American dollars.
D)  aggravate an existing American trade deficit.E) None of the above
F) A) and C)

Question 20

The Glass-Steagall Act

Accepted Answer

A)  was created in 1933 to divide commercial banking from investment banking.
B)  allowed banks to become more diverse in the investments they were allowed to make.
C)  made U.S.banks similar to the "universal banks" of continental Europe.
D)  created conflicts of interest between commercial banks and investment banks.E) C) and D)
F) All of the above

Exam 14: The Federal Reserve and Monetary Policy

Open market operations involve each of the following except

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If Fifth Third Bank had actual reserves of $1 billion and required reserves of $1.1 billion,its excess reserves would be

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

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Legal 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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The purpose of establishing the Federal Reserve System was to

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The Federal Reserve System was NOT

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The Glass-Steagall Act

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When the Fed issues currency

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Excess reserves are important to a banker because

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All else equal,an easy money policy in the United States tends to

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Our currency is issued by

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The agency directly responsible for monetary policy in the United States is

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When the Fed purchases securities on the open market,the securities it buys are

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If you wrote a check for $37.55 to pay your phone bill and sent it to Verizon,

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How many members appointed by the president sit on the Federal Reserve Board?

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Which statement is false?

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When a bank loan is repaid the supply of money

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Kansas City,Minneapolis,St.Louis,and Atlanta are all locations of ______ banks.

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Reserves must be deposited in the Federal Reserve Banks by

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

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Federal Re...
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