Question 1

If the Federal Reserve increases the discount rate:

Accepted Answer

When the Federal Reserve increases the discount rate, it raises the cost of borrowing for banks, which can lead to a decrease in the amount of money banks are willing to lend. This can ultimately result in a decrease in the money supply.

Question 2

Which of the following is (are) a tool(s) of monetary policy used by the Federal Reserve? I. reserve requirements
II) the discount rate

Accepted Answer

Both reserve requirements and the discount rate are tools of monetary policy used by the Federal Reserve. Reserve requirements refer to the percentage of deposits that banks are required to hold in reserve, while the discount rate is the interest rate the Federal Reserve charges banks for loans. By adjusting these tools, the Federal Reserve can influence the money supply and interest rates to achieve its policy goals.

Question 3

The Fed's minimum required reserve requirement for checkable bank deposits is:

Accepted Answer

The Fed's minimum required reserve requirement for checkable bank deposits is 10%.

Question 4

When the Fed decreases the reserve requirement, banks lend _____ of their deposits, which leads to a(n) _____ in the money supply.

Accepted Answer

When the Fed decreases the reserve requirement, banks are required to hold less money in reserves and are therefore able to lend out more of their deposits. This results in an increase in the money supply, as there is more money available for borrowers to use for spending and investing.

Question 5

The major tools of monetary policy available to the Federal Reserve System include:

Accepted Answer

The three major tools of monetary policy available to the Federal Reserve System are reserve requirements, open-market operations, and the discount rate. Reserve requirements refer to the percentage of deposits that banks are required to hold in reserves, while open-market operations involve the buying and selling of government securities to influence the supply of money in the economy. The discount rate is the interest rate at which banks can borrow money from the Federal Reserve. Margin regulations and moral suasion are not major tools of monetary policy.

Question 6

Which of the following is a function of the Federal Reserve System? I. conducting fiscal policy
II) examining and supervising commercial banks in the Fed regions
III) evaluating corporate mergers

Accepted Answer

The Federal Reserve System's main function is to conduct monetary policy, which has a direct impact on the economy by controlling inflation and promoting economic growth. Examining and supervising commercial banks in the Fed regions is also a function of the Federal Reserve System, as it helps to ensure the stability and safety of the banking system. However, evaluating corporate mergers is not a function of the Federal Reserve System.

Question 7

The three main monetary policy tools are:

Accepted Answer

The three main monetary policy tools are reserve requirements, the discount rate, and open-market purchases. Reserve requirements refer to the amount of money that banks must hold in reserve from their deposits. The discount rate is the interest rate at which banks can borrow money from the central bank. Open-market purchases refer to the central bank buying or selling government securities on the open market to influence the money supply. Together, these tools can be used to manage inflation, control the money supply, and stabilize the economy.

Question 8

Which of the following is (are) a tool(s) of monetary policy used by the Federal Reserve? I. tax rates
II) government purchases of goods and services

Accepted Answer

The answer of Which of the following is (are) a...

Question 9

If it looks as if a bank won't meet the Federal Reserve Bank's reserve requirement, normally it will first turn to the:

Accepted Answer

The answer of If it looks as if a bank...

Question 10

Which of the following is a function of the Federal Reserve System? I. conducting monetary policy
II) examining and supervising commercial banks in the Fed regions
III) providing liquidity to financial institutions

Accepted Answer

All three options are functions of the Federal Reserve System. The Fed is responsible for setting and implementing monetary policy, examining and supervising banks in their regions, and providing liquidity to financial institutions when needed.

Question 11

Loans of reserves from one bank to another are made in the _____ market.

Accepted Answer

Loans of reserves from one bank to another are made in the federal funds market. This market is where banks borrow and lend overnight reserves to each other to meet reserve requirements set by the Federal Reserve.

Question 12

Federal funds are:

Accepted Answer

The answer of Federal funds are:
...

Question 13

When banks borrow from and lend reserves to each other, they are participating in the _____ market.

Accepted Answer

Banks borrowing from and lending reserves to each other participate in the federal funds market. This is where banks with excess reserves lend to banks in need of reserves to meet their reserve requirement or fund their daily operations. The interest rate charged on these loans is called the federal funds rate, which is a key benchmark interest rate for the economy.

