Question 1

The Board of Governors

Accepted Answer

A)   is chaired by the U.S. Secretary of the Treasury.
B)   members are elected by the U.S. public.
C)   has 7 members.
D)   All of the above are correct.E) B) and D)
F) B) and C)

Question 2

All of the presidents of the regional Federal Reserve banks

Accepted Answer

A)   attend each FOMC meeting.
B)   have voting rights at each FOMC meeting.
C)   are appointed by the president of the U.S. and confirmed by the U.S. Senate.
D)   All of the above are correct.E) B) and C)
F) A) and B)

Question 3

To decrease the money supply, the Fed can

Accepted Answer

A)   buy government bonds or increase the discount rate.
B)   buy government bonds or decrease the discount rate.
C)   sell government bonds or increase the discount rate.
D)   sell government bonds or decrease the discount rate.E) C) and D)
F) B) and D)

Question 4

Monetary policy affects employment

Accepted Answer

A)   only in the long run.
B)   only in the short run.
C)   in both the long run and the short run.
D)   in neither the long run nor the short run.E) A) and B)
F) A) and C)

Question 5

Table 29-2.
The information in the table pertains to an imaginary economy.
 
-Refer to Table 29-2. What is the M1 money supply?

Accepted Answer

A)   $705 billion
B)   $570 billion
C)   $505 billion
D)   $585 billionE) A) and B)
F) A) and C)

Question 6

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

Accepted Answer

A) True 
 B)False

Question 7

Reserves decrease if the Federal Reserve

Accepted Answer

A)   raises the discount rate or auctions more credit.
B)   raises the discount rate but not if it auctions more credit.
C)   lowers the discount rate or auctions more credit.
D)   lowers the discount rate but not if it auctions more credit.E) All of the above
F) A) and B)

Question 8

The Federal Reserve

Accepted Answer

A)   was created in 1913.
B)   is the U.S.'s central bank.
C)   has other duties in addition to controlling the money supply.
D)   All of the above are correct.E) A) and C)
F) B) and C)

Question 9

If the reserve ratio is 5 percent, then $500 of additional reserves can create up to

Accepted Answer

A)   $10,500 of new money.
B)   $10,000 of new money.
C)   $9,500 of new money.
D)   $2,500 of new money.E) A) and B)
F) A) and C)

Question 10

Which of the following items is not included in the most narrow definition of money, M1?

Accepted Answer

A)   currency
B)   savings deposits
C)   traveler's checks
D)   demand depositsE) A) and D)
F) None of the above

Question 11

What does the Fed auction at the Term-Auction Facility?

Accepted Answer

A)   government bonds of a quantity it sets
B)   government bonds with the quantity determined at the auction
C)   loans of a quantity it sets
D)   loans with the quantity determined at the auctionE) B) and D)
F) A) and C)

Question 12

Money is the most liquid asset available because

Accepted Answer

A)   it is a store of value.
B)   it is a medium of exchange.
C)   it is a unit of account.
D)   it has intrinsic value.E) A) and D)
F) None of the above

Question 13

If the Fed buys bonds in the open market, the money supply decreases.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following might explain why the United States has so much currency per person?

Accepted Answer

A)   U.S. citizens are holding a lot of foreign currency.
B)   Currency may be a preferable store of wealth for criminals.
C)   People use credit and debit cards more frequently.
D)   All of the above help explain the abundance of currency.E) A) and C)
F) C) and D)

Question 15

Which list ranks assets from most to least liquid?

Accepted Answer

A)   money, bonds, cars, houses
B)   money, cars, houses, bonds
C)   bonds, money, cars, houses
D)   bonds, cars, money, housesE) A) and B)
F) A) and C)

Question 16

When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by

Accepted Answer

A)   more than $1000.
B)   exactly $1000.
C)   less than $1000.
D)   None of the above are correct.E) A) and C)
F) None of the above

Question 17

Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?

Accepted Answer

1. The president appoints the Board of G...

Question 18

Trace the effects on the money supply when the Fed decreases the discount rate.

Accepted Answer

The discount rate represents the cost of...

Question 19

The tool most often used by the Fed to control the money supply is

Accepted Answer

A)   changing reserve requirements.
B)   open market operations.
C)   buying and selling of equities.
D)   altering the discount rate.E) B) and C)
F) A) and B)

Question 20

Discuss why the Fed rarely changes the reserve requirements.

Accepted Answer

There are two main reasons the Fed does ...

Exam 11: The Monetary System

The tool most often used by the Fed to control the money supply is

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Reserves decrease if the Federal Reserve

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Which of the following items is not included in the most narrow definition of money, M1?

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The Federal Reserve

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To decrease the money supply, the Fed can

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Trace the effects on the money supply when the Fed decreases the discount rate.

Correct AnswerverifiedThe discount rate represents the cost of...View AnswerShow Answer

If the reserve ratio is 5 percent, then $500 of additional reserves can create up to

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Discuss why the Fed rarely changes the reserve requirements.

Correct AnswerverifiedThere are two main reasons the Fed does ...View AnswerShow Answer

Banks cannot influence the money supply if they are required to hold all deposits in reserve.

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When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by

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If the Fed buys bonds in the open market, the money supply decreases.

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Monetary policy affects employment

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The Board of Governors

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Money is the most liquid asset available because

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What does the Fed auction at the Term-Auction Facility?

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Designers of the Federal Reserve System were concerned that the Fed might form policy favorable to one part of the country or to a particular party. What are some ways that the organization of the Fed reflects such concerns?

Correct Answerverified1. The president appoints the Board of G...View AnswerShow Answer

All of the presidents of the regional Federal Reserve banks

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Which list ranks assets from most to least liquid?

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Which of the following might explain why the United States has so much currency per person?

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Table 29-2. The information in the table pertains to an imaginary economy. -Refer to Table 29-2. What is the M1 money supply?

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The discount rate represents the cost of...
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There are two main reasons the Fed does ...
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1. The president appoints the Board of G...
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