econ 2035 exam 3
a $10 million open market sale will decrease the monetary base by
$10 million
suppose the required reserve is 8% and the Fed purchases $100 million worth of Treasury bills from Wells Fargo. By how much is Wells Fargo able to increase its loans?
$100 million
If banks hold no excess reserves, checkable deposits total $10 billion, currency in circulation totals $5 million, and the required reserve ratio is 10%, then the monetary base equals
$6 billion
which of the following is NOT a form of a short-term loan in the shadow banking system?
bank deposits
the united states has a dual banking system which means
banks are chartered by the federal government and by state government
which of the following is NOT considered to be a goal of monetary policy?
fair wages
hedge funds differ from mutual funds in that
hedge funds consist of a relatively small number of wealthy investors
the principal-agent view of Fed motivation predicts that the Fed acts
in order to increase its power, influence, and prestige
all of the following are arguments against Fed independence EXCEPT
independent central banks tend to have higher rates of inflation
which of the following assumptions made in deriving the simple deposit multiplier is unrealistic?
individuals hold no currency
most economists believe that a zero rate of unemployment
is not a charactersitic of a well-functioning economy
when banks repay their loans to the Fed
it decreases the level of reserves
the Fed does NOT have to go through the normal congressional appropriations process because
it is self financing
vault cash is a(n)
liability of the Fed and is counted as reserves
during the financial crisis, the Fed introduced three new policy tools connected with bank reserve accounts. Which of the following is NOT one of those three new tools?
open market operations
which of the following is the mandate of the European Central Banks?
price stability
what are the two main objectives of policymakers in restoring the Glass-Steagall Act?
reduce risk in the financial system and reduce the size of banks
which of the following is NOT a role of Federal Reserve Banks?
set the discount rate
which of the following activities is NOT a primary concern of investment banks?
taking in deposits and making loans
all of the following help make the Fed independent of the political process EXCEPT
the chair of the Fed receives a lifetime appointment
investment banks are vulnerable to liquidity risk because
the maturity of their liabilities is less than the maturity of their assets
which of the following is NOT a reason that firms in the shadow banking system were more vulnerable that commercial banks during the financial crisis of 2007-09?
they were more heavily regulated than commercial banks, making them less able to adjust to changing market conditions
which of the following would cause the realistic money multiplier to decrease?
an increase in excess reserves relative to deposits
if the simple deposit multiplier is 5, what is the required reserve ratio?
20%
which of the following is NOT considered one of the four groups in the Federal Reserve System?
Federal Deposit Insurance Corporation
which of the following is NOT an example of an off-balance-sheet activity?
an adjustable rate mortgage
the "shadow banking system" includes all the following EXCEPT
commercial banks
assuming reserves are scarce, in order to increase its target for the federal funds rate, the Fed would
conduct open market sales
which of the following is a liability of the fed?
currency in circulation
the Beige Book is prepared by
district banks
