Econ 353 isu
Which of the following cities does not have a Federal Reserve Bank located in it?
A) Denver
The Governors of the Federal Reserve System are appointed by the:
A) President of the United States.
The Federal Reserve District that covers the largest geographic area is serviced by the Bank located in:
A) San Francisco.
Which of the following is (are) not a permanent voting member(s) on the fome?
A) The Secretary of the Treasury
A repurchase agreement is:
A) an agreement where the parties agree to reverse the transaction on a specificday.
When the Fed makes a discount loan, the impact on the Fed's balance sheet will reflect;
A) an increase in assets and liabilities.
The Federal reserves fed wire system is used mainly to provide:
A) an inexpensive and reliable way for financial institutions to transfer funds to one
To be independent, a central bank must have:
A) control of its own budget.
If a bank has more interest rate sensitive liabilities than interest rate sensitive assets, an increase in the interest rate will cause profits to:
A) decrease.
If the Fed were to decrease the required reserve rate from ten percent to five percent, the simple deposit expansion multiplier would:
A) double.
The Federal reserves Open Market Committee currently meets:
A) eight times a year.
If there were an increase in the number of bank failures, we should expect the amount of excess reserves in the banking system to:
A) increase.
One monopoly that modern central banks have is in:
A) issuing currency.
Higher than expected inflation will increase the:
A) nominal amounts people need to save for retirement.
The primary objective of most central banks in industrialized economies is:
A) price stability.
The money multiplier is much lower today than it was twenty five years ago because:
A) the currency to deposit ratio is much higher today.
In dollar amounts:
A) the monetary base is smaller than M1 and M2 is larger than M1.
The Federal Reserve System is composed of:
A) three branches with overlapping responsibilities.
A bank's assets tend to be long term while its liabilities are short term. Therefore, when interest rates rise, the value of the bank's assets:
A) will decrease by more than the value of its liabilities.
Bank A has checkable deposits of $100 million, vault cash equaling $1 million and deposits at the Fed equaling $14 million. If the required reserve rate is ten percent what is the maximum amount Bank A could lend?
B) $5 million
Consider a $2 billion open market purchase of U.S. Treasury securities by the Federal Reserve. The Fed's balance sheet will show:
B) an increase in the asset category of securities and the liability category of reserves by $2 billion.
Most economists agree that a well designed central bank would:
B) be independent of political pressure.
The following items would appear as assets on the central bank's balance sheet, except
B) currency
The Governors of the Federal Reserve System serve terms of:
B) fourteen years.
As a portion of total assets measured in billion dollars, the least important asset on the Fed's balance sheet is
B) gold
The specific goals of central banks include each of the following, except:
B) high levels of exports.
Once the FOMC meetings adjourn, the public is made aware of the FOMC's decision:
B) immediately after the meeting.
When interest rates fall a bank's capital will usually:
B) increase.
A bank that makes most of its long term loans at adjustable interest rates is:
B) increasing credit risk and reducing interest rate risk.
The policy directive that is produced from the FOMC meeting:
B) instructs the staff of the New York Fed on how to manage the Fed's balance sheet.
The fact that a bank's assets tend to be long term while its liabilities are short term creates:
B) interest-rate risk.
During the early years of the Great Depression, the monetary base and M2:
B) moved in opposite directions; the monetary base increased but M2 decreased.
To say monetary policy is transparent implies:
B) policymakers offer plausible explanations for their decisions along with supporting data.
To obtain a discount loan from the Fed, a commercial bank must:
B) provide collateral.
In its role as the bankers' bank, a central bank performs each of the following, except: 4) A) managing the payments system.
B) providing deposit insurance.
All of the following are consequences of an economy operating above its potential 7) level except:
B) stable prices
The Reserve Banks of the Federal Reserve System are owned by:
B) the commercial banks in their districts.
The interest rate that the fome currently chooses to control is:
B) the federal funds rate.
One thing the Fed has learned over the past twentyfive years is: 28) A) it should focus its attention on targeting M2.
B) the money multiplier is unstable over time.
If required reserves are expressed by RR; the required reserve rate by rD and deposits by D, the simple deposit expansion multiplier is expressed as:
C) 1/rD.
The number of voting members on the Federal Open Market Committee is:
C) 12.
