Econ Ch 13

Front 1

The Board of Governors of the Federal Reserve is part of a larger policy-making group called the

Back 1

Federal Open Market Committee.

Front 2

Which of the following is not a major responsibility of the Fed?

Back 2

determining tax rates

Front 3

When a check is written on an account at Bank A and deposited in Bank B, the reserve account of __________ will rise and reserves of the entire banking system will __________.

Back 3

Bank B; remain constant

Front 4

Open Market Operations are conducted by

Back 4

the Federal Reserve Bank of New York.

Front 5

Open market operations are the

Back 5

buying and selling of government securities by the Fed.

Front 6

When the federal government incurs a budget deficit, it will

Back 6

borrow money from the public by issuing securities.

Front 7

If the Fed wants to increase the money supply through an open market operation, it will

Back 7

purchase government securities.

Front 8

An open market purchase by the Fed

Back 8

increases the supply of money.

Front 9

Suppose the Fed forecasts a reduction in excess reserve holdings by banks. It might offset the effect of this on the money supply by

Back 9

selling government securities.

Front 10

The Fed can change the money supply by changing

Back 10

the required reserve ratio

Front 11

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

Back 11

federal funds

Front 12

The lower the discount rate relative to the federal funds rate, the more likely a commercial bank will borrow from

Back 12

the Fed instead of another commercial bank.

Front 13

Which of the following will increase the money supply?

Back 13

a decrease in the required reserve ratio

Front 14

To decrease the money supply, the Fed may

Back 14

increase the required reserve ratio.

Front 15

When Bank A obtains a loan from the Fed, the

Back 15

bank’s reserves increase.

Front 16

When the Fed increases the required reserve ratio, a bank's

Back 16

excess reserves are decreased.

Front 17

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

Back 17

Fed purchases of government securities

Front 18

The lower the required reserve ratio,

Back 18

the larger the simple deposit multiplier.

Front 19

Which of the following will lower the money supply?

Back 19

an open market sale

Front 20

An open market __________ by the Fed increases the money supply; a(n) __________ in the required reserve ratio increases the money supply.

Back 20

purchase; decrease

Front 21

The Federal Reserve System is the

Back 21

central bank of the United States.

Front 22

The Board of Governors of the Federal Reserve is comprised of

Back 22

seven persons, each appointed to a fourteen-year term.

Front 23

The United States is divided into __________ Federal Reserve districts, each with a district bank.

Back 23

twelve

Front 24

When commercial banks need more Federal Reserve Notes,

Back 24

they call their Federal Reserve District Bank, which delivers the requested amount.

Front 25

The funds the Fed receives from selling government securities are

Back 25

removed from the economy altogether.

Front 26

If the Fed purchases government securities from a commercial bank, which of the following will happen?

Back 26

a and d

Front 27

An "open market operation" is said to occur when the Fed

Back 27

buys or sells government securities.

Front 28

If banks are currently holding zero excess reserves and the Fed lowers the required reserve ratio, which of the following will happen?

Back 28

Banks will have positive excess reserves.

Front 29

The word that best describes the relationship between the required reserve ratio and the money supply is

Back 29

inverse

Front 30

When a commercial bank borrows from the Fed,

Back 30

the bank can make more loans.

Front 31

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

Back 31

increases; increases

Front 32

An open market sale by the Fed will

Back 32

reduce the money supply

Front 33

The discount rate is the interest rate

Back 33

the Fed charges when it lends reserves to banks.

Front 34

Open market purchases of government securities

Back 34

banks charge their loan customers.

Front 35

The Fed has been called "the lender of last resort" because it

Back 35

serves as the last place to acquire loans for banks suffering cash management, or liquidity, problems.

Front 36

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

Back 36

open market purchases of Treasury notes

Front 37

The banking system currently holds $20 billion in required reserves and zero excess reserves. The Fed lowers the required reserve ratio from 20 percent to 12.5 percent. Assuming that there are no cash leakages, the resulting change in checkable deposits (or the money supply) is

Back 37

$60 billion.

Front 38

If a bank has no excess reserves and is approached by a creditworthy customer applying for a loan, the bank will be able to grant the loan if it

Back 38

b or c

Front 39

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

Back 39

increases; increases

Front 40

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 __________.

Back 40

buys; Fed; reserves

Front 41

Every time the Fed buys or sells on the open market, the __________ changes.

Back 41

money supply

Front 42

If the Fed lowers the discount rate at the same time it conducts an open market sale, it follows that

Back 42

There is not enough information to answer this question.

Front 43

If the Fed wants to increase the money supply, it can __________ the required reserve ratio, conduct an open market __________, or __________the discount rate.

Back 43

lower; purchase; lower

Front 44

If the Fed raises the discount rate at the same time it conducts an open market sale, it follows that the money supply will

Back 44

fall.

Front 45

Which of the following is not a monetary policy tool of the Fed?

Back 45

income tax rates