Question 1

If there are no excess reserves in the banking system and the Fed lowers the required reserve ratio,it follows that banks will now have __________,which they can use to extend loans and create new __________.

Accepted Answer

If there are no excess reserves and the Fed lowers the required reserve ratio, banks will now have positive excess reserves, which means they have more funds available to extend loans and create new checkable deposits.

Question 2

Why does the president of the Federal Reserve Bank of New York hold a permanent seat on the FOMC?

Accepted Answer

A substantial amount of financial activity takes place in New York City, and the New York Fed is responsible for executing open market operations. By having the president of the New York Fed hold a permanent seat on the FOMC, the committee has direct access to up-to-date information on financial market conditions and can quickly carry out its monetary policy decisions through the New York Fed's operations.

Question 3

If the Fed purchases government securities from Bank A,__________ in the banking system __________ and the money supply __________.

Accepted Answer

When the Fed purchases government securities from Bank A, it increases the reserves of Bank A, leading to a rise in reserves in the banking system. Since the money supply is directly related to the level of reserves in the banking system, the money supply also rises as a result. Therefore, the correct choice is (C) reserves; rise; rises.

Question 4

If the Fed lowers the required reserve ratio,__________ in the banking system will remain unchanged but __________ will rise.This will (likely)lead to an increase in new loans and checkable deposits and a(n)__________ in the money supply.

Accepted Answer

When the Fed lowers the required reserve ratio, the amount of required reserves in the banking system will decrease but the amount of excess reserves will increase. This increase in excess reserves will lead to an increase in new loans and checkable deposits, ultimately leading to an increase in the money supply. Therefore, the best choice is C as it correctly identifies the changes in reserves and excess reserves while also predicting an increase in the money supply.

Question 5

If the Fed lowers the discount rate at the same time it conducts an open market sale,it follows that

Accepted Answer

Lowering the discount rate typically encourages banks to borrow more from the Fed, which can increase the money supply. Conversely, an open market sale (selling securities) typically reduces the money supply by pulling liquidity out of the banking system. These actions have opposing effects on the money supply, making it unclear without additional information how the money supply will ultimately be affected.

Question 6

If the Fed wants to increase the money supply,it can __________ the required reserve ratio,conduct an open market __________,or __________the discount rate.

Accepted Answer

If the Fed wants to increase the money supply, it needs to implement expansionary monetary policy. It can do this by lowering the required reserve ratio, which will increase the amount of excess reserves that banks have available to lend out. Additionally, the Fed can conduct open market purchases, which involve buying securities from banks and injecting new money into the economy. Finally, the Fed can also lower the discount rate, which makes it cheaper for banks to borrow from the Fed and encourages them to lend more. Therefore, the best choice is C since it includes all three expansionary policy tools.

Question 7

Every time the Fed buys or sells on the open market,the __________ changes.

Accepted Answer

When the Fed buys or sells on the open market, they are affecting the money supply. This can have an impact on interest rates, inflation, and other economic factors, but it does not directly impact the budget deficit or income tax rates. Therefore, the correct answer is C, money supply.

Question 8

If the Fed raises the discount rate at the same time it conducts an open market sale,it follows that the money supply will

Accepted Answer

When the Fed raises the discount rate and conducts an open market sale, it is reducing the amount of reserves banks have available to lend out. This makes it more expensive for banks to borrow from the Fed, and as a result, they will lend out less money. This leads to a contraction of the money supply.

Question 9

Which of the following has never been a monetary policy tool of the Fed?

Accepted Answer

Income tax rates are not a monetary policy tool of the Fed. They are determined by the legislative branch of the government and are used to affect fiscal policy.

Question 10

The members of the Board of Governors of the Federal Reserve are

Accepted Answer

Members of the Board of Governors are appointed by the President of the United States with approval by the Senate, as outlined in the Federal Reserve Act.

Question 11

A Federal Reserve Bank is located in which of the following cities?

Accepted Answer

All of the above cities have a Federal Reserve Bank. There are 12 Federal Reserve Banks located in cities across the United States, each responsible for a specific geographic district.

