chapter 13 money and banking

Suppose that from a new checkable deposit, First National Bank holds eight million dollars on deposit with the Federal Reserve, one million dollars in required reserves, and faces a required reserve ratio of ten percent. Given this information, we can say First National Bank has ________ million dollars in vault cash. a. nine b. two c. ten d. eight

b

The monetary liabilities of the Federal Reserve include a. currency in circulation and loans to financial institutions. b. currency in circulation and reserves. c. securities and reserves. d. securities and loans to financial institutions.

b

The monetary liabilities of the Federal Reserve include a. securities and loans to financial institutions. b. currency in circulation and reserves. c. securities and reserves. d. currency in circulation and loans to financial institutions.

b

The percentage of deposits that banks must hold in reserve is the a. total reserve ratio. b. required reserve ratio. c. excess reserve ratio. d. currency ratio.

b

Total reserves minus bank deposits with the Fed equals a. currency in circulation. b. vault cash. c. excess reserves. d. required reserves.

b

When banks borrow money from the Federal Reserve, these funds are called a. Treasury funds. b. discount loans. c. federal loans. d. federal funds.

b

When the Fed buys $100 worth of bonds from a primary dealer, reserves in the banking system a. decrease by more than $100. b. increase by $100. c. decrease by $100. d. increase by more than $100.

b

Of the three players in the money supply process, most observers agree that the most important player is a. the Office of Thrift Supervision. b. the FDIC. c. the Federal Reserve System. d. the United States Treasury.

c

Purchases and sales of government securities by the Federal Reserve are called a. discount loans. b. swap transactions. c. open market operations. d. federal fund transfers.

c

Purchases and sales of government securities by the Federal Reserve are called a. swap transactions. b. federal fund transfers. c. open market operations. d. discount loans.

c

Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, eight million dollars on deposit with the Federal Reserve, and nine million dollars in excess reserves. Given this information, we can say First National Bank has ________ million dollars in required reserves. a. ten b. two c. one d. eight

c

The monetary base minus currency in circulation equals a. the nonborrowed base. b. the borrowed base. c. reserves. d. discount loans.

c

The sum of the Fed's monetary liabilities and the U.S. Treasury's monetary liabilities is called a. the money supply. b. currency in circulation. c. the monetary base. d. bank reserves.

c

There are two ways in which the Fed can provide additional reserves to the banking system: it can ________ government bonds or it can ________ discount loans to commercial banks. a. sell; extend b. purchase; call in c. purchase; extend d. sell; call in

c

When the Federal Reserve sells a government bond to a primary dealer, reserves in the banking system ________ and the monetary base ________, everything else held constant. a. increase; decreases b. decrease; increases c. decrease; decreases d. increase; increases

c

A decrease in ________ leads to an equal ________ in the monetary base in the short run. a. float; decrease b. float; increase c. discount loans; increase d. Treasury deposits at the Fed; decrease

a

All else the same, when the Fed calls in a $100 discount loan previously extended to the First National Bank, reserves in the banking system a. decrease by $100. b. increase by more than $100. c. increase by $100. d. decrease by more than $100.

a

Both ________ and ________ are monetary liabilities of the Fed. a. currency in circulation; reserves b. securities; loans to financial institutions c. securities; reserves d. currency in circulation; loans to financial institutions

a

High-powered money minus currency in circulation equals a. reserves. b. the nonborrowed base. c. discount loans. d. the borrowed base.

a

The sum of the Fed's monetary liabilities and the U.S. Treasury's monetary liabilities is called a. the monetary base. b. bank reserves. c. currency in circulation. d. the money supply.

a

When a primary dealer sells a government bond to the Federal Reserve, reserves in the banking system ________ and the monetary base ________, everything else held constant. a. increase; increases b. increase; decreases c. decrease; decreases d. decrease; increases

a

Suppose that from a new checkable deposit, First National Bank holds two million dollars in vault cash, eight million dollars on deposit with the Federal Reserve, and one million dollars in required reserves. Given this information, we can say First National Bank faces a required reserve ratio of ________ percent. a. twenty b. eighty c. ninety d. ten

d

The monetary base consists of a. currency in circulation and the U.S. Treasury's monetary liabilities. b. reserves and Federal Reserve Notes. c. currency in circulation and Federal Reserve notes. d. currency in circulation and reserves.

d

Total reserves are the sum of ________ and ________. a. required reserves; currency in circulation b. excess reserves; borrowed reserves c. vault cash; excess reserves d. excess reserves; required reserves

d

When the Fed extends a $100 discount loan to the First National Bank, reserves in the banking system a. increase by more than $100. b. decrease by more than $100. c. decrease by $100. d. increase by $100.

d