Unit 13 Q Bank

Which of the following benchmark interest rates is considered a barometer of the direction of short-term interest rates? A) Federal funds rate B) Discount rate C) Broker call loan rate D) Prime rate

A) Federal funds rate

Which of the following benchmark interest rates is considered a barometer of the direction of short-term interest rates? A) Federal funds rate B) Prime rate C) Discount rate D) Broker call loan rate

A) Federal funds rate

Certain actions taken by the Federal Reserve Board (FRB) would likely have the effect of causing interest rates to increase. Which would these be? The Federal Open Market Committee (FOMC) buying securities Raising the reserve requirements Raising the discount rate Raising the prime rate A) II and III B) I and III C) I and IV D) II and IV

A) II and III

When the Federal Open Market Committee (FOMC) directs that Treasury securities be sold in the open market, this will do which of the following? A) Increase interest rates on loans to consumers B) Have no impact on lending rates to consumers C) Decrease interest rates on loans to consumers D) Loosen the money supply

A) Increase interest rates on loans to consumers

A bank is likely to do which of the following when the Federal Reserve Board (FRB) eases the money supply? A) Lower its prime rate B) Lower the hypothecation loan rate C) Raise its prime rate D) Raise its broker call loan rate

A) Lower its prime rate

All currency held by the public, including coins, checking accounts plus time deposits of less than $100,000, and money market mutual funds, is what economists define as A) M2. B) M3. C) the money supply. D) M1.

A) M2.

Currency held by the public, including checking accounts and time deposits less than $100,000, and money market mutual funds would best be described by economists as A) M2. B) M4. C) M3. D) M1.

A) M2.

Large time deposits of more than $100,000 are considered to be found in what part of the money supply? A) M3 B) M1 and M2 C) M1 D) M2

A) M3

Money available to lend to corporations and consumers is impacted most in the United States by the policies of which of the following? A) The Federal Open Market Committee (FOMC) B) The Internal Revenue Service (IRS) C) The National Securities Clearing Corporation (NSCC) D) The Securities and Exchange Commission (SEC)

A) The Federal Open Market Committee (FOMC)

Which of the following has the greatest influence on the money supply within the United States? A) The Federal Open Market Committee (FOMC) B) The Securities Exchange Commission (SEC) C) The Internal Revenue Service (IRS) D) The Depository Trust Corporation (DTC)

A) The Federal Open Market Committee (FOMC)

Which of the following entities is chiefly responsible to conduct U.S. monetary policy and maintain the stability of the financial system? A) The Federal Reserve Board (FRB) B) Securities and Exchange Commission (SEC) C) Internal Revenue Service (IRS) D) New York Stock Exchange (NYSE)

A) The Federal Reserve Board (FRB)

Which benchmark interest rate indicates the direction of the Federal Reserve Board's monetary policy? A) The discount rate B) The prime rate C) The federal funds rate D) The broker call loan rate

A) The discount rate

The prime rate is set by A) individual banks. B) the Federal Open Market Committee (FOMC). C) the Federal Reserve Board (FRB). D) the Securities and Exchange Commission (SEC).

A) individual banks.

When the money supply in the economy decreases, A) interest rates go up, hence borrowing and spending for consumers is more difficult. B) interest rates go down, hence borrowing and spending for consumers is more difficult. C) interest rates go up, hence borrowing and spending for consumers is easier. D) interest rates go down, hence borrowing and spending for consumers is easier.

A) interest rates go up, hence borrowing and spending for consumers is more difficult.

To stimulate the economy during a recession by expanding the availability of credit, the Federal Reserve Board (FRB) would do any of the following except A) raise the federal funds rate. B) lower the discount rate. C) lower the reserve requirement. D) buy U.S. government securities in open-market operations.

A) raise the federal funds rate.

When the Federal Reserve Board (FRB) wants to contract (tighten) the money supply, it will A) sell Treasury securities to banks in the open market. B) buy Treasury securities from banks in the open market. C) buy corporate securities from banks in the open market. D) sell corporate securities to banks in the open market.

A) sell Treasury securities to banks in the open market.

To contract the overall economy, the Federal Reserve Board (FRB), acting as agent for the U.S. Treasury department, will A) sell securities via open-market operations, pushing interest rates up. B) sell securities via open-market operations, pushing interest rates down. C) buy securities via open-market operations, pushing interest rates down. D) buy securities via open-market operations, pushing interest rates up.

