Question 1

Which of the following is the market where reserves can be borrowed by one bank from another bank for very short periods of time?

Accepted Answer

A)  Money market.
B)  Commercial paper market.
C)  Federal funds market.D) A) and B)
E) A) and C)

Question 2

The Fed can use all of the following except ____________ to change the lending capacity of the banking system.

Accepted Answer

A)  the reserve requirement
B)  the excess reserve requirement
C)  open market operationsD) A) and C)
E) All of the above

Question 3

Suppose the required reserve ratio is 20 percent,and the Fed buys $1 million worth of bonds from the public.If the public deposits this amount into transactions accounts,the money supply will

Accepted Answer

A)  Increase directly by $1 million in reserve deposits,with an additional lending capacity of $3 million created for the banking system.
B)  Increase directly by $1 million in reserve deposits,with an additional lending capacity of $4 million created for the banking system.
C)  Not be affected directly,but an additional lending capacity of $5 million will be created for the banking system.D) A) and B)
E) A) and C)

Question 4

The Federal Open Market Committee includes

Accepted Answer

A)  All 7 governors and 5 of the regional Reserve bank presidents.
B)  5 of the governors and all of the regional Reserve bank presidents.
C)  12 of the regional Reserve bank presidents plus the chairman of the Fed.D) B) and C)
E) None of the above

Question 5

The M2 money supply is defined as

Accepted Answer

A)  Currency held by the public plus transactions accounts.
B)  M1 plus savings accounts.
C)  M1 plus balances in most savings accounts and money market mutual funds.D) None of the above
E) All of the above

Question 6

If the Fed wants to sell more government bonds than people are willing to buy,then the Fed should

Accepted Answer

A)  Decrease the price it asks for the bonds.
B)  Switch to another type of monetary policy lever.
C)  Switch to fiscal policy.D) None of the above
E) All of the above

Question 7

Members of the Board of Governors are

Accepted Answer

A)  Elected by the people and confirmed by the president.
B)  Appointed by the president and confirmed by the Senate.
C)  Selected by each new president at the same time the cabinet is chosen.D) B) and C)
E) A) and C)

Question 8

The Fed can increase the federal funds rate by

Accepted Answer

A)  Selling government bonds,which causes market interest rates to rise.
B)  Buying government bonds.
C)  Simply announcing a higher rate because the Fed has direct control of this interest rate.D) B) and C)
E) All of the above

Question 9

If market interest rates fall,the selling price of existing bonds in the market will,ceteris paribus,

Accepted Answer

A)  Rise.
B)  Fall.
C)  Not change.D) B) and C)
E) None of the above

Question 10

The federal funds rate is the interest rate charged when

Accepted Answer

A)  One bank lends reserves to another bank.
B)  The Fed lends to banks.
C)  The Fed lends to individuals.D) A) and B)
E) None of the above

Question 11

When the Fed buys bonds from the public,it decreases the flow of reserves to the banking system.

Accepted Answer

A) True 
 B)False

Exam 14: The Federal Reserve System

The Federal Open Market Committee includes

Correct Answer
verified

Members of the Board of Governors are

Correct Answer
verified

Suppose the required reserve ratio is 20 percent,and the Fed buys $1 million worth of bonds from the public.If the public deposits this amount into transactions accounts,the money supply will

Correct Answer
verified

If the Fed wants to sell more government bonds than people are willing to buy,then the Fed should

Correct Answer
verified

The M2 money supply is defined as

Correct Answer
verified

The federal funds rate is the interest rate charged when

Correct Answer
verified

The Fed can use all of the following except ____________ to change the lending capacity of the banking system.

Correct Answer
verified

Which of the following is the market where reserves can be borrowed by one bank from another bank for very short periods of time?

Correct Answer
verified

When the Fed buys bonds from the public,it decreases the flow of reserves to the banking system.

Correct Answer
verified

The Fed can increase the federal funds rate by

Correct Answer
verified

If market interest rates fall,the selling price of existing bonds in the market will,ceteris paribus,

Correct Answer
verified

Exam 14: The Federal Reserve System

The Federal Open Market Committee includes

Correct AnswerverifiedShow Answer

Members of the Board of Governors are

Correct AnswerverifiedShow Answer

Suppose the required reserve ratio is 20 percent,and the Fed buys $1 million worth of bonds from the public.If the public deposits this amount into transactions accounts,the money supply will

Correct AnswerverifiedShow Answer

If the Fed wants to sell more government bonds than people are willing to buy,then the Fed should

Correct AnswerverifiedShow Answer

The M2 money supply is defined as

Correct AnswerverifiedShow Answer

The federal funds rate is the interest rate charged when

Correct AnswerverifiedShow Answer

The Fed can use all of the following except ____________ to change the lending capacity of the banking system.

Correct AnswerverifiedShow Answer

Which of the following is the market where reserves can be borrowed by one bank from another bank for very short periods of time?

Correct AnswerverifiedShow Answer

When the Fed buys bonds from the public,it decreases the flow of reserves to the banking system.

Correct AnswerverifiedShow Answer

The Fed can increase the federal funds rate by

Correct AnswerverifiedShow Answer

If market interest rates fall,the selling price of existing bonds in the market will,ceteris paribus,

Correct AnswerverifiedShow Answer

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verified

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