Econ Exam 3 Chapter 12
The Chairman of the Board of Governors is appointed for a _____ renewable term.
4-year
If the Fed reduces the money supply:
bond prices fall.
If Abigail withdraws $300 cash from her checking account, then her bank's assets:
fall by $300, and its liabilities fall by $300.
There are two ways for money to be initially deposited into the banking system. They include:
a cash deposit by a bank customer and an electronic reserve deposit by the government.
All of these actions are performed by the Federal Reserve regional banks :
distributing coins and currency. regulating and supervising member banks. providing a nationwide payments system.
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 finally begin to reduce bond purchases:
interest rates will rise.
In February 2010, the Central Bank of Brazil raised reserve requirements. By raising reserve requirements, Brazil was attempting to:
decrease its money supply.
The fractional reserve banking system refers to a system in which banks:
hold reserves equal to a fraction of their deposit liabilities.
The Federal Open Market Committee is responsible for:
overseeing the buying and selling of government securities in the open market.
If the Fed wants to raise the federal funds rate, it will ______ bonds, which ________ bond prices.
sell; lowers
The Fed's Board of Governors consists of _____ members who are appointed by the _____ and confirmed by the _____.
seven; President; Senate
Vanessa has a checking account at Empathy State Bank. If she writes a check for $5,000 to pay for her new car and if the bank has a reserve requirement of 5%, this bank's excess reserves will be:
$250.
If the reserve requirement is 10%, then the potential money multiplier is ____ and the actual money multiplier is ____.
10; less than 10
Which of the following lists represents monetary policy actions that are consistent with one another?
buy government bonds, lower reserve requirements, lower the discount rate
Which one of the following actions are the tool of monetary policy? (primary tools of the Fed)
changing the discount rate changing reserve requirements open market operations
At Christmas, people tend to draw money out of their checking accounts to pay for Christmas presents. As a result, the money multiplier will:
decrease.
The _____ rate is the rate at which banks charge each other for overnight loans, while the _____ rate is the rate at which regional Federal Reserve banks charge depository institutions for short-term loans.
federal funds; discount
Assume the reserve requirement is 10%. If the Federal Open Market Committee buys a $10,000 bond from Bank A, Bank A's reserves:
increase by $10,000.
The Federal Open Market Committee:
is composed of the Board of Governors and five other regional Reserve Bank presidents.
The national economic objectives that the Fed attempts to achieve include all the following actions EXCEPT:
keeping tax rates low.
The national economic objectives that the Fed attempts to achieve include all the following actions :
keeping the price level stable. maintaining moderate long-term interest rates promoting economic growth accompanied by full employment.
The financial panic and credit freeze in late 2008 pointed to the Fed's important role as:
lender of last resort.
If the Fed wanted to use all three of its primary tools to increase the money supply, it should:
lower the reserve requirement, lower the discount rate, and conduct an open market purchase.
If a bank is subject to a reserve requirement of 15%, then it is required to:
place 15% of its deposits in the account with its regional Federal Reserve bank or the vault.
Appointments to the Federal Reserve Board are staggered so that one expires every other year. This provision was enacted to ensure:
stability and continuity on the Board.
If banks increase excess reserves to increase their ability to absorb a higher rate of defaults:
the actual multiplier will fall.