A) sell securities via open-market operations, pushing interest rates up.

The broker loan rate charged by banks is also known as A) the call loan rate. B) federal funds rate. C) prime rate. D) discount rate.

A) the call loan rate.

When the Federal Reserve Board (FRB) utilizes the tools available to it, it is influencing A) the money supply. B) the amount of money raised through taxes. C) fiscal policies. D) the federal budget.

A) the money supply.

To arrive at M3, one would add to M2 which of the following? A) Gold and silver bars held on reserve at the FR B) $100,000 and larger time deposits and repurchase agreements C) All currency in circulation, including coins D) Savings and checking accounts

B) $100,000 and larger time deposits and repurchase agreements

When a bank lends money to a broker-dealer for the purpose of lending to margin account customers, the bank is lending at which of the following rates? A) Federal funds B) Broker call loan C) Prime D) Discount

B) Broker call loan

The Federal Reserve sets which of these rates? A) Prime B) Discount C) Broker call D) Federal funds

B) Discount

Which of the following would be associated with loans made to member banks of the Federal Reserve? A) Call loan rate B) Discount rate C) Prime rate D) Margin rate

B) Discount rate

When the Federal Open Market Committee (FOMC) directs that Treasury securities be sold in the open market, this will do which of the following? A) Loosen the money supply B) Increase interest rates on loans to consumers C) Decrease interest rates on loans to consumers D) Have no impact on lending rates to consumers

B) Increase interest rates on loans to consumers

All currency held by the public, including coins, checking accounts plus time deposits of less than $100,000, and money market mutual funds, is what economists define as A) M1. B) M2. C) the money supply. D) M3.

B) M2.

Currency held by the public, including checking accounts and time deposits less than $100,000, and money market mutual funds would best be described by economists as A) M1. B) M2. C) M4. D) M3.

B) M2.

A bank is likely to do which of the following when the Federal Reserve Board (FRB) tightens the money supply? A) Raise the hypothecation loan rate B) Raise its prime rate C) Lower its broker call loan rate D) Lower its prime rate

B) Raise its prime rate

The Federal Reserve could do which of the following to slow the economy? A) Increase government spending B) Raise the discount rate C) Buy Treasury securities from banks D) Lower taxes

B) Raise the discount rate

Which of the following is the rate of interest charged by the Federal Reserve Bank (FRB) for short-term loans to its member banks? A) The prime rate B) The discount rate C) The federal funds rate D) The broker call loan rate

B) The discount rate

When the Federal Open Market Committee (FOMC) directs that Treasury securities be purchased in the open market, this A) stabilizes the money supply. B) increases the supply of money. C) decreases the money supply. D) is intended to hinder contraction of the money supply.

B) increases the supply of money.

When the supply for money exceeds the demand, A) interest rates fall, making consumer borrowing more difficult. B) interest rates fall, making consumer borrowing easier. C) interest rates rise, making consumer borrowing more difficult. D) interest rates rise, making consumer borrowing easier.

B) interest rates fall, making consumer borrowing easier.

When the money supply in the economy increases, A) interest rates go up, hence borrowing and spending for consumers is easier. B) interest rates go down, hence borrowing and spending for consumers is easier. C) interest rates go up, hence borrowing and spending for consumers is more difficult. D) interest rates go down, hence borrowing and spending for consumers is more difficult.

B) interest rates go down, hence borrowing and spending for consumers is easier.

To tighten its monetary policy, making it more difficult for consumers to borrow money, the Federal Reserve Board (FRB) can A) lower the discount rate. B) raise the discount rate. C) raise the federal funds rate. D) lower the federal funds rate.

B) raise the discount rate.

Tighter credit will A) stimulate the economy, preventing expansion. B) slow economic expansion, preventing inflation. C) slow economic expansion, fueling inflation. D) stimulate the economy, fueling expansion.

B) slow economic expansion, preventing inflation.

