Question 1

A decrease in the required reserve ratio __________ the money supply;an open market purchase __________ the money supply.

Accepted Answer

The answer of A decrease in the required reserve ratio...

Question 2

Which of the following will increase the money supply?

Accepted Answer

Increasing the required reserve ratio will decrease the amount of funds that banks can lend out, leading to a decrease in the money supply. An open market sale involves the Fed selling securities, which decreases the amount of reserves that banks hold, also leading to a decrease in the money supply. Raising the discount rate relative to the federal funds rate will make it more expensive for banks to borrow from the Fed, causing them to reduce their lending, which will also lead to a decrease in the money supply. Therefore, none of the above choices will increase the money supply.

Question 3

The president of the ________________________ holds a permanent seat on the FOMC.

Accepted Answer

The president of the Federal Reserve District Bank of New York holds a permanent seat on the Federal Open Market Committee (FOMC), due to the New York Fed's key role in executing monetary policy and its close proximity to financial markets.

Question 4

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

Lowering the discount rate makes it cheaper for banks to borrow from the Fed, meaning they will likely borrow more. This will increase reserves in the banking system, and eventually increase the money supply through multiple rounds of lending and re-depositing.

Question 5

The most important responsibility of the Fed is to

Accepted Answer

The most important responsibility of the Fed is to control the money supply. This involves implementing monetary policy to achieve macroeconomic goals such as price stability, full employment, and economic growth. While the Fed does also clear checks, supervise member banks, and serve as fiscal agent for the U.S. Treasury, these are secondary responsibilities in comparison to the primary role of controlling the money supply.

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

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 required reserve ratio is lowered, banks will now have positive excess reserves, which can be used to extend loans and create new checkable deposits. This is because the required reserve ratio determines the amount of reserves banks must hold against their deposits. If the required reserve ratio is lowered, banks can hold less in reserves and lend more, resulting in an increase in checkable deposits.

Question 8

An open market __________ by the Fed increases the money supply;a(n)__________ in the required reserve ratio increases the money supply.

Accepted Answer

An open market purchase by the Fed injects money into the banking system, increasing the money supply. Decreasing the required reserve ratio allows banks to lend more of their deposits, also increasing the money supply.

Question 9

Which of the following is not a function of the Fed?

Accepted Answer

The answer of Which of the following is not a...

Question 10

Paper money is printed at the _______________________,but it is issued to commercial banks by the ______________________________.

Accepted Answer

Paper money is printed at the Bureau of Engraving and Printing, but it is issued to commercial banks by the 12 Federal Reserve District Banks. The U.S. Mint is responsible for producing coins, not paper money. The FOMC (Federal Open Market Committee) is responsible for setting monetary policy, not printing or issuing money. The U.S. Treasury oversees the production of money and manages the government's finances, but it does not issue money to commercial banks.

Question 11

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 12

Here is how an open market purchase works: The Fed __________ government securities to (from)a commercial bank,which raises the bank's deposits at the __________ and increases the bank's __________.

Accepted Answer

An open market purchase is when the Federal Reserve buys government securities from a commercial bank, which increases the bank's reserves at the Fed and increases the bank's ability to lend. Choice A is incorrect because the Fed would not sell securities to a commercial bank in an open market purchase. Choices C, D, and E do not accurately describe the process of an open market purchase.

Question 13

Each of the governors of the Federal Reserve System is appointed for a term of __________ years.The Board of Governors is comprised of _____________ members and the FOMC is comprised of __________ members.

Accepted Answer

Each of the governors of the Federal Reserve System is appointed for a term of 14 years. The Board of Governors is comprised of 7 members and the FOMC is comprised of 12 members.

Question 14

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 15

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, it impacts the money supply. When the Fed buys securities, it injects money into the economy, increasing the money supply. When the Fed sells securities, it removes money from the economy, decreasing the money supply. The budget deficit and income tax rate are not directly affected by open market operations.