Question 14

The discount rate is the interest rate the Federal Reserve charges on loans to:

Accepted Answer

The discount rate is the interest rate the Federal Reserve charges on loans to banks. This allows the Federal Reserve to influence the amount of money available in the economy and control inflation.

Question 15

When the Fed increases the reserve requirement, banks lend _____ of their deposits, which leads to a(n) _____ in the money supply.

Accepted Answer

When the Fed increases the reserve requirement, banks are required to hold a higher percentage of their deposits in reserve and are hence left with less money to lend. This results in a decrease in the amount of money available for loans and thus, a decrease in the money supply.

Question 16

Which of the following is (are) a tool(s) of monetary policy used by the Federal Reserve? I. open market operations
II) government purchases of goods and services

Accepted Answer

The tool of monetary policy used by the Federal Reserve is open market operations, which involve the buying and selling of government securities in order to influence the money supply and interest rates. Government purchases of goods and services, on the other hand, are a fiscal policy tool used by the government to stimulate the economy and promote growth.

Question 17

If the Fed decreases the reserve requirement from 10% to 5%, the money multiplier will _____ and the money supply will most likely _____.

Accepted Answer

When the Fed decreases the reserve requirement from 10% to 5%, banks are required to hold less reserves and can lend out more money. This increases the money multiplier, which is the factor by which the money supply expands as a result of an increase in bank reserves.

The formula for the money multiplier is 1/reserve requirement ratio. So if the reserve requirement ratio decreases, the money multiplier increases.

Therefore, the money supply will most likely increase as a result of the decrease in reserve requirement.

Question 18

The tools of conducting monetary policy include:

Accepted Answer

Changes in the required reserve requirement are one of the main tools used by central banks to conduct monetary policy. By adjusting the minimum amount of reserves that commercial banks are required to hold, central banks can influence the amount of money banks can lend out and the overall money supply in the economy. The other options listed (changes in the prime rate, open market purchases of corporate stock, and changes in tax rates) are not typically used as tools of monetary policy.

Question 19

The federal funds rate is the interest rate at which:

Accepted Answer

The answer of The federal funds rate is the interest...

Question 20

Which of the following is a function of the Federal Reserve System? I. collecting corporate income tax
II) setting personal income tax rates
III) holding bank reserves

Accepted Answer

The Federal Reserve System's primary function is to hold bank reserves, which helps to ensure the stability of the banking system and the broader economy. It does not collect corporate or personal income taxes, which are functions of the Treasury Department and the IRS, respectively.

Quiz 26: Money, Banking, and the Federal Reserve System

If the Federal Reserve increases the discount rate:

Which of the following is (are) a tool(s) of monetary policy used by the Federal Reserve? I. reserve requirements II) the discount rate

The Fed's minimum required reserve requirement for checkable bank deposits is:

When the Fed decreases the reserve requirement, banks lend _ of their deposits, which leads to a(n) _ in the money supply.

The major tools of monetary policy available to the Federal Reserve System include:

Which of the following is a function of the Federal Reserve System? I. conducting fiscal policy II) examining and supervising commercial banks in the Fed regions III) evaluating corporate mergers

The three main monetary policy tools are:

Which of the following is (are) a tool(s) of monetary policy used by the Federal Reserve? I. tax rates II) government purchases of goods and services

If it looks as if a bank won't meet the Federal Reserve Bank's reserve requirement, normally it will first turn to the:

Which of the following is a function of the Federal Reserve System? I. conducting monetary policy II) examining and supervising commercial banks in the Fed regions III) providing liquidity to financial institutions

Loans of reserves from one bank to another are made in the _____ market.

Federal funds are:

When banks borrow from and lend reserves to each other, they are participating in the _____ market.

The discount rate is the interest rate the Federal Reserve charges on loans to:

When the Fed increases the reserve requirement, banks lend _ of their deposits, which leads to a(n) _ in the money supply.

Which of the following is (are) a tool(s) of monetary policy used by the Federal Reserve? I. open market operations II) government purchases of goods and services

If the Fed decreases the reserve requirement from 10% to 5%, the money multiplier will _ and the money supply will most likely _.

The tools of conducting monetary policy include:

The federal funds rate is the interest rate at which:

Which of the following is a function of the Federal Reserve System? I. collecting corporate income tax II) setting personal income tax rates III) holding bank reserves