Where can demand deposits, checking accounts, paper currency and coins be found in the money supply? A) M1 only B) M1 and M3 only C) M1, M2, and M3 D) M2 only

C) M1, M2, and M3

Within the money supply, which of the following are part of M2 but not M1? A) Demand deposits at S&Ls B) Checking accounts at commercial banks C) Money market mutual funds D) Currency in circulation

C) Money market mutual funds

Which of the following has the greatest influence on the money supply within the United States? A) The Securities Exchange Commission (SEC) B) The Depository Trust Corporation (DTC) C) The Federal Open Market Committee (FOMC) D) The Internal Revenue Service (IRS)

C) The Federal Open Market Committee (FOMC)

Which benchmark interest rate indicates the direction of the Federal Reserve Board's monetary policy? A) The federal funds rate B) The broker call loan rate C) The discount rate D) The prime rate

C) The discount rate

When the Federal Reserve Board (FRB) wants to expand (loosen) the money supply, it will A) buy corporate securities from banks in the open market. B) sell Treasury securities to banks in the open market. C) buy Treasury securities from banks in the open market. D) sell corporate securities to banks in the open market.

C) buy Treasury securities from banks in the open market.

When the demand for money exceeds the supply, A) interest rates rise, making consumer borrowing easier. B) interest rates fall, making consumer borrowing more difficult. C) interest rates rise, making consumer borrowing more difficult. D) interest rates fall, making consumer borrowing easier.

C) interest rates rise, making consumer borrowing more difficult.

The cost of doing business is closely linked to the cost of money, which is known as A) supply. B) M1. C) interest. D) demand.

C) interest.

To ease its monetary policy, allowing consumers to borrow more easily, the Federal Reserve Board (FRB) can A) raise the discount rate. B) lower the federal funds rate. C) lower the discount rate. D) raise the federal funds rate.

C) lower the discount rate.

To prevent inflation by tightening the availability of credit, the Federal Reserve Board (FRB) would do any of the following except A) raise the discount rate. B) raise the reserve requirement. C) lower the prime rate. D) sell U.S. government securities in open-market operations.

C) lower the prime rate.

To prevent inflation by tightening the availability of credit, the Federal Reserve Board (FRB) would do any of the following except A) sell U.S. government securities in open-market operations. B) raise the reserve requirement. C) lower the prime rate. D) raise the discount rate.

C) lower the prime rate.

Tools available to the Federal Reserve Board (FRB) include A) setting the discount rate, enacting tax laws, and setting the Fed funds rate. B) setting the Fed funds rate, setting the prime rate, and setting the discount rate. C) open-market operations, setting the discount rate, and setting reserve requirements. D) open-market operations, setting the discount rate, and enacting tax laws.

C) open-market operations, setting the discount rate, and setting reserve requirements.

The rate at which banks lend to broker-dealers for the purpose of lending money for margin loans is typically A) notably below (several percentage points) other short-term lending rates. B) notably above (several percentage points) other short-term lending rates. C) slightly above (a percentage point or so) other short-term lending rates. D) slightly below (a percentage point or so) other short-term lending rates.

C) slightly above (a percentage point or so) other short-term lending rates.

Tighter credit will A) stimulate the economy, fueling expansion. B) stimulate the economy, preventing expansion. C) slow economic expansion, preventing inflation. D) slow economic expansion, fueling inflation.

C) slow economic expansion, preventing inflation.

A registered representative has a customer buying securities, but rather than paying in full, the customer wants to borrow some of the money needed for the purchase from the broker-dealer. It is explained to the customer that in order to borrow the money, there will be interest payable based on A) the discount rate. B) the federal funds rate. C) the broker call loan rate. D) the prime rate.

C) the broker call loan rate.

The rate that commercial money center banks charge each other for overnight loans is A) the broker call loan rate. B) the discount rate. C) the federal funds rate. D) the prime rate.

C) the federal funds rate.

Which of the following correctly states the impact of open-market operations taken by the Federal Reserve Board (FRB)? A) By selling securities, the FRB takes money out of the banking system, expanding the money supply and increasing interest rates. B) By selling securities, the FRB puts money into the banking system, expanding the money supply and reducing interest rates. C) By buying securities, the FRB takes money out of the banking system, expanding the money supply and increasing interest rates. D) By buying securities, the FRB puts money into the banking system, expanding the money supply and reducing interest rates.

D) By buying securities, the FRB puts money into the banking system, expanding the money supply and reducing interest rates.

