Fi 301 Ch. 4

increase

21. To decrease money supply, the Fed could ____ the reserve requirement ratio.

lower; greater, greater; less

22. The ____ the reserve requirement ratio, the ____ the ultimate effect of any initial increase in money supply.

False

Adjustment of the primary credit lending rate is the most common means by which the Fed controls the money supply.

national banks

All ____ are required to be members of the Federal Reserve System.

False

All commercial banks are required to be members of the Fed.

True

Members of the Board of Governors serve 14-year nonrenewable terms.

False

Most of the Fed's income is transferred to the U.S. Department of Justice.

buy;decrease, sell;increase

The Trading Desk is sometimes directed to ____ a sufficient amount of Treasury securities that will ____ the federal funds rate to a new targeted level set by the FOMC.

Board of Governors

The ____ consists of seven members, each of whom is appointed by the President of the United States.

Board of Governors

The ____ consists of seven members, each of whom is appointed by the president of the United States.

FOMC

The ____ is directly responsible for conducting monetary policy.

FOMC

The ____ is directly responsible for controlling money supply growth.

Board of Governors

The ____ is directly responsible for setting reserve requirements.

Board of Governors

The ____ is made up of seven individual members, and each member is appointed by the president of the U.S.

primary credit lending

The ____ rate is the interest rate charged on Fed district bank loans to depository institutions.

Federal Advisory Council.

The advisory committee making recommendations to the Fed about economic and banking related issues is the

Thrift Institutions Advisory Council.

The advisory committee offering views on issues related to, among others, credit unions is the

increase; purchased

Total funds of commercial banks will initially ____ by the dollar amount of securities ____ by the Fed.

upward; downward

When the Fed buys Treasury bills as a means of increasing the money supply, it places ____ pressure on their prices and ____ pressure on their yields.

increase; loosening

When the Fed purchases securities, the total funds of commercial banks _____ by the market value of securities purchased by the Fed. This activity initiated by the FOMC's policy directive is referred to as a(n) ___ of money supply growth.

decrease; tightening

When the Fed sells securities, the total funds of commercial banks ___ by the market value of securities sold by the Fed. This activity initiated by the FOMC's policy directive is referred to as a ____ of money supply growth.

False

When the Trading Desk sells a sufficient amount of Treasury securities, it creates a surplus of funds in the banking system. Consequently, the federal funds rate decreases along with other interest rates.

buying or selling Treasury securities in the secondary market

Which of the following is an action that the Fed uses to increase or decrease the money supply?

regulating commercial banks, controlling monetary policy

Which of the following is currently a main role of the Federal Reserve's Board of Governors?

Securities and Exchange Commission

Which of the following is not a major component of the Federal Reserve System?

acting as an intermediary to match up lenders and borrowers in the stock market

Which of the following is not an activity of Fed district banks?

It specified fourteen districts across the United States as well as a city in each district where a Federal Reserve district bank was to be established.

Which of the following is not true with respect to the Federal Reserve Act of 1913?

revise reserve requirements for depository institutions

With regard to monetary policy, which of the following is under direct control of the Federal Reserve's Board of Governors?

Primary

____ credit extended by the Fed to financial institutions may be used for any purpose and is available only to depository institutions that satisfy specific criteria reflecting financial soundness.

Primary

____ credit may be used for any purpose and is available only to depository institutions that meet specific requirements for financial soundness.

M2

____ includes only currency held by the public and checking deposits as well as savings accounts and small time deposits, money market deposit accounts, and some other items.

Defensive

____ open market operations offset the impact of other conditions that affect the level of funds.

increases; declines

As the supply of funds in the banking system ____, the federal funds rate ____.

False

To increase the money supply, the Fed may increase the reserve requirement ratio.

False

To increase the money supply, the Trading Desk would be instructed to sell government securities.

6

Of the nine directors of each Fed district bank, ____ are elected by member banks in that district.

Presidents of 5 Fed district banks.

The voting members of the Federal Open Market Committee consist of the Board of Governors plus the

True

Each Federal Reserve district bank is responsible for reporting its regional conditions, and all of these reports are consolidated to compose the Beige Book.

True

Each member of the Board of Governors is appointed by the president of the United States and serves a nonrenewable 14-year term.

increase; purchase

If the Fed desires to ____ the money supply using open market operations, it would instruct the trading desk to ____ government securities.

increase;decrease, decrease, decrease

A(n) ____ in Federal Reserve float causes a(n) ____ in bank funds.

increase; $1.67 billion

Assume that the reserve requirement ratio is 12 percent and that the Fed uses open market operations by buying $200 million worth of Treasury securities. Assuming that banks use all funds except required reserves to make loans and that the public does not store any cash, the money supply should ____ by about ____.

$1 billion.

Assume that the reserve requirements ratio is 15%. An initial injection of $150 million could result in a maximum change in the money supply of

above the federal funds rate.

Based on a 2003 policy, the primary credit lending rate is set

temporarily increase the aggregate level of bank funds.

Repurchase agreements are purchased by the Fed to

primary credit lending rate.

Since 2003, the Fed's rate on short-term loans to depository institutions is referred to as the

seven members appointed by the President of the United States.

The Board of Governors is composed of

all depository institutions to the reserve requirements set by the Fed.

The Monetary Control Act of 1980 subjected

False

The Policy Directive is provided by Board of Governors to the FOMC.

True

The federal funds rate is the rate at which the Fed lends money directly to member banks.

M1.

The form of money consisting of currency held by the public and checkable deposits at depository institutions is called

False

The main monetary policy goal of most central banks is to stabilize the value of the local currency against foreign currency.

True

The primary credit lending rate changes in accordance with changes in the federal funds rate.

offsetting changes in funds at commercial banks.

The purchase of government securities by someone other than the Fed results in

False

The purpose of the Trading Desk of the Federal Reserve Bank of New York is to buy stocks for member commercial banks.

reduce; increases

When open market operations are used to ____ bank funds, the yield on debt instruments____.