Macroeconomics 202: Ch. 15

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If banks want a reserve ratio of 1/10 and the Fed increases reserves by $1,000, by how much must the money supply increase?

10,000 because The money multiplier is 1/RR, or 10. So $1,000 × 10

how many members does the federal open market committee have?

12

If the Fed increases bank reserves by $5,000 and the banking system has a reserve ratio of 1/10, what is the change in the money supply?

50,000

How many seats are there on the Federal Reserve System's Board of Governors?

7

Which is true?

Governors of the Federal Reserve System are appointed for 14-year terms and cannot be reappointed

Which president asked the Federal Reserve chair to stimulate the economy before an election, contributing to his landslide victory?

Richard Nixon

Which of the following statements is TRUE?

The Fed has the most influence over short-term rates, while most investment spending depends on longer-term rates

The federal reserve

The bank account of the u.s. treasury is maintained by:

Which of the following statements is TRUE?

The money multiplier is the amount by which the money supply expands with each dollar increase in reserves

True?

There are 12 Federal Reserve Banks, each headquartered in a different region of the country

money is

a widely accepted means of payment

When the Federal Reserve lends money to banks and other financial institutions because no one else will, it is:

acting as a lender of last resort

Loans

are the main asset of fractional reserve banks

In 2008, there was fear that many banks would become insolvent due to:

bad real estate loans and other investment mistakes

The Federal Deposit Insurance Corporation makes:

bank runs less likely

M1 includes

currency and checkable deposits

an insolvent bank is one whose:

liabilities > assets

The factor of increase in the money supply that occurs with each dollar of increase in reserves is called:

money multiplier

Which number is the largest?

number of members on the Federal Open Market Committee

Which of these is true?

reserve ratio is the ratio of bank-held cash to deposits

ΔReserves × MM equals:

ΔMS.

Which factor(s) help(s) to reduce the potential economic consequences of banks facing a liquidity problem? I. the existence of the FDIC II. the Fed's role as lender of last resort III. the existence of the Federal Open Market Committee

I and II

What was the long-run impact of the Federal Reserve policies that stimulated the economy and helped President Richard Nixon win reelection?

Inflation was too high for the rest of the 1970s

Which of the following is defined as currency + checkable deposits?

M1

Which of the following is one of the reasons that banks keep their accounts at the Federal Reserve?

Some banks are required by law to hold accounts with the Federal Reserve.

The monetary base (MB) includes:

currency and total reserves held at the Fed

Which of the following is one of the major tools of monetary policy covered in the textbook?

paying interest on reserves held by banks at the Fed

Which of the following includes currency, checkable deposits, savings deposits, money market mutual funds, and small-time deposits?

M2

M2 includes

currency, checkable deposits, savings deposits, money market mutual funds, and small-time deposits

What effect does a decrease in reserves have on the money supply?

decreases both M1 and M2

The overnight lending rate from one major bank to another is known as the _____ rate

federal funds

When banks hold only a fraction of their deposits in reserve and lend the rest, this practice is called:

fractional reserve banking

Which of the following is NOT something that the Fed will try to predict and monitor to estimate the effect of its actions on aggregate demand?

how much the LRAS growth rate will change as a result

An asset that can be quickly converted so that it can be used for payments is a(n) _____ asset

liquid

Which of the following is one of the services that the Federal Reserve performs for the U.S. government?

maintaining the U.S. Treasury's bank account

The Federal Reserve does all of the following activities EXCEPT: regulate banks.manage the nation's check payment system.lend money to banks.

print money to finance government spending

The membership of the Federal Open Market Committee is composed of the:

seven members of the Board of Governors and five of the regional Federal Reserve Bank presidents

Which of the following is NOT one of the tools of monetary policy covered in the textbook?

the use of funds to aid banks through the Troubled Asset Relief Program (TARP)

Which of the following statements is FALSE?

there are 21 members of the federal open market committee


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