Chapter 11- Adaptive test

The manager of the bank where you work tells you that the bank has $500 million in deposits and $350 million dollars in loans. If the reserve requirement is 5 percent, how much is the bank holding in excess reserves?

$125 million

Suppose a bank has total assets of $1,000, capital of $50, and liabilities of $950; the leverage ratio for this bank is ____.

20

Assume banks hold no excess reserves. If the Fed decreases the reserve ratio from 20 percent to 10 percent, then the money multiplier increases from

5 to 10.

The Federal Open Market Committee (FOMC) is responsible for carrying out the Fed's tasks of regulating banks and ensuring the health of the financial system. True False

False

When the Fed sells government bonds the money supply increases and the federal funds rate decreases. True False

False

The agency responsible for regulating the money supply in the United States is U.S. Treasury True False

False, it's the Fed

The two primary tasks of the Federal Reserve are

Monetary policy and bank regulation

M1 includes demand deposits, traveler's checks, other checkable deposits and currency True False

True

M2 includes everything in M1, plus savings deposits, small time deposits, money market mutual funds and the miscellaneous categories of M2. True False

True

U.S. dollars are an example of fiat money and alcohol used to make trades is an example of commodity money. True False

True

All else equal, which of the following will cause the money supply to fall? a) banks decide to hold more excess reserves relative to deposits. b) banks decide to hold less excess reserves relative to deposits c) banks make more loans. d) banks decide to hold keep the same

a) banks decide to hold more excess reserves relative to deposits.

First Bank of Zogua, a fictional bank, has made a $1 million loan. This loan appears on what part of T-account of the First Bank of Zogua?

assets.

Which of the following is not true in a system of 100-percent-reserve banking? a) banks hold all deposits in reserves until the depositor withdraws the funds. b) banks influence the supply of money. c) banks accept deposits. d) banks do not make loans.

b) banks influence the supply of money.

Which of the following is not correct about the Fed? a) The Board of Governors has 7 members b) members of the Board of Governors serve 14-year terms. c) the Federal Reserve has 12 regional banks. d) the Federal Reserve Chair is appointed by the speaker of the house to a four-year term.

d) the Federal Reserve Chair is appointed by the speaker of the house to a four-year term.

As a result of sizable losses in 2008 and 2009, banks experienced a shortage of capital, which induced them to ____ lending because they had to meet capital requirements.

decrease

To increase the money supply the Fed can conduct open-market purchases. Alternatively, the Fed can ______ the discount rate.

decrease

In a system of fractional-reserve banking, the amount of money in the economy depends on the behavior of ______, which prevents the Fed from perfectly controlling the money supply.

depositors and bankers

One reason that the Fed's control of the money supply is not precise is because ____, which are out of the Fed's control, impact the money supply.

households' decisions

The Federal Reserve acts as a lender of ______ to banks

last resort

First Bank of Zogua, a fictional bank, has just received a $100 deposit from an individual. This deposit appears on what part of T-account of the First Bank of Zogua?

liabilities.

When it buys government bonds to increase the money supply, the Fed is conducting an

open-market purchase

Central banks are institutions designed to ______ the banking system and ______ the quantity of money in the economy

oversee; regulate

The New York Federal Reserve Bank ______ always gets to vote at the FOMC meetings.

president

The members of the Federal Reserve's Board of Governors are appointed by the ______ and confirmed by the ______.

president; senate