Question 1

The Federal Reserve CANNOT do which one of the following?

Accepted Answer

A)  Change the tax rate on profits
B)  Change the discount rate
C)  Change the required reserve ratio
D)  Change margin requirements
E)  Buy securities on the open marketF) A) and D)
G) C) and D)

Question 2

If NCNB Corp's deposits are $12.5 billion,its excess reserves are $100 million,and the reserve requirement is 10%,its actual reserves are

Accepted Answer

A)  $100 million.
B)  $1.15 billion.
C)  $1.25 billion.
D)  $1.35 billion.
E)  $12.5 billion.F) B) and C)
G) A) and B)

Question 3

What caused the credit crisis of 2008?

Accepted Answer

A)  The sub-prime mortgage mess.
B)  The sub-prime mortgage mess along with existing huge leveraged bets that prices of real estate made by investment banks and other firms not regulated by the Fed.
C)  Home buyers' misrepresentation of repayment capacity.
D)  A large number of home buyers loosing their jobs.E) None of the above
F) B) and C)

Question 4

The growth primary growth stimulus provided to the economy through monetary policy comes from the ___________ sector.

Accepted Answer

A)  government
B)  business
C)  consumer
D)  import/ExportE) B) and C)
F) A) and C)

Question 5

Statement I: When the Fed sells U.S.government securities on the open market,excess reserves are increased.
Statement II: Banks try to carry large balances of excess reserves.

Accepted Answer

A)  Statement I is true and statement II is false.
B)  Statement II is true and statement I is false.
C)  Both statements are true.
D)  Both statements are false.E) C) and D)
F) A) and B)

Question 6

Which of the following statements is false?

Accepted Answer

A)  A liquidity trap means that at very low interest rates people simply hold their money.
B)  Since the late 1990s,Japan has been caught in a liquidity trap.
C)  The liquidity trap relates to the precautionary demand for money.
D)  Keynes cited the liquidity trap as one of the consequences of the speculative demand for money.E) A) and B)
F) A) and C)

Question 7

The Federal Reserve System

Accepted Answer

A)  has regional Federal Reserve Banks that make most of the decisions.
B)  makes decisions subject to the approval of the President.
C)  makes its major policy decisions in its Open Market Committee.
D)  makes decisions subject to the approval of Congress.E) B) and C)
F) None of the above

Question 8

The Federal Open Market Committee has _____ members.

Accepted Answer

A)  7
B)  10
C)  12
D)  14
E)  17F) C) and D)
G) A) and D)

Question 9

Monetary policy is

Accepted Answer

A)  minting coins and printing Federal Reserve notes.
B)  manipulating interest rates,credit conditions,and the money supply.
C)  manipulating government expenditures and tax revenues.
D)  regulating the United States dollar price of golD.E) A) and B)
F) All of the above

Question 10

During a depression,the best strategy of the Federal Reserve is to

Accepted Answer

A)  sell government bonds,to make low-risk,sound assets available for commercial banks to buy.
B)  sell government bonds,in order to reduce the size of the government's deficits.
C)  sell government bonds,in order to increase aggregate demand.
D)  buy government securities.E) All of the above
F) C) and D)

Question 11

The responsibility for monetary policy in the United States lies with

Accepted Answer

A)  the president.
B)  the presidents of the Federal Reserve Banks.
C)  the chairman of the Board of Governors of the Federal Reserve System.
D)  the Board of Governors of the Federal Reserve System.
E)  both the president and the chairman of the Federal Reserve Board of Governors.F) C) and D)
G) B) and C)

Question 12

Which of the following is charged with the job of buying and selling securities?

Accepted Answer

A)  The New York Federal Reserve Bank
B)  The Federal Advisory Council
C)  The United States Treasury
D)  The Department of Internal Affairs
E)  The Office of Management and BudgetF) C) and E)
G) A) and E)

Question 13

In January 2010,the Federal Funds Target rate was

Accepted Answer

A)  between 0% and .25%.
B)  between .5% and .6%.
C)  between 2.5% and 2.6%.
D)  between 5.0% and 5.25%.E) A) and D)
F) All of the above

Question 14

The principal source of borrowed reserves is the

Accepted Answer

A)  Federal Reserve System.
B)  United States Treasury.
C)  federal funds market.
D)  Federal Home Loan Bank BoarD.
E)  Federal Deposit Insurance Corporation.F) A) and D)
G) A) and E)

Question 15

If there were a 20% reserve requirement,how much would the deposit multiplier be?

Accepted Answer

The answer of If there were a 20% reserve requirement,how...

Question 16

According to the John Maynard Keynes' liquidity trap,at very low rates of interest,people tend to

Accepted Answer

A)  lend out their money.
B)  put their money in the bank.
C)  buy bonds.
D)  hold their money.E) B) and D)
F) B) and C)

Question 17

To create deposits for clients to which it makes loans,a bank typically uses its

Accepted Answer

A)  liabilities.
B)  required reserves.
C)  excess reserves.
D)  federal reserves.E) C) and D)
F) B) and D)

Question 18

If a bank has no excess reserves,the reserve requirement is 10%,and it receives a new $2 million deposit,the bank can lend out

Accepted Answer

A)  $2 million.
B)  $1 million.
C)  $200,000.
D)  $1,800,000.E) All of the above
F) B) and C)

Question 19

All of the following are objectives of the Federal Reserve system,except

Accepted Answer

A)  to furnish an elastic currency.
B)  to conduct monetary policy.
C)  to accept deposits from individuals.
D)  to serve as a lender of last resort to commercial banks and thrift institutions.
E)  to supervise and regulate our financial institutions.F) None of the above
G) C) and D)

Question 20

When the Federal Reserve began paying interest on excess reserves,the effect on monetary policy was

Accepted Answer

A)  making open market operations less effective.
B)  adding a new tool to monetary policy.
C)  reducing the effect of a change in reserve requirements.
D)  eliminated the need for the Federal Funds Market.E) A) and C)
F) B) and C)

Exam 14: The Federal Reserve and Monetary Policy

The Federal Reserve CANNOT do which one of the following?

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During a depression,the best strategy of the Federal Reserve is to

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Monetary policy is

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The Federal Open Market Committee has _____ members.

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In January 2010,the Federal Funds Target rate was

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The Federal Reserve System

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What caused the credit crisis of 2008?

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The growth primary growth stimulus provided to the economy through monetary policy comes from the ___________ sector.

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If a bank has no excess reserves,the reserve requirement is 10%,and it receives a new $2 million deposit,the bank can lend out

Correct AnswerverifiedShow Answer

The principal source of borrowed reserves is the

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All of the following are objectives of the Federal Reserve system,except

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To create deposits for clients to which it makes loans,a bank typically uses its

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Statement I: When the Fed sells U.S.government securities on the open market,excess reserves are increased. Statement II: Banks try to carry large balances of excess reserves.

Correct AnswerverifiedShow Answer

According to the John Maynard Keynes' liquidity trap,at very low rates of interest,people tend to

Correct AnswerverifiedShow Answer

Which of the following statements is false?

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The responsibility for monetary policy in the United States lies with

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If NCNB Corp's deposits are $12.5 billion,its excess reserves are $100 million,and the reserve requirement is 10%,its actual reserves are

Correct AnswerverifiedShow Answer

If there were a 20% reserve requirement,how much would the deposit multiplier be?

Correct AnswerverifiedShow Answer

When the Federal Reserve began paying interest on excess reserves,the effect on monetary policy was

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Which of the following is charged with the job of buying and selling securities?

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