Question 12

If Bank A borrows from Bank B,reserves in the banking system __________.If Bank A borrows from the Fed,reserves in the banking system __________.

Accepted Answer

When Bank A borrows from Bank B, the reserves simply shift from one bank to another, leaving the total reserves in the banking system unchanged. However, when Bank A borrows from the Federal Reserve, new reserves are added to the banking system, causing the total reserves to rise.

Question 13

If the Fed lowers the discount rate (relative to the federal funds rate),banks will (likely)borrow __________ from the Fed,which will __________ reserves in the banking system,and eventually __________ the money supply.

Accepted Answer

If the Fed lowers the discount rate relative to the federal funds rate, banks will likely borrow more from the Fed (since it is cheaper to borrow), which will increase reserves in the banking system. This increase in reserves can eventually lead to an increase in the money supply through the money multiplier process. Therefore, the best answer is B, where banks will borrow more, increase reserves, and eventually raise the money supply.

Question 14

Which of the following will increase the money supply?

Accepted Answer

None of the options mentioned will increase the money supply. Increasing the required reserve ratio will decrease the money supply, an open market sale will decrease the money supply and raising the discount rate relative to the federal funds rate will make borrowing more expensive for banks, decreasing their ability to lend and in turn decreasing the money supply.

Question 15

Which of the following statements is false?

Accepted Answer

There is an inverse relationship between the money supply and the required reserve ratio - as the required reserve ratio decreases, the money supply expands.

Question 16

If the Fed wants to decrease the money supply,it can __________ the required reserve ratio,conduct an open market __________,or __________ the discount rate.

Accepted Answer

If the Fed wants to decrease the money supply, it can adopt contractionary monetary policy measures such as raising the required reserve ratio, conducting an open market sale, or raising the discount rate. These measures would reduce the amount of money available in the economy and make borrowing more expensive, thereby slowing down economic activity and decreasing inflation. Option C is the correct choice as it includes all the correct measures for contractionary monetary policy.

Question 17

In the United States,paper currency is printed at the

Accepted Answer

Paper currency in the United States is printed at the Bureau of Engraving and Printing, which is a government agency within the U.S. Department of the Treasury. The Federal Reserve District banks are responsible for distributing and circulating the currency once it has been printed. The U.S. Mint primarily produces coins, not paper currency.

Question 18

The Banking Act of 1935 changed the name of the _______________ to the Board of Governors of the Federal Reserve System.

Accepted Answer

The Banking Act of 1935 changed the name of the Federal Reserve Board to the Board of Governors of the Federal Reserve System. The other options listed are either incorrect or not relevant to the name change specified in the question.

Question 19

If the federal funds rate falls below the discount rate,banks will decrease their borrowings from __________ and __________ their borrowings from __________.It follows that when one bank borrows from __________,reserves in the banking system __________.

Accepted Answer

The answer of If the federal funds rate falls below...

Question 20

The chairman of the Board of Governors of the Fed is designated by ____________________ to serve a _______ year term as chairman.

Accepted Answer

The chairman of the Board of Governors of the Fed is designated by the President to serve a four-year term as chairman.

Quiz 13: The Federal Reserve System

If there are no excess reserves in the banking system and the Fed lowers the required reserve ratio,it follows that banks will now have ,which they can use to extend loans and create new .

Why does the president of the Federal Reserve Bank of New York hold a permanent seat on the FOMC?

If the Fed purchases government securities from Bank A, in the banking system and the money supply __.

If the Fed lowers the required reserve ratio, in the banking system will remain unchanged but will rise.This will (likely) lead to an increase in new loans and checkable deposits and a(n) __ in the money supply.

If the Fed lowers the discount rate at the same time it conducts an open market sale,it follows that

If the Fed wants to increase the money supply,it can the required reserve ratio,conduct an open market ,or __the discount rate.

Every time the Fed buys or sells on the open market,the __________ changes.

If the Fed raises the discount rate at the same time it conducts an open market sale,it follows that the money supply will

Which of the following has never been a monetary policy tool of the Fed?

The members of the Board of Governors of the Federal Reserve are

A Federal Reserve Bank is located in which of the following cities?

