eco 12

Monetary policy, like fiscal policy, is subject to _____ lags. decision implementation information information, implementation, and decision

information, implementation, and decision

If the reserve requirement is 10%, a withdrawal of $500 leads to a potential decrease in the money supply of $2,500. $5,000. $50. $4,500.

5000

(Table) SCENARIO: Assume that Empathy State Bank begins with the balance sheet and is fully loaned-up. This bank's reserve ratio is 0.025. 0.25. 0.10. 0.075.

0.10

Sumit deposits $1,500 cash into his checking account, which the bank holds in its vault. The reserve requirement is 25%. What is the change in his bank's required reserves? $6,000 $1,125 $375 $1,500

375

Which of these is a basic goal of the Federal Reserve System? full employment export promotion a balanced federal budget zero interest rates

full employment

Open market operations involve the purchase and sale of corporate bonds. utility bonds. government securities. municipal bonds.

government securities.

The discount rate is now set below the federal funds rate. the interest rate banks charge one another when they lend or borrow reserves. the rate regional Federal Reserve banks charge depository institutions to borrow reserves. the Fed's most effective monetary policy tool.

the rate regional Federal Reserve banks charge depository institutions to borrow reserves.

If Abigail withdraws $300 cash from her checking account, her bank's assets fall by $300 and liabilities fall by $300. do not change but liabilities fall by $300. fall by $300 and liabilities rise by $300. fall by $300 but liabilities do not change.

fall by $300 and liabilities fall by $300.

The main tool of monetary policy is open market operations. capital gains taxes. the reserve requirement. the discount rate.

open market operations.

If the reserve requirement is 25% and a new deposit leads to a potential increase in the money supply of $4,000, the amount of the new deposit must equal $1,000. $10,000. $4,000. $5,000.

1000

Sumit deposits $1,500 cash into his checking account, which his bank puts in the vault. The reserve requirement is 25%. What is the change in his bank's excess reserves? $1,500 $0 $375 $1,125

1125

The main policymaking arm of the Fed is the Federal Open Market Committee. Money Committee. Council of Economic Advisers. Beige Book Committee.

Federal Open Market Committee.

Which statement concerning the structure of the Federal Reserve System is correct? There are 10 regional Federal Reserve banks. The chair and vice chair of the Board of Governors are appointed by the president and confirmed by the Senate for terms of 4 years. The Federal Open Market Committee (FOMC) has seven members. The Fed's Board of Governors consists of 12 members.

The chair and vice chair of the Board of Governors are appointed by the president and confirmed by the Senate for terms of 4 years.

If banks increase excess reserves to increase their ability to absorb a higher rate of defaults, the _____ multiplier will _____. potential; fall actual; fall potential; rise actual; rise

actual; fall

A lower reserve requirement increases the ability of banks to make loans. restricts the borrowing capability of borrowers. lowers the money multiplier. further limits deposit creation.

increases the ability of banks to make loans.

When the Fed buys bonds, its demand _____ the price of bonds, _____ nominal interest rates. increases; increasing decreases; decreasing decreases; increasing increases; decreasing

increases; decreasing

The Fed announced in September 2013 that it would postpone winding down its monetary stimulus until the economic recovery was stronger. When the Fed does begin to reduce bond purchases interest rates will rise. bond prices will rise. stock prices will rise. interest rates will fall.

interest rates will rise.

Which list represents monetary policy actions that are consistent with one another? buy government bonds, lower reserve requirements, raise the discount rate sell government bonds, raise reserve requirements, lower the discount rate sell government bonds, raise reserve requirements, raise the discount rate buy government bonds, raise reserve requirements, raise the discount rate

sell government bonds, raise reserve requirements, raise the discount rate