Quiz 12

If the Fed wants to increase the money supply , it will__________ Treasury securities .

buy

Quantitative easing involves the Federal Reserve :

buying long - term government bonds .

When the Fed conducts open market operations to decrease the monetary base , real GDP growth :

decreases only in the short run .

Suppose the economy is growing faster than its long - run potential growth rate . To bring the real growth rate back to the long - run potential rate , the Fed should :

engage in actions to raise interest rates .

The Federal Reserve acquires its exclusive powers through its ability to :

issue money

A bank is considered illiquid but solvent if :

it has short - term liabilities greater than its short - term assets , but overall assets greater than liabilities .

The amount by which the money supply expands with each additional dollar in reserves is the :

money multiplier .

The risk that the failure of a few large financial institutions can affect the entire financial system is called :

systemic risk .

If the Fed buys government bonds , which will likely NOT increase ?

the Federal Funds rate

If a bank has $ 81600 in reserves , $ 158400 in loans , what is the banks reserve ratio ?

34 %

If the money multiplier in the economy is 10.5 , what is the reserve ratio in the fractional reserve banking system ?

9.52 %

The interest rate that the Fed has the most control over is the :

Federal Funds rate .

Which are the two major tools the Fed uses to control the money supply ?

paying interest on reserves held by banks at the Fed and open market operations

The Federal Reserve has direct control over :

the monetary base .