Question 1

Open market operations differ from setting reserve requirements in that they are

Accepted Answer

A)   initiated by member depository institutions.
B)   designed to be of significance only to large city banks.
C)   initiated by the President.
D)   used daily. D

Question 2

The Treasury's primary checkable deposit accounts for day-to-day operations are kept at several commercial banks in large cities.

Accepted Answer

A) True 
 B)False

Question 3

Changes in the growth rates for money supply and money velocity affect the growth rate in:

Accepted Answer

A)   real economic activity
B)   the amount of transfer payments
C)   the turnover of goods and services
D)   bank borrowing A

Question 4

A customer of a bank needs additional currency and cashes a check for $10,000. The reserve requirement is 20%. The bank has no excess reserves. It must

Accepted Answer

A)   refuse the check.
B)   get an additional $8,000 of reserves.
C)   get an additional $2,000 of reserves.
D)   transfer $10,000 of reserves to the Fed.

Question 5

There are four ways a government raises funds to pay for its activities.

Accepted Answer

A) True 
 B)False

Question 6

The Fed closely monitors the Treasury account and takes any changes into consideration in conducting daily open market operations in order to minimize the effect on bank reserves.

Accepted Answer

A) True 
 B)False

Question 7

Tax cuts are an automatic stabilizers.

Accepted Answer

A) True 
 B)False

Question 8

In the fractional reserve system, banks must hold, with the Fed, reserves equal to a certain percentage of their deposits.

Accepted Answer

A) True 
 B)False

Question 9

Bank reserves are increased when the Treasury

Accepted Answer

A)   sells government bonds to individuals
B)   decreases its holding of cash
C)   increases its account at a Federal Reserve bank
D)   increases its holding of cash

Question 10

Low inflation is one of the three general goals of U.S. economic policy actions.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements is false?

Accepted Answer

A)   The difference between total reserves and the monetary base is currency held by the nonbank public.
B)   The ability to alter the money supply and credit is based on the fact that our banking system does not utilize a fractional reserve system.
C)   The ability to predict M1 velocity, in addition to money supply changes, is important in achieving successful monetary policy making.
D)   A derivative deposit arising out of a loan from Bank A is transferred by check to Bank B, where reserve requirement are again imposed.

Question 12

Primary deposits are deposits that add new reserves to a bank while secondary deposits are deposits that were borrowed from the reserves of primary deposits.

Accepted Answer

A) True 
 B)False  False

Question 13

Which one of the following transactions or operations is entirely at the initiative of the Federal Reserve?

Accepted Answer

A)   Open market operations
B)   Change in float
C)   Change in bank borrowings
D)   Change in Treasury cash holdings

Question 14

Price stability is one of the three general goals of U.S. economic policy actions.

Accepted Answer

A) True 
 B)False

Question 15

The President of the United States has no influence over the Federal Reserve System nor exerts any pressure on the Fed.

Accepted Answer

A) True 
 B)False

Question 16

Bank reserves are decreased when the Treasury

Accepted Answer

A)   is in recess.
B)   writes checks.
C)   decreases its account at a Federal Reserve bank.
D)   reduces its holding of cash.

Question 17

If a customer makes new deposits of $10,000 to a bank and the reserve requirement is 15%, then excess reserves will be

Accepted Answer

A)   $1,500.
B)   $8,500.
C)   $10,000.
D)   $6,666.

Question 18

The velocity of money is expressed as the average number of times each dollar is spend on purchases of goods and services, and it is calculated as real GDP divided by M1.

Accepted Answer

A) True 
 B)False

Question 19

One of the reasons open market operations are conducted virtually every business day is to implement changes in the money supply called for by the Federal Open Market Committee.

Accepted Answer

A) True 
 B)False

Question 20

The monetary base

Accepted Answer

A)   equals the money supply.
B)   consists of checkable and non-checkable deposits.
C)   consists of bank reserves, plus currency.
D)   equals the money multiplier, plus bank reserves.

Exam 5: Policy Makers and the Money Supply

Open market operations differ from setting reserve requirements in that they are

Correct AnswerverifiedD

The Treasury's primary checkable deposit accounts for day-to-day operations are kept at several commercial banks in large cities.

Correct AnswerverifiedShow Answer

Changes in the growth rates for money supply and money velocity affect the growth rate in:

Correct AnswerverifiedA

A customer of a bank needs additional currency and cashes a check for $10,000. The reserve requirement is 20%. The bank has no excess reserves. It must

Correct AnswerverifiedShow Answer

There are four ways a government raises funds to pay for its activities.

Correct AnswerverifiedShow Answer

The Fed closely monitors the Treasury account and takes any changes into consideration in conducting daily open market operations in order to minimize the effect on bank reserves.

Correct AnswerverifiedShow Answer

Tax cuts are an automatic stabilizers.

Correct AnswerverifiedShow Answer

In the fractional reserve system, banks must hold, with the Fed, reserves equal to a certain percentage of their deposits.

Correct AnswerverifiedShow Answer

Bank reserves are increased when the Treasury

Correct AnswerverifiedShow Answer

Low inflation is one of the three general goals of U.S. economic policy actions.

Correct AnswerverifiedShow Answer

Which of the following statements is false?

Correct AnswerverifiedShow Answer

Primary deposits are deposits that add new reserves to a bank while secondary deposits are deposits that were borrowed from the reserves of primary deposits.

Correct AnswerverifiedFalse

Which one of the following transactions or operations is entirely at the initiative of the Federal Reserve?

Correct AnswerverifiedShow Answer

Price stability is one of the three general goals of U.S. economic policy actions.

Correct AnswerverifiedShow Answer

The President of the United States has no influence over the Federal Reserve System nor exerts any pressure on the Fed.

Correct AnswerverifiedShow Answer

Bank reserves are decreased when the Treasury

Correct AnswerverifiedShow Answer

If a customer makes new deposits of $10,000 to a bank and the reserve requirement is 15%, then excess reserves will be

Correct AnswerverifiedShow Answer

The velocity of money is expressed as the average number of times each dollar is spend on purchases of goods and services, and it is calculated as real GDP divided by M1.

Correct AnswerverifiedShow Answer

One of the reasons open market operations are conducted virtually every business day is to implement changes in the money supply called for by the Federal Open Market Committee.

Correct AnswerverifiedShow Answer

The monetary base

Correct AnswerverifiedShow Answer

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified
A

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
False

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified