9.3 the federal reserve
To arrive at M3, one would add to M2 which of the following?
$100,000 and larger time deposits and repurchase agreements
When a bank lends money to a broker-dealer for the purpose of lending to margin account customers, the bank is lending at which of the following rates?
Broker call loan
The Federal Reserve could use which of the following to stimulate the economy?
Buy Treasury securities from banks
Which of the following correctly states the impact of open-market operations taken by the Federal Reserve Board (FRB)?
By buying securities, the FRB puts money into the banking system, expanding the money supply and reducing interest rates.
M1 is a measure of which of the following?
Cash and funds in demand deposit accounts
Which of these is not a tool used by the Federal Reserve Board (FRB) to impact the money supply?
Changing the prime rate
The Federal Reserve sets which of these rates?
Discount
Which of the following interest rates is set by the FRB?
Discount rate
Which of the following would be associated with loans made to member banks of the Federal Reserve?
Discount rate
Which of the following organizations engaging in open-market operations acts as agent for the U.S. Treasury Department?
Federal Reserve Board (FRB)
Which of the following benchmark interest rates is considered a barometer of the direction of short-term interest rates?
Federal funds rate
Which of the following is not a tool of the Federal Reserve?
Federal funds rate
Which of the following would be the interest rate charged for overnight, uncollateralized loans negotiated between two money center banks?
Federal funds rate
The Federal Reserve System's primary goals are I. maintaining maximum employment levels. II. maintaining an appropriate level of inflation. III. managing tax policies. IV. managing the federal debt.
I and II
The Federal Reserve's dual mandate includes which of these? I. Maintaining maximum employment II. Enforcement of price controls III. Control the value of the dollar versus other currencies IV. Price stability
I and IV
Certain actions taken by the Federal Reserve Board (FRB) would likely have the effect of causing interest rates to increase. Which would these be? I. The Federal Open Market Committee (FOMC) buying securities II. Raising the reserve requirements III. Raising the discount rate IV. Raising the prime rate
II and III
When the Federal Open Market Committee (FOMC) directs that Treasury securities be sold in the open market, this will do which of the following?
Increase interest rates on loans to consumers
When the Federal Open Market Committee (FOMC) directs that Treasury securities be purchased in the open market, this will do which of the following?
Lower interest rates on loans to consumers
A bank is likely to do which of the following when the Federal Reserve Board (FRB) eases the money supply?
Lower its prime rate
Where can demand deposits, checking accounts, paper currency and coins be found in the money supply?
M1, M2, and M3
All currency held by the public, including coins, checking accounts plus time deposits of less than $100,000, and money market mutual funds, is what economists define as
M2.
Currency held by the public, including checking accounts and time deposits less than $100,000, and money market mutual funds would best be described by economists as
M2.
For those who follow monetary theory, which is the most complete measure of the money supply?
M3
Large time deposits of more than $100,000 are considered to be found in what part of the money supply?
M3
According to economists which of the following is the correct characterization of the money supply?
M3 includes all of M1 and M2.
Match the following statement to the best expression: A well-controlled, moderately increasing money supply leads to price stability and a healthy economy.
Monetarist Theory
Which of the following regarding monetary or fiscal policy is true?
Monetary policy is what the Federal Reserve Board (FRB) engages in when it attempts to influence the money supply.
Within the money supply, which of the following are part of M2 but not M1?
Money market mutual funds
The Federal Reserve is concerned that the economy is slowing. With this in mind, which of these actions would the Federal Reserve most likely engage in? A) Engage in open market sales of T-bills B) Raise the margin requirements under Regulation T C) Double the reserve requirements for member banks D) Open market purchases of T-bills
Open market purchases of T-bills
Which of the following interest rates do large U.S. money center commercial banks charge their most creditworthy corporate borrowers for unsecured loans?
Prime rate
The Federal Reserve is concerned that the economy is slowing. With this in mind, which of these actions would the Federal Reserve most likely engage in? A) Pursue an easy-money policy to lower interest rates B) Double the reserve requirements for member banks C) Raise the margin requirements under Regulation T D) Engage in open market sales of T-bills
Pursue an easy-money policy to lower interest rates
A bank is likely to do which of the following when the Federal Reserve Board (FRB) tightens the money supply?
Raise its prime rate
The Federal Reserve could do which of the following to slow the economy?
Raise the discount rate
Which of the following is not an activity of the Federal Reserve?
Raising or lowering the prime rate
Of the standard Federal Reserve tools, which of these is considered the most powerful and used infrequently?
Reserve rate
If large money center commercial banks begin to lower their prime rates, which of the following is most likely to occur?
Smaller banks will lower lending rates for creditworthy corporate customers as well.
Money available to lend to corporations and consumers is impacted most in the United States by the policies of which of the following?
The Federal Open Market Committee (FOMC)
Which of the following has the greatest influence on the money supply within the United States?
The Federal Open Market Committee (FOMC)
Which of the following entities is chiefly responsible to conduct U.S. monetary policy and maintain the stability of the financial system?
The Federal Reserve Board (FRB)
The monetarist theory proposes which of the following?
The Federal Reserve may impact the economy by raising and lowering the discount rate.
A customer of a Financial Industry Regulatory Authority (FINRA) member firm buys securities on margin. The customer is expected to pay a rate of interest on the margin loan based on which of the following?
The broker call loan rate
Which benchmark interest rate indicates the direction of the Federal Reserve Board's monetary policy?
The discount rate
Which of the following is the rate of interest charged by the Federal Reserve Bank (FRB) for short-term loans to its member banks?
The discount rate
When engaging in open-market operations, taking actions to either expand or contract the money supply, the Federal Reserve Board (FRB) will buy or sell
Treasury securities.
When the Federal Reserve Board (FRB) wants to expand (loosen) the money supply, it will
buy Treasury securities from banks in the open market.
To expand the overall economy, the Federal Reserve Board (FRB), acting as agent for the U.S. Treasury department, will
buy securities via open-market operations, pushing interest rates down.
The best characterization of how economists view the money supply is
cash, loans, different forms of credit, and other liquid instruments.
When the Federal Open Market Committee (FOMC) directs that Treasury securities be sold in the open market, this
decreases the money supply.
When the Federal Open Market Committee (FOMC) directs that Treasury securities be purchased in the open market, this
increases the supply of money.
The prime rate is set by
individual banks.
The cost of doing business is closely linked to the cost of money, which is known as
interest
When the supply for money exceeds the demand,
interest rates fall, making consumer borrowing easier.
When the money supply in the economy increases,
interest rates go down, hence borrowing and spending for consumers is easier.
When the money supply in the economy decreases,
interest rates go up, hence borrowing and spending for consumers is more difficult.
When the demand for money exceeds the supply,
interest rates rise, making consumer borrowing more difficult.
To ease its monetary policy, allowing consumers to borrow more easily, the Federal Reserve Board (FRB) can
lower the discount rate.
To prevent inflation by tightening the availability of credit, the Federal Reserve Board (FRB) would do any of the following except
lower the prime rate.
Under the dual mandate, the Federal Reserve is most concerned with achieving
maximum employment and controlling inflation.
Tools available to the Federal Reserve Board (FRB) include
open-market operations, setting the discount rate, and setting reserve requirements.
The Federal Reserve Board (FRB) might impact the money supply by using all of the following except
prime rate.
The Federal Reserve Bank is raising interest rates, this will
push bond prices lower in the open market.
To tighten its monetary policy, making it more difficult for consumers to borrow money, the Federal Reserve Board (FRB) can
raise the discount rate.
To stimulate the economy during a recession by expanding the availability of credit, the Federal Reserve Board (FRB) would do any of the following except
raise the federal funds rate.
The Federal Reserve Board (FRB) can have an impact on the money supply utilizing all of the following except
raising or lowering the prime rate.
When the Federal Reserve Board (FRB) wants to contract (tighten) the money supply, it will
sell Treasury securities to banks in the open market.
To contract the overall economy, the Federal Reserve Board (FRB), acting as agent for the U.S. Treasury department, will
sell securities via open-market operations, pushing interest rates up.
The rate at which banks lend to broker-dealers for the purpose of lending money for margin loans is typically
slightly above (a percentage point or so) other short-term lending rates.
Tighter credit will
slow economic expansion, preventing inflation.
Implementing monetary policy, and thereby undertaking the responsibility to maintain the stability of the U.S. financial system, is
the Federal Open Market Committee (FOMC).
Federal Reserve member banks needing to borrow money can borrow from
the Federal Reserve Bank at the discount rate.
A member of the Federal Reserve System wanting to increase its reserves could do so by borrowing money from
the Federal Reserve Board (FRB) at the discount rate.
A registered representative has a customer buying securities, but rather than paying in full, the customer wants to borrow some of the money needed for the purchase from the broker-dealer. It is explained to the customer that in order to borrow the money, there will be interest payable based on
the broker call loan rate.
Seacoast Securities, a FINRA member firm and a large corporation, needs to secure funds to cover customers' margin purchases. Seacoast reaches an agreement to borrow from a large money-center bank for a loan that the bank can terminate with 24 hours' notice. The rate that the bank charges Seacoast for this loans is called
the broker call loan rate.
The broker loan rate charged by banks is also known as
the call loan rate.
A barometer of short-term interest rates and one that is therefore considered the most volatile interest rate in the U.S. economy is
the federal funds rate.
Considered the most volatile of the benchmark interest rates in the economy would be
the federal funds rate.
The interest rate negotiated for an uncollateralized overnight loan between two money center banks is known as
the federal funds rate.
The rate that commercial money center banks charge each other for overnight loans is
the federal funds rate.
When the Federal Reserve Board (FRB) utilizes the tools available to it, it is influencing
the money supply.