The Federal Reserve was created in:
C) 1913.
If the required reserve rate is ten percent and banks do not hold any excess reserves and there are no changes in currency holdings, a $1 million open market purchase by the Fed will result in what change in loans?
C) An increase of $10 million
If M = the quantity of money, m, the money multiplier, MB, the Monetary Base, C = Currency, D = Deposits, R = Reserves, RR = required reserves, and ER = Excess reserves, then C + R would equal:
C) MB.
Which of the following statements is true?
C) Printing currency can be a profitable venture for a government.
An open market sale of U.S. Treasury securities by the Fed will cause the Fed's 11) balance sheet to show:
C) a decrease in the asset of securities and a decrease in the liability of reserves.
One valuable lesson investors should learn from the stock market behavior during the late 1990s and early 2000s is that the Fed:
C) cannot prevent a stock market decline.
The Federal Reserve banks play a role in formulating monetary policy by each of the following, except:
C) conducting open market operations from their banks.
Empirical research seems to verify that:
C) countries that have high rates of inflation seem to have central banks with low levels of independence.
The monetary base is the sum of:
C) currency in the hands of the public and reserves in the banking system.
If we assume a ten percent required reserve rate, and banks not holding any excess reserves and no change in currency holdings, an open market sale of $5 million of U.S. Treasury securities by the Fed, will result in deposits:
C) decreasing by $50 million.
In the U.S., loans made by Federal Reserve to banks fall in the categories
C) discount loans.
The information contained in the Fed's Tealbook is released to the public:
C) five years after the FOMC meeting in which they are used.
The procedure that estimates the interest rate sensitivity of a bank's assets and liabilities is called:
C) gap analysis.
Interest rate volatility is a problem because:
C) it adds to uncertainty, thereby diminishing the investment.
Assume that the required reserve rate is ten percent, banks want to hold excess 21) reserves in an amount that equals three percent of deposits, and the public withdraws ten percent of every deposit in cash. An open market purchase of $1 million by the Fed will see banking system deposits increase by:
C) more than $1 million but less than $10 million.
An open market sale of U.S. Treasury securities by the Fed will cause the Banking System's balance sheet to show:
C) no net change in assets or liabilities, only a change in the composition of assets with securities increasing and reserves decreasing.
In 2015, the average daily volume on the Federal reserves fed wire system was:
D) $3.3 trillion.
How many members are on the Board of Governors of the Federal Reserve System?
D) Seven
Which of the books used at the FOMC meetings contains anecdotal information collect by the Federal Reserve Banks?
D) The Beigebook
For every $100 in assets, a bank has $40 in interest rate sensitive assets, and the other $60 in non interest rate sensitive assets. The same bank has $50 for every $100 in liabilities in interest rate sensitive liabilities, the other $50 are in liabilities that are not interest rate sensitive. If the interest rate on assets increases from 5 to 6 percent, and the interest rate on liabilities increases from 3 to 4 percent, the impact on the bank's profits per $100 of assets will be:
D) a decrease of $0.10.
A liability of the central bank in functioning as the bankers' bank is:
D) accounts of commercial banks.
The stability of the financial system is enhanced by the ability of central banks to: 6) A) provide deposit insurance.
D) be a lender of last resort.
The central bank has the ability to create money; this means it:
D) can impact the rate of inflation.
Which of the following best completes the statement? If people increase their currency holdings, all else the same, the monetary base:
D) does not change but the quantity of M2 will decrease.
The simple deposit expansion multiplier is really too simple for understanding the link between changes in a central bank's balance sheet and the quantity of money in the economy because it:
D) ignores the fact people might change their currency holdings.
A central bank's purchase of securities made by writing checks on itself will:
D) increase the size of their balance sheet.
In terms of economic growth, the central bank would like to:
D) keep the economy close to its potential or sustainable rate of growth.
If prices are not stable:
D) money becomes less useful as a store of value.
During the 2007 to 2009 financial crisis which of the following temporarily became the 15) largest component of assets on the Fed's balance sheet:
D) mortgage backed securities.
Monetary policy operations for central banks are run through changes in the liability category of:
D) reserves
As a portion of total assets measured in billion dollars, the most important asset on the Fed's balance sheet is
D) securities
The central bank in the United States is:
D) the Federal Reserve.