The Federal Reserve sets which of these rates? A) Federal funds B) Broker call C) Prime D) Discount

D) Discount

Which of the following organizations engaging in open-market operations acts as agent for the U.S. Treasury Department? A) Securities and Exchange Commission (SEC) B) U.S. Congress C) Securities Investors Protection Corporation (SIPC) D) Federal Reserve Board (FRB)

D) Federal Reserve Board (FRB)

Which of the following would be the interest rate charged for overnight, uncollateralized loans negotiated between two money center banks? A) Repo rate B) Prime rate C) Discount rate D) Federal funds rate

D) Federal funds rate

For those who follow monetary theory, which is the most complete measure of the money supply? A) M2 B) M1 + M2 C) M1 D) M3

D) M3

The Federal Reserve could do which of the following to slow the economy? A) Lower taxes B) Increase government spending C) Buy Treasury securities from banks D) Raise the discount rate

D) Raise the discount rate

If large money center commercial banks begin to lower their prime rates, which of the following is most likely to occur? A) Smaller banks will need to offset the lower prime rate by increasing the broker call loan rate. B) Smaller banks will need to increase their lending rates for creditworthy corporate customers. C) Smaller banks will follow by lowering the discount rate. D) Smaller banks will lower lending rates for creditworthy corporate customers as well.

D) Smaller banks will lower lending rates for creditworthy corporate customers as well.

A customer of a Financial Industry Regulatory Authority (FINRA) member firm buys securities on margin. The customer is expected to pay a rate of interest on the margin loan based on which of the following? A) The discount rate B) The prime rate C) The federal funds rate D) The broker call loan rate

D) The broker call loan rate

When engaging in open-market operations, taking actions to either expand or contract the money supply, the Federal Reserve Board (FRB) will buy or sell A) U.S government agency securities. B) corporate bonds. C) corporate equity securities. D) Treasury securities.

D) Treasury securities.

When the Federal Reserve Board (FRB) wants to expand (loosen) the money supply, it will A) sell corporate securities to banks in the open market. B) sell Treasury securities to banks in the open market. C) buy corporate securities from banks in the open market. D) buy Treasury securities from banks in the open market.

D) buy Treasury securities from banks in the open market.

To expand the overall economy, the Federal Reserve Board (FRB), acting as agent for the U.S. Treasury department, will A) sell securities via open-market operations, pushing interest rates up. B) buy securities via open-market operations, pushing interest rates up. C) sell securities via open-market operations, pushing interest rates down. D) buy securities via open-market operations, pushing interest rates down.

D) buy securities via open-market operations, pushing interest rates down.

The prime rate is set by A) the Securities and Exchange Commission (SEC). B) the Federal Reserve Board (FRB). C) the Federal Open Market Committee (FOMC). D) individual banks.

D) individual banks.

When the money supply in the economy decreases, A) interest rates go down, hence borrowing and spending for consumers is more difficult. B) interest rates go down, hence borrowing and spending for consumers is easier. C) interest rates go up, hence borrowing and spending for consumers is easier. D) interest rates go up, hence borrowing and spending for consumers is more difficult.

D) interest rates go up, hence borrowing and spending for consumers is more difficult.

When the demand for money exceeds the supply, A) interest rates fall, making consumer borrowing easier. B) interest rates fall, making consumer borrowing more difficult. C) interest rates rise, making consumer borrowing easier. D) interest rates rise, making consumer borrowing more difficult.

D) interest rates rise, making consumer borrowing more difficult.

The Federal Reserve Board (FRB) might impact the money supply by using all of the following except A) buying or selling securities in open market. B) discount rate. C) reserve requirements for member banks. D) prime rate.

D) prime rate.

The Federal Reserve Board (FRB) might impact the money supply by using all of the following except A) reserve requirements for member banks. B) discount rate. C) buying or selling securities in open market. D) prime rate.

D) prime rate.

To stimulate the economy during a recession by expanding the availability of credit, the Federal Reserve Board (FRB) would do any of the following except A) buy U.S. government securities in open-market operations. B) lower the reserve requirement. C) lower the discount rate. D) raise the federal funds rate.

D) raise the federal funds rate.

Implementing monetary policy, and thereby undertaking the responsibility to maintain the stability of the U.S. financial system, is A) the Internal Revenue Service (IRS). B) the New York Stock Exchange (NYSE). C) the Securities and Exchange Commission (SEC). D) the Federal Open Market Committee (FOMC).

D) the Federal Open Market Committee (FOMC).

The broker loan rate charged by banks is also known as A) prime rate. B) federal funds rate. C) discount rate. D) the call loan rate.

D) the call loan rate.