Question 1

The Fed's policy is determined by the

Accepted Answer

The answer of The Fed's policy is determined by the
...

Question 2

The ________ easing that the Fed created during the 2008 financial crisis was designed to stimulate ________.

Accepted Answer

The Fed created credit easing during the 2008 financial crisis to stimulate private banks to increase their lending. This was done by purchasing securities from banks, which injected new money into the financial system and therefore provided banks with additional funds to lend out. Quantitative easing refers to the Fed's purchase of longer-term securities to lower long-term interest rates, which is a separate policy from credit easing. Choices B, C, and E are incorrect because the Fed did not make direct loans to home buyers or small businesses during the crisis, nor did it decrease the required reserve ratio through quantitative easing.

Question 3

In 2008, the Fed created a new policy tool called

Accepted Answer

Quantitative easing (QE) was a policy tool introduced by the Fed in 2008 that allowed it to purchase both government and private sector securities in order to increase the money supply and stimulate economic growth. This tool was used during and after the financial crisis to help stabilize the economy.

Question 4

The Fed's policy tools include

Accepted Answer

The Fed's policy tools include required reserve ratios, the discount rate, open market operations, and extraordinary crisis measures, as stated in option A. Option B is incorrect as holding deposits for the U.S. government and reserve requirements are the same policy tool. Option C is incorrect as the Fed sets regulations for lending standards but this is not a policy tool. Option D is incorrect as the Fed does supervise the banking system but buying and selling commercial banks is not a policy tool. Option E is incorrect as income tax rates are set by the government, not the Fed.

Question 5

New money is created in the U.S.economy by

Accepted Answer

Banks have the ability to create checkable deposits, which increases the money supply through the fractional reserve banking system. When banks lend out a portion of the funds deposited by their customers, new money is created as the borrower spends the funds and the receiver deposits the funds into another bank, allowing that bank to lend out a portion and repeating the process. This cycle of lending and depositing creates new money and contributes to the overall money supply in the economy. Governments and the U.S. Treasury can also play a role in creating money through spending and issuing currency, but these sources are not as significant for creating new money as the banking system.

Question 6

The monetary base is equal to the sum of coins,

Accepted Answer

The answer of The monetary base is equal to the...

Question 7

The monetary base is the sum of

Accepted Answer

The monetary base consists of coins, Federal Reserve notes, and banks' reserves at the Fed. Treasury deposits and individuals' deposits are not part of the monetary base. Gold is also not part of the monetary base.

Question 8

Banks create money by

Accepted Answer

Banks create money by making loans and creating deposits. When a bank makes a loan, it credits the borrower's account with new deposits, which effectively creates new money. This process is limited by the size of the bank's excess reserves, which is the amount of cash or equivalents that a bank holds above the required amount. Banks can only create new deposits up to the amount of their excess reserves. Therefore, option D is the correct choice.

Question 9

The Board of Governors of the Federal Reserve System has

Accepted Answer

The Board of Governors of the Federal Reserve System has seven members appointed by the President of the United States for 14-year terms.

Question 10

The monetary base does NOT include which of the following items?
i. Federal Reserve notes
ii. banks' reserves at the Federal Reserve
iii. U.S.government securities owned by the Federal Reserve

Accepted Answer

The monetary base consists of the currency in circulation (Federal Reserve notes) plus banks' reserves at the Federal Reserve. U.S. government securities owned by the Federal Reserve are not part of the monetary base. Therefore, the correct choice is C, iii only.

Question 11

If Federal Reserve notes and coins are $765 billion, and banks' reserves at the Fed are $8 billion, the gold stock is $11 billion, and the Fed owns $725 billion of government securities, what does the monetary base equal?

Accepted Answer

The monetary base equals the sum of Federal Reserve notes and coins in circulation ($765 billion) plus banks' reserves at the Fed ($8 billion) plus the gold stock ($11 billion) plus the Fed's holdings of government securities ($725 billion), which equals $773 billion.

