Question 1

The main assets held by banks are:

Accepted Answer

A)   deposits.
B)   bond holdings.
C)   loans.
D)   reserves.

Question 2

To reduce the money supply in the economy,the Fed would:

Accepted Answer

A)   increase the discount rate.
B)   carry out open market purchases.
C)   carry out open market sales and/or lower the discount rate.
D)   carry out open market purchases and/or lower the discount rate. A

Question 3

The Fed loaned money to J.P.Morgan and AIG because it was concerned about:

Accepted Answer

A)   moral hazard on the part of these banks.
B)   systemic risk,should these banks fail.
C)   the liquidity of these banks.
D)   the market demands being placed on these banks. B

Question 4

The government's bank and the bankers' bank in the United States are called the:

Accepted Answer

A)   central bank.
B)   Federal Reserve System.
C)   Bank of America.
D)   Bank of the United States.

Question 5

Why do banks hold reserves?

Accepted Answer

Banks hold some reserves because they ar...

Question 6

Which is included in M2?

Accepted Answer

A)   currency
B)   checkable deposits
C)   savings deposits
D)   currency,checkable deposits,and savings deposits

Question 7

The interest rate that the Fed charges to commercial banks when they borrow money from the Fed is called the Federal Funds rate.

Accepted Answer

A) True 
 B)False

Question 8

If the money multiplier is large,then action taken at the bottom of the money pyramid will have a relatively large effect on the entire pyramid.

Accepted Answer

A) True 
 B)False

Question 9

Which is NOT a duty performed by the Federal Reserve System?

Accepted Answer

A)   manage the nation's payment system
B)   print money
C)   regulate the U.S.banking system
D)   maintain the bank account for the U.S.Treasury

Question 10

If the Fed buys government bonds,which will likely NOT increase?

Accepted Answer

A)   the monetary base
B)   M1
C)   the Federal Funds rate
D)   bank reserves

Question 11

The reserve ratio is the ratio of reserves to:

Accepted Answer

A)   loans.
B)   vault cash.
C)   net worth.
D)   deposits.

Question 12

What is systemic risk and how does the Fed deal with it?

Accepted Answer

Systemic risk is the risk that failure o...

Question 13

When banks borrow directly from the Fed,the interest rate on those loans is the:

Accepted Answer

A)   prime rate.
B)   discount rate.
C)   Federal Funds rate.
D)   required reserve rate. B

Question 14

The interest rate that the Fed has the most control over is the:

Accepted Answer

A)   Federal Funds rate.
B)   mortgage loan rate.
C)   long-term government bond rate.
D)   prime rate.

Question 15

An insolvent bank has greater liabilities than assets.

Accepted Answer

A) True 
 B)False

Question 16

When the Fed wants to change the money supply,it usually buys or sells money market mutual funds.

Accepted Answer

A) True 
 B)False

Question 17

Which is NOT true of the Federal Reserve System?

Accepted Answer

A)   It maintains the bank account of the U.S.Treasury.
B)   It carries out policies passed by the federal government.
C)   It regulates the nation's money supply.
D)   It serves as the banker's bank.

Question 18

Which is the LEAST liquid means of payment?

Accepted Answer

A)   small-time deposits
B)   money market mutual funds
C)   savings deposits
D)   checkable deposits

Question 19

Moral hazard occurs when:

Accepted Answer

A)   the failure of one financial institution can bring down other institutions as well.
B)   financial institutions take on too much risk because they are insured.
C)   financial institutions become insolvent because they issued too many loans.
D)   there are more short-term liabilities than short-term assets.

Question 20

An increase in money growth will cause inflation to increase in:

Accepted Answer

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

Exam 15: The Federal Reserve System

The main assets held by banks are:

Correct AnswerverifiedShow Answer

To reduce the money supply in the economy,the Fed would:

Correct AnswerverifiedA

The Fed loaned money to J.P.Morgan and AIG because it was concerned about:

Correct AnswerverifiedB

The government's bank and the bankers' bank in the United States are called the:

Correct AnswerverifiedShow Answer

Why do banks hold reserves?

Correct AnswerverifiedBanks hold some reserves because they ar...View AnswerShow Answer

Which is included in M2?

Correct AnswerverifiedShow Answer

The interest rate that the Fed charges to commercial banks when they borrow money from the Fed is called the Federal Funds rate.

Correct AnswerverifiedShow Answer

If the money multiplier is large,then action taken at the bottom of the money pyramid will have a relatively large effect on the entire pyramid.

Correct AnswerverifiedShow Answer

Which is NOT a duty performed by the Federal Reserve System?

Correct AnswerverifiedShow Answer

If the Fed buys government bonds,which will likely NOT increase?

Correct AnswerverifiedShow Answer

The reserve ratio is the ratio of reserves to:

Correct AnswerverifiedShow Answer

What is systemic risk and how does the Fed deal with it?

Correct AnswerverifiedSystemic risk is the risk that failure o...View AnswerShow Answer

When banks borrow directly from the Fed,the interest rate on those loans is the:

Correct AnswerverifiedB

The interest rate that the Fed has the most control over is the:

Correct AnswerverifiedShow Answer

An insolvent bank has greater liabilities than assets.

Correct AnswerverifiedShow Answer

When the Fed wants to change the money supply,it usually buys or sells money market mutual funds.

Correct AnswerverifiedShow Answer

Which is NOT true of the Federal Reserve System?

Correct AnswerverifiedShow Answer

Which is the LEAST liquid means of payment?

Correct AnswerverifiedShow Answer

Moral hazard occurs when:

Correct AnswerverifiedShow Answer

An increase in money growth will cause inflation to increase in:

Correct AnswerverifiedShow Answer

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A

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B

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Banks hold some reserves because they ar...
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Systemic risk is the risk that failure o...
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B

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