econ101-money and monetary policy quizlet
To reduce the federal funds rate, the Fed can ______. A. buy government bonds from the public B. increase the discount rate C. increase the reserve ratio D. sell government bonds to commercial banks
A
Which of the following varies directly with the interest rate? A. the opportunity cost of holding money B. the transactions demand for money C. the asset demand for money D. the level of investment
A
Which of the following will increase commercial bank reserves? A. the purchase of government bonds in open market by the Federal Reserve Banks B. a decrease in the reserve requirement C. an increase in the discount D. an increase in the federal funds rate
A
A commercial bank has required reserves of $60 million and the reserve ratio is 20%. How much are the commercial bank's checkable-deposit liabilities? A. $120 million B. $900 million C. $300 million D. $1,200 million
C
Assuming that the Federal Reserve Banks sell $40 million in government securities to commercial banks and the reserve requirement is 20%, then the effect will be to reduce _____. A. excess reserves by $8 million B. excess reserves by $200 million C. the money supply by potentially $200 million D. the money supply by potentially $400
C
If the Board of Governors of the Federal Reserve System increases the reserve requirement, this change will _____. A. increase the excess reserves of member banks and thus increase the money supply B. increase the excess reserves of member banks and thus decrease the money supply C. decrease the excess reserves of member banks and thus decrease the money supply D. decrease the excess reserves of member banks and thus increase the money suppyC
C
If the Federal Reserve System buys government securities from commercial banks and the public, then _____. A. commercial banks reserves will decline B. commercial bank reserves will be unaffected C. it will be easier to obtain loans at commercial banks D. the money supply will contract
C
If you use $1,000 to purchase silver coins, which you plan to keep in a safe, you are using money as A. bank reserves B. a unit of account C. a medium of exchange D. a store of value
C
Suppose that the demand for money increases as people anticipate upcoming economic problems. To offset this increase in money demand, the Fed should ______ the money supply, which would put ______ pressure on nominal interest rates. A. decrease; downward B. decrease; upward C. increase; downward D. increase; upward
C
The main function of the Federal Reserve System is to A. serve as the fiscal agent for the federal government B. set reserve requirements of banks C. clear checks from member banks D. control the money supply
D
To keep high inflation from eroding the value of money, monetary authorities in the United States A. create token money that is less than its intrinsic value B. make paper money legal tender for the payment of debt C. establish insurance on checkable deposit accounts D. control the supply of money in the economy
D
When output is below the full employment level of real GDP, the Federal Reserve banks should ______. A. raise the discount B. raise the federal funds rate C. sell bonds D. lower the reserve ration
D
Cash held by a bank in its vault is a part of the bank's A. reserves B. liabilities C. money supply D. net worth
A
How many members can serve on the Board of Governors of the Federal Reserve System? A. 7 B. 9 C. 12 D. 14
A
Monetary policy is determined by ______. A. the president and her economic advisers B. the central bank (the fed) C. congress D. the world bank
B
The Federal Reserve System performs many functions but its most important one is A. issuing currency B. controlling the money supply C. providing for check clearing and collection D. acting as fiscal agent for the U.S. government
B
The M1 measure of money consists of the sum of A. currency and travelers' checks B. currency, checking deposits, and travelers' check C. currency, checking deposits, and savings deposits D. checking deposits and travelers' checks
B
The purpose of a contractionary monetary policy is to ______. A. alleviate recessions B. raise interest rates and restrict the availability of bank credit C. increase aggregate demand and GDP D. increase investment
B
When a banker records how many dollars each of his borrowers owes the bank, money is serving as a A. store of value B. unit of account C. medium of exchange D. legal tender
B
Which of the following functions does the Federal Reserve System not perform? A. issuing the paper currency in the economy B. providing banking services to the general public C. providing financial services to the Federal Government D. lending money to banks and thrifts
B
The Federal Reserve System regulates the money supply primarily by A. controlling the production of coins at the U.S. mint B. altering the reserves requirements of commercial banks and thereby the ability of banks to make loans C. altering the reserves of commercial banks, largely through sales and purchases of government D. restricting the issuance of Federal Reserve Notes because paper money is the largest portion of the money supply
C
The impact of monetary policy on investment spending may be weakened _____. A. because of the Treasury's desire for high interest rates B. if the rate at which dollars are spent changes in the same direction as the money supply C. if the investment demand curve shifts to the right during inflation and to the left during recession D. if the investment demand curve is very flat
C
The interest rate at which the Federal Reserve Banks lend to commercial banks is called the _____. A. prime rate B. short-term C. discount rate D. federal funds rate
C
The most important among the Federal Reserve district banks in conducting monetary policy is the A. boston bank B. chicago bank C. new york bank D. san francisco bank
C
The multiple by which the commercial banking system can expand the supply of money is equal to the A. ratio of actual reserves to required reserves B. reciprocal federal funds rate C. reciprocal of the reserve ratio D. ratio of required reserves to actual reserves
C
When a commercial bank borrows from a Federal Reserve Bank, _____. A. the supply of money automatically increases B. it indicates that the commercial bank is unsound financially C. the commercial bank's lending ability is increased D. the commercial bank's reserves are reduced
C
When the Fed acts as a "lender of last resort," like it did in the financial crisis of 2007-2008, it is performing its role of A. controlling the money supply B. setting the reserve requirements C. being the bankers' bank D. providing for check clearing and collection
C
Which of the following institutions does not provide checkable-deposit services to the general public? A. commercial banks B. savings and loan associations C. U.S. treasury D. credit unions
C
Which of the following statements is true? A. the federal reserve sets the federal funds rate B. the federal reserve sets the target for the federal funds rate, and then uses the reserve requirement to push banks toward the target C. the federal reserve does not set the federal funds rate, but it influences it through the use of its open market operations D. the federal reserve will set a higher target for the federal funds rate if pursuing an expansionary policy
C
When the reserve requirement is increased, the excess reserves of member banks are _____. A. reduced, but the multiple by which the commercial banking systems can lend B. reduced and the multiple by which the commercial baking system can lead is increased C. increase and the multiple by which the commercial banking system can lend is increased D. reduced and the multiple by which the commercial banking system can lend is reduced
D