Question 12

The monetary base is equal to

Accepted Answer

The monetary base is defined as the sum of coins, Federal Reserve notes (currency), and banks' reserves at the Fed. Therefore, the correct answer is D.

Question 13

If the Fed engages in quantitative easing, it has likely

Accepted Answer

Quantitative easing involves the Fed buying large sums of securities, which increases the money supply and can lower interest rates. This can include buying Treasury securities, mortgage-backed securities, and other assets. The goal is often to stimulate economic growth and combat deflationary pressures. As a result of this buying, the federal funds rate may be decreased to almost zero.

Question 14

Regulating the amount of money in the United States is one of the most important responsibilities of the

Accepted Answer

The Federal Reserve is responsible for regulating the amount of money in the United States by adjusting interest rates, setting reserve requirements for banks, and conducting monetary policy. The State Department is responsible for foreign policy, state governments have limited control over monetary policy, the Treasury Department manages the federal government's finances, and the U.S. Mint is responsible for producing and circulating coins.

Question 15

The monetary base is the

Accepted Answer

The monetary base is defined as the sum of currency in circulation (coins and Federal Reserve notes) and banks' reserves held at the Federal Reserve. This definition is consistent with option B. Option A is incorrect because it describes the minimum reserve requirement, not the monetary base. Option C is incorrect because gold and foreign exchange are assets held by the Fed but are not included in the monetary base. Option D is incorrect because government securities and loans to banks are not part of the monetary base. Option E is incorrect because banks' loans are not included in the monetary base.

Question 16

The policy tool of "credit easing" refers to the ________ during the 2008 financial crisis.

Accepted Answer

Credit easing refers to the Federal Reserve's policy of purchasing private securities to stimulate banks' lending. This was one of the measures taken by the Fed during the 2008 financial crisis to increase the availability of credit and support the economy.

Question 17

The minimum percent of deposits that banks must hold and cannot loan is determined by the

Accepted Answer

The minimum percent of deposits that banks must hold and cannot loan is determined by the required reserve ratio, which is set by the Federal Reserve. This ratio is the percentage of deposits that banks are required to hold in reserve and cannot loan out.

Question 18

The monetary base is equal to

Accepted Answer

The monetary base includes Federal Reserve notes (paper money) and coins in circulation, as well as the reserves held by banks at the Federal Reserve. This is because the Federal Reserve creates the monetary base through its control of the money supply. Therefore, (B) is the correct answer.

Question 19

If the Federal Reserve ________ the required reserve ratio, the interest rate ________.

Accepted Answer

The answer of If the Federal Reserve ________ the required...

Question 20

The discount rate is the interest rate that

Accepted Answer

The discount rate is the interest rate that the Fed charges commercial banks when it loans reserves to the banks.

Quiz 11: The Monetary System

The Fed's policy is determined by the

The easing that the Fed created during the 2008 financial crisis was designed to stimulate .

In 2008, the Fed created a new policy tool called

The Fed's policy tools include

New money is created in the U.S.economy by

The monetary base is equal to the sum of coins,

The monetary base is the sum of

Banks create money by

The Board of Governors of the Federal Reserve System has

The monetary base does NOT include which of the following items? i. Federal Reserve notes ii. banks' reserves at the Federal Reserve iii. U.S.government securities owned by the Federal Reserve

If Federal Reserve notes and coins are $765 billion, and banks' reserves at the Fed are $8 billion, the gold stock is $11 billion, and the Fed owns $725 billion of government securities, what does the monetary base equal?

The monetary base is equal to

If the Fed engages in quantitative easing, it has likely

Regulating the amount of money in the United States is one of the most important responsibilities of the

The monetary base is the

The policy tool of "credit easing" refers to the ________ during the 2008 financial crisis.

The minimum percent of deposits that banks must hold and cannot loan is determined by the

The monetary base is equal to

If the Federal Reserve the required reserve ratio, the interest rate .

The discount rate is the interest rate that