Chapter 14 Quiz

Which of the following represents the money multiplier?

1 ÷ (required reserve ratio).

The Board of Governors consists of

7 members, appointed for 14-year terms.

The Federal Open Market Committee includes

All 7 governors and 5 of the regional Reserve bank presidents.

Members of the Board of Governors are

Appointed by the president and confirmed by the Senate.

Excess reserves are

Bank reserves in excess of required reserves.

If a bank does not have enough reserves to satisfy the reserve requirement, it is likely to do any of the following except

Buy securities.

When the Fed wishes to increase the reserves of the member banks, it

Buys securities.

Regional Fed banks are responsible for all of the following except

Cashing checks for large nonfinancial corporations.

Regional Fed banks

Clear checks between private banks.

Suppose Brian receives a check for $100 from a bank in Atlanta. He deposits the check in his account at a Dallas bank. The Dallas bank will most likely collect the $100 directly from the

Dallas regional Federal Reserve Bank.

The rate of interest charged by Federal Reserve banks for lending reserves to member banks is the

Discount rate.

Which of the following is the market where reserves can be borrowed by one bank from another bank for very short periods of time?

Federal funds market.

When the Fed buys bonds from the public, it

Increases the flow of reserves to the banking system.

The current chairman of the Federal Reserve is

Janet Yellen.

Discounting refers to the Fed's practice of

Lending reserves directly to private banks.

Which of the following does not reduce the Fed's control of the money supply?

Lobbying by consumer watchdog groups.

If the Fed wishes to increase the money supply, it could

Lower the discount rate.

Currency held by the public plus balances in transactions accounts plus travelers checks is the definition of

M1.

The federal funds rate is the interest rate charged when

One bank lends reserves to another bank.

The purchase and sale of government bonds by the Fed for the purpose of altering bank reserves is known as

Open market operations.

Which of the following is the tool used most frequently by the Fed?

Open market operations.

A bond is a

Promise to repay borrowed funds.

Which of the following services is performed by the regional Federal Reserve banks?

Providing currency to private banks.

In order to decrease the money supply, the Fed can

Raise the reserve requirement, increase the discount rate, or sell bonds.

If market interest rates fall, the selling price of existing bonds in the market will, ceteris paribus,

Rise

A reduction in the discount rate

Signals the Federal Reserve's desire for additional credit expansion.

A growing economy needs a

Steadily increasing supply of money to finance market exchanges.

Which of the following is responsible for the Fed's daily activity in financial markets?

The FOMC.

The Federal Open Market Committee is responsible for

The Fed's daily activity in financial markets.

Which of the following is responsible for buying and selling government securities to influence reserves in the banking system?

The Federal Open Market Committee.

All of the following would be true for the banking system if there was no government regulation except

The banking system would be regulated by consumers.

_____________ can be altered to change the lending capacity of the banking system.

The reserve requirement

A banks that has excess reserves can earn additional income by lending the money overnight

To other banks in the federal funds market.

Which of the following represents the lending capacity of an individual (nonmonopoly) bank?

Total reserves - required reserves.

The money supply (M1) includes currency held by the public plus

Transactions accounts plus travelers checks.

The Fed is most likely to pursue

Use of open market operations as the primary mechanism to change reserves.

The primary method for controlling the money supply in the United States is to limit the

Volume of loans the banking system can make.

The rate of return on a bond is the

Yield.

The Fed can use all of the following except ____________ to change the lending capacity of the banking system.

the excess reserve requirement