Question 16

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

If the Fed lowers the required reserve ratio, the required reserves in the banking system will decrease, but excess reserves will remain unchanged. This will lead to an increase in new loans and checkable deposits, as banks have more funds available to lend out. As a result, the money supply will increase. Therefore, choice C is the correct answer.

Question 17

Which of the following will cause the money supply to decline?

Accepted Answer

Raising the required reserve ratio (B) means banks must hold more funds in reserve and thus can lend out less, reducing the money supply. An open market sale (D) involves the central bank selling securities, which decreases bank reserves and the money supply as banks exchange reserves for these securities.

Question 18

Here is how an open market sale works: A commercial bank __________ government securities to (from)the Fed,which lowers the bank's deposits at the __________ and __________ the bank's __________.

Accepted Answer

The answer of Here is how an open market sale...

Question 19

The __________ rate is the interest rate one bank pays another bank for a loan.

Accepted Answer

The federal funds rate is the interest rate that banks charge each other for overnight loans from their excess reserves held at the Federal Reserve. This rate is set by the Federal Reserve and is used to help steer monetary policy.

Question 20

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.

Quiz 13: The Federal Reserve System

A decrease in the required reserve ratio the money supply;an open market purchase the money supply.

Which of the following will increase the money supply?

The president of the ________________________ holds a permanent seat on the FOMC.

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.

The most important responsibility of the Fed is to

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

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 .

An open market by the Fed increases the money supply;a(n) in the required reserve ratio increases the money supply.

Which of the following is not a function of the Fed?

Paper money is printed at the _,but it is issued to commercial banks by the ________.

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

Here is how an open market purchase works: The Fed government securities to (from) a commercial bank,which raises the bank's deposits at the and increases the bank's __.

Each of the governors of the Federal Reserve System is appointed for a term of ____ years.The Board of Governors is comprised of _ members and the FOMC is comprised of ____ members.

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 __.

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

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.

Which of the following will cause the money supply to decline?

Here is how an open market sale works: A commercial bank government securities to (from) the Fed,which lowers the bank's deposits at the and the bank's .

The __________ rate is the interest rate one bank pays another bank for a loan.

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

Quiz 13: The Federal Reserve System

A decrease in the required reserve ratio __________ the money supply;an open market purchase __________ the money supply.

Which of the following will increase the money supply?

The president of the ________________________ holds a permanent seat on the FOMC.

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.

The most important responsibility of the Fed is to

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

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 __________.

An open market __________ by the Fed increases the money supply;a(n) __________ in the required reserve ratio increases the money supply.

Which of the following is not a function of the Fed?

Paper money is printed at the _______________________,but it is issued to commercial banks by the ______________________________.

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

Here is how an open market purchase works: The Fed __________ government securities to (from) a commercial bank,which raises the bank's deposits at the __________ and increases the bank's __________.

Each of the governors of the Federal Reserve System is appointed for a term of __________ years.The Board of Governors is comprised of _____________ members and the FOMC is comprised of __________ members.

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 __________.

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

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.

Which of the following will cause the money supply to decline?

Here is how an open market sale works: A commercial bank __________ government securities to (from) the Fed,which lowers the bank's deposits at the __________ and __________ the bank's __________.

The __________ rate is the interest rate one bank pays another bank for a loan.

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

A decrease in the required reserve ratio the money supply;an open market purchase the money supply.

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

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 .

An open market by the Fed increases the money supply;a(n) in the required reserve ratio increases the money supply.

Paper money is printed at the _,but it is issued to commercial banks by the ________.

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

Here is how an open market purchase works: The Fed government securities to (from) a commercial bank,which raises the bank's deposits at the and increases the bank's __.

Each of the governors of the Federal Reserve System is appointed for a term of ____ years.The Board of Governors is comprised of _ members and the FOMC is comprised of ____ members.

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 __.

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.

Here is how an open market sale works: A commercial bank government securities to (from) the Fed,which lowers the bank's deposits at the and the bank's .