econ 2035 exam 3

a $10 million open market sale will decrease the monetary base by

$10 million

suppose the required reserve is 8% and the Fed purchases $100 million worth of Treasury bills from Wells Fargo. By how much is Wells Fargo able to increase its loans?

$100 million

If banks hold no excess reserves, checkable deposits total $10 billion, currency in circulation totals $5 million, and the required reserve ratio is 10%, then the monetary base equals

$6 billion

which of the following is NOT a form of a short-term loan in the shadow banking system?

bank deposits

the united states has a dual banking system which means

banks are chartered by the federal government and by state government

which of the following is NOT considered to be a goal of monetary policy?

fair wages

hedge funds differ from mutual funds in that

hedge funds consist of a relatively small number of wealthy investors

the principal-agent view of Fed motivation predicts that the Fed acts

in order to increase its power, influence, and prestige

all of the following are arguments against Fed independence EXCEPT

independent central banks tend to have higher rates of inflation

which of the following assumptions made in deriving the simple deposit multiplier is unrealistic?

individuals hold no currency

most economists believe that a zero rate of unemployment

is not a charactersitic of a well-functioning economy

when banks repay their loans to the Fed

it decreases the level of reserves

the Fed does NOT have to go through the normal congressional appropriations process because

it is self financing

vault cash is a(n)

liability of the Fed and is counted as reserves

during the financial crisis, the Fed introduced three new policy tools connected with bank reserve accounts. Which of the following is NOT one of those three new tools?

open market operations

which of the following is the mandate of the European Central Banks?

price stability

what are the two main objectives of policymakers in restoring the Glass-Steagall Act?

reduce risk in the financial system and reduce the size of banks

which of the following is NOT a role of Federal Reserve Banks?

set the discount rate

which of the following activities is NOT a primary concern of investment banks?

taking in deposits and making loans

all of the following help make the Fed independent of the political process EXCEPT

the chair of the Fed receives a lifetime appointment

investment banks are vulnerable to liquidity risk because

the maturity of their liabilities is less than the maturity of their assets

which of the following is NOT a reason that firms in the shadow banking system were more vulnerable that commercial banks during the financial crisis of 2007-09?

they were more heavily regulated than commercial banks, making them less able to adjust to changing market conditions

which of the following would cause the realistic money multiplier to decrease?

an increase in excess reserves relative to deposits

if the simple deposit multiplier is 5, what is the required reserve ratio?

20%

which of the following is NOT considered one of the four groups in the Federal Reserve System?

Federal Deposit Insurance Corporation

which of the following is NOT an example of an off-balance-sheet activity?

an adjustable rate mortgage

the "shadow banking system" includes all the following EXCEPT

commercial banks

assuming reserves are scarce, in order to increase its target for the federal funds rate, the Fed would

conduct open market sales

which of the following is a liability of the fed?

currency in circulation

the Beige Book is prepared by

district banks