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5 Cards in this Set
- Front
- Back
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Which of the following is true?
a) The Fed's FOMC sets the Fed Funds rate and all banks in the banking system use that fixed rate. b) Supply and demand forces set the Fed's Discount Window interest rate. c) The Fed targets the Fed Funds rate but cannot set the Fed Funds rate. d) The Fed targets the Fed Funds rate by changing the reserve requirement. e) None of the above |
c) The Fed targets the Fed Funds rate but cannot set the Fed Funds rate.
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Which of the following is the best statement concerning the impact of Federal Funds Market activity on the amount of legal reserves in the banking system?
a) Fed Funds market activity increases legal reserves in the system. b) Fed Funds market activity decreases legal reserves in the system. c) Fed Funds market activity makes more efficient use of existing legal reserves in the system. d) None of the above are true. |
c) Fed Funds market activity makes more efficient use of existing legal reserves in the system.
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If the public's demand for cash in their pockets increases what is the impact on legal reserves and the money supply (assuming the Fed does nothing to offset the effects)?
a) Increase b) Decrease c) No impact |
b) Decrease
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The Fed changes the average reserve requirement from 10% to 5%. There are $8 trillion in legal reserves in the banking system. Assuming the money expansion/contraction process reaches its theoretical limit, what will happen to the money supply?
a) Increase by $8 trillion b) Decrease by $ 8 trillion c) Increase by $16 trillion d) Decrease by $16 trillion e) None of the above |
e) None of the above
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During tax time the US Treasury collects taxes in the form of checks written by taxpayers. When those checks clear the banking system, what happens to the amount of legal reserves in the banking system?
a) Increase b) Decrease c) No impact |
b) Decrease
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