If Bank A borrows from Bank B,reserves in the banking system .If Bank A borrows from the Fed,reserves in the banking system .

If the Fed lowers the discount rate (relative to the federal funds rate) ,banks will (likely) borrow from the Fed,which will reserves in the banking system,and eventually __ the money supply.

Which of the following will increase the money supply?

Which of the following statements is false?

If the Fed wants to decrease the money supply,it can the required reserve ratio,conduct an open market ,or __ the discount rate.

In the United States,paper currency is printed at the

The Banking Act of 1935 changed the name of the _______________ to the Board of Governors of the Federal Reserve System.

If the federal funds rate falls below the discount rate,banks will decrease their borrowings from and their borrowings from .It follows that when one bank borrows from ,reserves in the banking system __.

The chairman of the Board of Governors of the Fed is designated by ______________ to serve a _ year term as chairman.

Quiz 13: The Federal Reserve System

If there are no excess reserves in the banking system and the Fed lowers the required reserve ratio,it follows that banks will now have __________,which they can use to extend loans and create new __________.

Why does the president of the Federal Reserve Bank of New York hold a permanent seat on the FOMC?

If the Fed purchases government securities from Bank A,__________ in the banking system __________ and the money supply __________.

If the Fed lowers the required reserve ratio,__________ in the banking system will remain unchanged but __________ will rise.This will (likely) lead to an increase in new loans and checkable deposits and a(n) __________ in the money supply.

If the Fed lowers the discount rate at the same time it conducts an open market sale,it follows that

If the Fed wants to increase the money supply,it can __________ the required reserve ratio,conduct an open market __________,or __________the discount rate.

Every time the Fed buys or sells on the open market,the __________ changes.

If the Fed raises the discount rate at the same time it conducts an open market sale,it follows that the money supply will

Which of the following has never been a monetary policy tool of the Fed?

The members of the Board of Governors of the Federal Reserve are

A Federal Reserve Bank is located in which of the following cities?

If Bank A borrows from Bank B,reserves in the banking system __________.If Bank A borrows from the Fed,reserves in the banking system __________.

If the Fed lowers the discount rate (relative to the federal funds rate) ,banks will (likely) borrow __________ from the Fed,which will __________ reserves in the banking system,and eventually __________ the money supply.

Which of the following will increase the money supply?

Which of the following statements is false?

If the Fed wants to decrease the money supply,it can __________ the required reserve ratio,conduct an open market __________,or __________ the discount rate.

In the United States,paper currency is printed at the

The Banking Act of 1935 changed the name of the _______________ to the Board of Governors of the Federal Reserve System.

If the federal funds rate falls below the discount rate,banks will decrease their borrowings from __________ and __________ their borrowings from __________.It follows that when one bank borrows from __________,reserves in the banking system __________.

The chairman of the Board of Governors of the Fed is designated by ____________________ to serve a _______ year term as chairman.

If there are no excess reserves in the banking system and the Fed lowers the required reserve ratio,it follows that banks will now have ,which they can use to extend loans and create new .

If the Fed purchases government securities from Bank A, in the banking system and the money supply __.

If the Fed lowers the required reserve ratio, in the banking system will remain unchanged but will rise.This will (likely) lead to an increase in new loans and checkable deposits and a(n) __ in the money supply.

If the Fed wants to increase the money supply,it can the required reserve ratio,conduct an open market ,or __the discount rate.

If Bank A borrows from Bank B,reserves in the banking system .If Bank A borrows from the Fed,reserves in the banking system .

If the Fed lowers the discount rate (relative to the federal funds rate) ,banks will (likely) borrow from the Fed,which will reserves in the banking system,and eventually __ the money supply.

If the Fed wants to decrease the money supply,it can the required reserve ratio,conduct an open market ,or __ the discount rate.

If the federal funds rate falls below the discount rate,banks will decrease their borrowings from and their borrowings from .It follows that when one bank borrows from ,reserves in the banking system __.

The chairman of the Board of Governors of the Fed is designated by ______________ to serve a _ year term as chairman.