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 .