Question 1

The Federal Reserve Board of Governors

Accepted Answer

A)  will lower the discount rate to restrict monetary growth.
B)  are appointed by the president for seven-year terms.
C)  is basically independent.
D)  serve at the pleasure of the president,who can force their resignations at any time.

Question 2

Commercial banks are required by law to hold reserves.These reserves are specified as percentages of a bank's

Accepted Answer

A)  total assets.
B)  total liabilities.
C)  checkable deposit liabilities.
D)  holdings of government securities.
E)  net worth.

Question 3

In October 2008,in attempt to avoid high inflationary tendencies which could damage the recovery from the Great Recession the Federal Reserve

Accepted Answer

A)  started paying interest to the banks on reserves held in the Federal Reserve Banks.
B)  increased the reserve requirements on all banks.
C)  sold a large quantity of government securities on the open market.
D)  increased the interest rates charged to the banks when borrowing from the FED.

Question 4

Which one of the following equations is correct?

Accepted Answer

A)  Total reserves minus excess reserves equals required reserves.
B)  Excess reserves minus required reserves equals total reserves.
C)  Required reserves equals excess reserves divided by total reserves.
D)  Total reserves equals excess reserves divided by required reserves.
E)  Excess reserves plus outstanding loans equals total reserves.

Question 5

The agency directly responsible for monetary policy in the United States is

Accepted Answer

A)  the twelve Federal Reserve Banks.
B)  the Board of Governors of the Federal Reserve System.
C)  the Congress of the United States.
D)  the United States Treasury.

Question 6

What would be the effect on U.S.interest rates if the Chinese and Japanese governments sold all their U.S.government securities?

Accepted Answer

A)  Interest rates would rise.
B)  Interest rates would fall.
C)  The selling of Chinese and Japanese U.S.government securities would have very little effect on U.S.interest rates.

Question 7

Statement I: When the Fed was set up in 1913,it was envisaged as a lender of last resort.
Statement II: The Fed did a basically good job in limiting the financial collapse between 1929 and 1933.

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.

Question 8

The deposit expansion multiplier is

Accepted Answer

A)  the reserve ratio.
B)  the excess reserves.
C)  the reciprocal of the reserve ratio.
D)  the reciprocal of the discount rate.
E)  equal to 1.

Question 9

Statement I: Easy money tends to make our exports cheaper and our imports more expensive.
Statement II: The Fed was able to help end the recessions of 1980 and 1981 by relaxing credit and driving down interest rates.

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.

Question 10

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.

Question 11

A tight monetary policy does all of the following,except

Accepted Answer

A)  raise interest rates.
B)  drive up the dollar relative to foreign currencies.
C)  raise net exports.
D)  increase imports.

Question 12

An individual bank may legally loan out an amount equal to its _________.

Accepted Answer

The answer of An individual bank may legally loan out...

Question 13

Which statement is false?

Accepted Answer

A)  There are Federal Reserve district banks in Atlanta,Minneapolis,and Kansas City.
B)  There are 12 Federal Reserve District Banks.
C)  The Federal Reserve System was set up in 1935.
D)  None of the statements are false.

Question 14

Which is NOT a legal reserve?

Accepted Answer

A)  Vault cash
B)  Government securities
C)  Deposits at a Federal Reserve Bank

Question 15

Statement I: The reserve requirement for time deposits is 3%.
Statement II: A bank's primary reserves are its vault cash and its deposits at the Federal Reserve District Bank.

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.

Question 16

Which is the most accurate statement?

Accepted Answer

A)  The members of the Fed are appointed by the president and can be made to resign by the president.
B)  The chairman of the Board of Governors of the Fed is elected by the Board to a 4-year term.
C)  Once a Board member has been appointed by the president and confirmed by the Senate,she or he is not answerable to the president or Congress.
D)  There is virtually unanimous opinion that for a group of unelected officials,the Federal Reserve Board has way too much power.

Question 17

Which of the following are factors that will modify the size of the deposit expansion multiplier?

Accepted Answer

A)  A foreign trade imbalance
B)  Cash
C)  Excess reserves
D)  Change in reserve requirements of all these factors

Question 18

Federal Reserve Notes are

Accepted Answer

A)  the currency part of the United States money supply.
B)  United States government securities owned by the Fed.
C)  the backing for all bank account balances.
D)  used exclusively by the government to pay off its debt.

Question 19

The purpose of establishing the Federal Reserve System was

Accepted Answer

A)  to regulate commercial banking.
B)  to provide for a more elastic currency.
C)  to increase the confidence in the nation's banks.
D)  All of the choices are correct.

Question 20

The Board of Governors of the Federal Reserve is independent of

Accepted Answer

A)  both the President and Congress.
B)  neither the President nor Congress.
C)  the President,but not Congress.
D)  Congress,but not the President.

Exam 14: The Federal Reserve and Monetary Policy

Which is the most accurate statement?

Correct AnswerverifiedShow Answer

Statement I: When the Fed was set up in 1913,it was envisaged as a lender of last resort. Statement II: The Fed did a basically good job in limiting the financial collapse between 1929 and 1933.

Correct AnswerverifiedShow Answer

Which is NOT a legal reserve?

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The purpose of establishing the Federal Reserve System was

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The Federal Reserve Board of Governors

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Which one of the following equations is correct?

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What caused the credit crisis of 2008?

Correct AnswerverifiedShow Answer

The Board of Governors of the Federal Reserve is independent of

Correct AnswerverifiedShow Answer

Statement I: Easy money tends to make our exports cheaper and our imports more expensive. Statement II: The Fed was able to help end the recessions of 1980 and 1981 by relaxing credit and driving down interest rates.

Correct AnswerverifiedShow Answer

Commercial banks are required by law to hold reserves.These reserves are specified as percentages of a bank's

Correct AnswerverifiedShow Answer

Which statement is false?

Correct AnswerverifiedShow Answer

What would be the effect on U.S.interest rates if the Chinese and Japanese governments sold all their U.S.government securities?

Correct AnswerverifiedShow Answer

In October 2008,in attempt to avoid high inflationary tendencies which could damage the recovery from the Great Recession the Federal Reserve

Correct AnswerverifiedShow Answer

Which of the following are factors that will modify the size of the deposit expansion multiplier?

Correct AnswerverifiedShow Answer

Statement I: The reserve requirement for time deposits is 3%. Statement II: A bank's primary reserves are its vault cash and its deposits at the Federal Reserve District Bank.

Correct AnswerverifiedShow Answer

An individual bank may legally loan out an amount equal to its _________.

Correct AnswerverifiedShow Answer

The deposit expansion multiplier is

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A tight monetary policy does all of the following,except

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The agency directly responsible for monetary policy in the United States is

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Federal Reserve Notes are

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