Question 1

If a bank has negative excess reserves,then its ______ are greater than its _____.

Accepted Answer

required r...

Question 2

Which statement is true?

Accepted Answer

A)  Actual reserves - required reserves = excess reserves.
B)  Required reserves - actual reserves = excess reserves.
C)  Required reserves + actual reserves = excess reserves.
D)  None of the statements are true.

Question 3

If the Fed buys $30 million in government securities,paying for them with new deposit balances at the Fed,the money supply will end up

Accepted Answer

A)  decreasing by $30 million.
B)  decreasing by much more than $30 million.
C)  increasing by $30 million.
D)  increasing by much more than $30 million.

Question 4

The Board of Governors of the Federal Reserve does each of the following,except

Accepted Answer

A)  sit on the Federal Open Market Committee.
B)  serve on the Board at the pleasure of the President,who can make individual governors resign at any time.
C)  carry out monetary policy.
D)  raise and lower reserve requirements. B

Question 5

The liquidity trap is based on the _____ demand for money.

Accepted Answer

A)  overall
B)  transactions
C)  precautionary
D)  speculative

Question 6

The Federal Reserve System

Accepted Answer

A)  regulates not only banks but some of the other financial institutions.
B)  is directly controlled by the President.
C)  regulates all financial institutions in the United States.
D)  controls the fiscal policy of the federal government.

Question 7

Statement I: One key provision of the Depository Institutions Deregulation and Monetary Control Act of 1980 was that all depository institutions were now subject to the Fed's legal reserve requirements.
Statement II: According to the same act all thrift institutions were barred from issuing checking accounts.

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 8

When a commercial bank borrows from a Federal Reserve Bank

Accepted Answer

A)  the supply of money automatically increases.
B)  it indicates that the commercial bank is unsound financially.
C)  the commercial bank's lending ability is increased.
D)  the commercial bank's reserves are reduceD.

Question 9

Statement I: If a bank has negative excess reserves,then its required reserves are greater than its actual reserves.
Statement II: If a bank has negative excess reserves,it generally eliminates them by borrowing money in the Federal Funds market.

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. C

Question 10

Which of the following will NOT happen when the Federal Reserve buys bonds from the public in the open market and cash in the hands of the public does not change?

Accepted Answer

A)  The required reserve ratio will increase.
B)  The money supply will increase.
C)  The deposits of commercial banks will increase.
D)  Commercial bank reserves will increase.

Question 11

Statement I: Banks try to carry large excess reserves.
Statement II: Actual reserves minus excess reserves = required 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 12

If banks face a reserve requirement of 10%,then when the Fed increases bank reserves by $20 million,the money supply can be estimated to increase by about

Accepted Answer

A)  $2 million.
B)  $20 million.
C)  $200 million.
D)  None of the choices are correct.

Question 13

By decreasing the required reserve ratio,the Federal Reserve will

Accepted Answer

A)  increase the money supply unless accompanied by a decrease in the discount rate.
B)  increase the money supply unless banks hold on to excess reserves instead of lending them.
C)  decrease the money supply by the amount of the initial change caused by the decreased required reserve ratio.
D)  decrease the money supply by a multiple of the initial change caused by the decreased required reserve ratio.

Question 14

Which of the following will increase commercial bank reserves?

Accepted Answer

A)  The purchase of government bonds in the open market by the Federal Reserve Banks
B)  An increase in the reserve ratio
C)  An increase in the discount rate
D)  The sale of government bonds in the open market by the Federal Reserve Banks

Question 15

If a bank has negative excess reserves,

Accepted Answer

A)  it is bankrupt.
B)  its required reserves are greater than its actual reserves.
C)  it must stop making loans.
D)  it must raise the interest rates it is charging borrowers.

Question 16

Members of the Board of Governors of the Federal Reserve serve one _____ year term.

Accepted Answer

The answer of Members of the Board of Governors of...

Question 17

There was a very clear line of demarcation,which divided commercial banks and thrift institutions until the year

Accepted Answer

A)  1950.
B)  1960.
C)  1970.
D)  1980.
E)  1990.

Question 18

If the Fed sells government securities on the open market,this will cause _____ in the quantity of money available and _____ in the interest rate.

Accepted Answer

A)  an increase;an increase
B)  a decrease;an increase
C)  an increase;a decrease
D)  a decrease;a decrease

Question 19

Open market operations designed to fight inflation will drive interest rates _____ and bond prices _____.

Accepted Answer

The answer of Open market operations designed to fight inflation...

Question 20

Demand deposits multiplied by the required reserve ratio equal the amount of reserves

Accepted Answer

A)  the Federal Reserve is required to hold.
B)  business firms are required to hold.
C)  a bank is required to hold.
D)  foreign investors are required to holD. C

Exam 14: The Federal Reserve and Monetary Policy

If a bank has negative excess reserves,then its __ are greater than its _.

Correct Answer
verified
required r...
View Answer

Which statement is true?

Correct Answer
verified

If the Fed buys $30 million in government securities,paying for them with new deposit balances at the Fed,the money supply will end up

Correct Answer
verified

The Board of Governors of the Federal Reserve does each of the following,except

Correct Answer
verified
B

The liquidity trap is based on the _____ demand for money.

Correct Answer
verified

The Federal Reserve System

Correct Answer
verified

Correct Answer
verified

When a commercial bank borrows from a Federal Reserve Bank

Correct Answer
verified

Statement I: If a bank has negative excess reserves,then its required reserves are greater than its actual reserves. Statement II: If a bank has negative excess reserves,it generally eliminates them by borrowing money in the Federal Funds market.

Correct Answer
verified
C

Which of the following will NOT happen when the Federal Reserve buys bonds from the public in the open market and cash in the hands of the public does not change?

Correct Answer
verified

Statement I: Banks try to carry large excess reserves. Statement II: Actual reserves minus excess reserves = required reserves.

Correct Answer
verified

If banks face a reserve requirement of 10%,then when the Fed increases bank reserves by $20 million,the money supply can be estimated to increase by about

Correct Answer
verified

By decreasing the required reserve ratio,the Federal Reserve will

Correct Answer
verified

Which of the following will increase commercial bank reserves?

Correct Answer
verified

If a bank has negative excess reserves,

Correct Answer
verified

Members of the Board of Governors of the Federal Reserve serve one _____ year term.

Correct Answer
verified

There was a very clear line of demarcation,which divided commercial banks and thrift institutions until the year

Correct Answer
verified

If the Fed sells government securities on the open market,this will cause _ in the quantity of money available and _ in the interest rate.

Correct Answer
verified

Open market operations designed to fight inflation will drive interest rates _ and bond prices _.

Correct Answer
verified

Demand deposits multiplied by the required reserve ratio equal the amount of reserves

Correct Answer
verified
C

Exam 14: The Federal Reserve and Monetary Policy

If a bank has negative excess reserves,then its ______ are greater than its _____.

Correct Answerverifiedrequired r...View AnswerShow Answer

Which statement is true?

Correct AnswerverifiedShow Answer

If the Fed buys $30 million in government securities,paying for them with new deposit balances at the Fed,the money supply will end up

Correct AnswerverifiedShow Answer

The Board of Governors of the Federal Reserve does each of the following,except

Correct AnswerverifiedB

The liquidity trap is based on the _____ demand for money.

Correct AnswerverifiedShow Answer

The Federal Reserve System

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a commercial bank borrows from a Federal Reserve Bank

Correct AnswerverifiedShow Answer

Statement I: If a bank has negative excess reserves,then its required reserves are greater than its actual reserves. Statement II: If a bank has negative excess reserves,it generally eliminates them by borrowing money in the Federal Funds market.

Correct AnswerverifiedC

Which of the following will NOT happen when the Federal Reserve buys bonds from the public in the open market and cash in the hands of the public does not change?

Correct AnswerverifiedShow Answer

Statement I: Banks try to carry large excess reserves. Statement II: Actual reserves minus excess reserves = required reserves.

Correct AnswerverifiedShow Answer

If banks face a reserve requirement of 10%,then when the Fed increases bank reserves by $20 million,the money supply can be estimated to increase by about

Correct AnswerverifiedShow Answer

By decreasing the required reserve ratio,the Federal Reserve will

Correct AnswerverifiedShow Answer

Which of the following will increase commercial bank reserves?

Correct AnswerverifiedShow Answer

If a bank has negative excess reserves,

Correct AnswerverifiedShow Answer

Members of the Board of Governors of the Federal Reserve serve one _____ year term.

Correct AnswerverifiedShow Answer

There was a very clear line of demarcation,which divided commercial banks and thrift institutions until the year

Correct AnswerverifiedShow Answer

If the Fed sells government securities on the open market,this will cause _____ in the quantity of money available and _____ in the interest rate.

Correct AnswerverifiedShow Answer

Open market operations designed to fight inflation will drive interest rates _____ and bond prices _____.

Correct AnswerverifiedShow Answer

Demand deposits multiplied by the required reserve ratio equal the amount of reserves

Correct AnswerverifiedC

If a bank has negative excess reserves,then its __ are greater than its _.

Correct Answer
verified
required r...
View Answer

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B

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C

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If the Fed sells government securities on the open market,this will cause _ in the quantity of money available and _ in the interest rate.

Correct Answer
verified

Open market operations designed to fight inflation will drive interest rates _ and bond prices _.

Correct Answer
verified

Correct Answer
verified
C