murgo part6 final

136. Callie withdraws $600 from her bank account. If the reserve requirement is 15%, by how many dollars must her bank reduce its lending? A) $510 B) $600 C) $90 D) $667

A) $510

137. Assume the reserve requirement is 10% and all banks are fully loaned up. If a new deposit of $10,000 is made into Bank X, with this deposit Bank X can make new loans of: A) $9,000. B) $10,000. C) $1,000. D) $11,000.

A) $9,000.

140. If a bank has assets of $5 billion and liabilities of $4.8 billion: A) its equity equals $200 million. B) its equity equals −$800 million. C) it faces a solvency crisis. D) its equity equals −$800 million and it faces a solvency crisis.

A) its equity equals $200 million.

143. Sometimes the Fed's goals conflict, and the Fed must emphasize one goal over another. Which of the following is a goal of the Fed that does NOT conflict with its goal of full employment? A) promoting economic growth B) promoting an equitable distribution of income C) keeping the price level stable D) keeping tax rates low

A) promoting economic growth

126. If Zachary deposits $500 cash into his checking account, then his bank's assets: A) rise by $500, and its liabilities rise by $500. B) rise by $500, but its liabilities do not change. C) do not change, but its liabilities rise by $500. D) rise by $500, and its liabilities fall by $500.

A) rise by $500, and its liabilities rise by $500.

133. If the reserve requirement is 10% and a bank initially receives $20,000 in deposits, then the maximum amount of money that the banking system can create is: A) $20,000. B) $200,000. C) $180,000. D) $100,000.

B) $200,000.

149. Federal Reserve board members serve for ______ years, but the chair serves for ______. A) 4; 14 years B) 14; 4 years C) 4; 4 years D) 14; life

B) 14; 4 years

135. If the reserve requirement is 20%, the money multiplier is: A) 4. B) 5. C) 0.2. D) 0.8.

B) 5.

138. If the reserve requirement is 25%, then a $1 increase in deposits means that the money supply: A) will increase by $4. B) has the potential to increase by $4. C) will increase by $25. D) has the potential to increase by $25.

B) has the potential to increase by $4.

129. Sumit deposits $1,500 cash into his checking account. The reserve requirement is 25%. What is the change in his bank's excess reserves? A) $1,500 B) $375 C) $1,125 D) $0

C) $1,125

128. Suppose a bank has $1 million in deposits, a reserve requirement of 10%, and bank reserves of $300,000. The bank has excess reserves of: A) $50,000. B) $100,000. C) $200,000. D) $300,000.

C) $200,000.

144. Which of the following is a provision of the Federal Reserve Act or subsequent legislation that contributes to the independence of the Fed? A) The Fed's actions are subject to executive branch control. B) Appointments to the Federal Reserve Board are staggered so that one expires every other year. C) Members of the Federal Reserve Board cannot be reappointed. D) The Federal Reserve System is subject to Congressional oversight.

C) Members of the Federal Reserve Board cannot be reappointed.

146. Which of the following statements is CORRECT? A) The Fed's actions are subject to executive branch control. B) Politically controlled banks are better at fighting inflation than are independent central banks. C) The Federal Reserve is considered to be an independent central bank. D) The Federal Reserve System is not subject to Congressional oversight.

C) The Federal Reserve is considered to be an independent central bank.

132. At Christmas, people tend to draw money out of their checking accounts to pay for Christmas presents. As a result, the money multiplier will: A) increase. B) not change. C) decrease. D) become more volatile.

C) decrease.

127. If Abigail withdraws $300 cash from her checking account, then her bank's assets: A) do not change, but its liabilities fall by $300. B) fall by $300, but its liabilities do not change. C) fall by $300, and its liabilities fall by $300. D) fall by $300, and its liabilities rise by $300.

C) fall by $300, and its liabilities fall by $300.

141. Sometimes the Fed's goals conflict, and the Fed must emphasize one goal over another. Which of the following is a goal of the Fed that might conflict with its goal of full employment? A) promoting economic growth B) promoting an equitable distribution of income C) keeping the price level stable D) keeping tax rates low

C) keeping the price level stable

150. The Federal Open Market Committee is responsible for: A) setting interest rates. B) running the check-clearing process. C) overseeing the buying and selling of government securities in the open market. D) reducing the Fed's reliance on open market operations.

C) overseeing the buying and selling of government securities in the open market.

145. Appointments to the Federal Reserve Board are staggered so that one expires every other year. This provision was enacted to ensure: A) that Federal Reserve Board members would serve their entire term. B) that the Fed would be accountable to Congress. C) stability and continuity on the Board. D) that regional considerations would not impact the Board's decisions.

C) stability and continuity on the Board.

131. If the reserve requirement is 2.5% and a bank initially receives $30,000 in deposits from the Fed, then the maximum amount of money that the banking system can create is: A) $750 B) $1,500 C) $30,000 D) $1.2 million

D) $1.2 million

130. Sumit deposits $1,500 cash into his checking account. The reserve requirement is 25%. How much money can the banking system create? A) $1,500 B) $0 C) $1,125 D) $6,000

D) $6,000

134. The money multiplier is: A) interest payment divided by yield. B) yield divided by interest payment. C) 1/1 - MPS. D) 1 divided by reserve requirement.

D) 1 divided by reserve requirement.

142. Which of the following is a provision of the Federal Reserve Act or subsequent legislation that weakens the independence of the Fed? A) The Fed's actions are subject to executive branch control. B) Members of the Federal Reserve Board serve 14-year terms. C) Members of the Federal Reserve Board cannot be reappointed. D) The Federal Reserve System is subject to Congressional oversight.

D) The Federal Reserve System is subject to Congressional oversight.

148. The 12 Federal Reserve banks and their branches do all of the following except: A) distribute coins and currency. B) regulate and supervise member banks. C) serve as the banker for the United States Treasury. D) accept deposits from U.S. citizens.

D) accept deposits from U.S. citizens.

147. Which of the following is NOT a policy tool of the Federal Reserve? A) reserve requirements B) the discount rate C) open market operations D) fiscal policy

D) fiscal policy

139. If the reserve requirement is 20%, then a $1 decrease in deposits means that the money supply: A) will decrease by $5. B) has the potential to increase by $20. C) will increase by $5. D) has the potential to decrease by $5.

D) has the potential to decrease by $5.