chapter 12

If the reserve requirement is 25%, a new deposit of $1,000 leads to a potential increase in the money supply of:

$4,000.

Sumit deposits $1,500 cash into his checking account. The reserve requirement is 25%. How many dollars' worth of loans can the banking system create?

$4,500

The money multiplier is:

1 divided by reserve requirement

If the reserve requirement is 1%, what is the money multiplier?

100

The Chairman of the Board of Governors is appointed for a _____ renewable term

4-year

Assume that the Empathy State Bank begins with the balance sheet below and is fully loaned up. What it is the amount of this banks reserve?

7,500

The main policymaking arm of the Fed is the

Federal Open Market Committee.

The _____ is the central bank of the United States.

Federal Reserve System

Which of the following is a provision of the Federal Reserve Act or subsequent legislation that weakens the independence of the Fed?

The Federal Reserve System is subject to Congressional oversight

Which of the following statements is CORRECT?

The Federal Reserve is considered to be an independent central bank

The 12 Federal Reserve banks and their branches do all of the following except:

accept deposits from U.S. citizens.

Banks

create money by making loans using the deposits of their customers

Tighter lending standards tend to ____ the money multiplier, making it ____ for the Fed to use its tools effectively.

decrease; harder

Which of the following is a basic goal of the Federal Reserve System?

full employment

The fractional reserve banking system refers to a system in which banks:

hold reserves equal to a fraction of their deposit liabilities

A lower reserve requirement

increases the ability of banks to make loans

Which of the following is NOT a lag inherent in monetary policy?

interest rate lag

The main tool of monetary policy is

open market operations

If the Fed wants to raise the federal funds rate, it will ______ bonds, which ________ bond prices.

sell; lowers

The discount rate is:

the rate regional Federal Reserve banks charge depository institutions to borrow reserves.