Question 1

Why did the Fed switch from increasing rates prior to 2007 to reducing interest rates in 2007 and 2008?

Accepted Answer

The growing problems in the housing mark...

Question 2

Is there a trade-off between controlling domestic inflation and maintaining a sustainable pattern of international trade?

Accepted Answer

Yes. If the United States curtails money...

Question 3

About 34 percent of all U.S. banks are members of the Federal Reserve System.

Accepted Answer

A) True 
 B)False

Question 4

The Fed offers three types of discount window loans. ________ credit is offered to small institutions with demonstrable patterns of financing needs,________ credit is offered for short-term temporary funds outflows,and ________ credit may be offered at a higher rate to troubled institutions with more severe liquidity problems.

Accepted Answer

A)  Seasonal; extended; adjustment
B)  Extended; adjustment; seasonal
C)  Adjustment; extended; seasonal
D)  Seasonal; primary; secondary
E)  Adjustment; seasonal; extended

Question 5

Currently the Fed sets monetary policy by targeting

Accepted Answer

A)  the Fed funds rate.
B)  the prime rate.
C)  the level of nonborrowed reserves.
D)  the level of borrowed reserves.
E)  the stock market.

Question 6

If the Fed is targeting interest rates and money demand increases,an appropriate policy response would be to

Accepted Answer

A)  increase reserve requirements.
B)  increase the discount rate.
C)  buy U.S. Treasury securities from government bond dealers.
D)  increase government spending.
E)  None of these choices are correct.

Question 7

The Fed increases bank reserves in the system by $75 million. If there are no drains,the expected change in bank deposits is

Accepted Answer

A)  $82.5 million.
B)  $945 million.
C)  $750 million.
D)  $1,500 million.
E)  $655 million.

Question 8

A decrease in reserve requirements could lead to an

Accepted Answer

A)  increase in bank lending.
B)  increase in the money supply.
C)  increase in the discount rate.
D)  increase in bank lending and an increase in the money supply.
E)  increase in bank lending and an increase in the discount rate.

Question 9

The major asset of the Federal Reserve is currency outside banks and the major liability is U.S. Treasury securities.

Accepted Answer

A) True 
 B)False  False

Question 10

A bank has $770 million in checkable deposits. The bank has $85 million in reserves. The bank's required reserves are ________ and its excess reserves are ________.

Accepted Answer

A)  $85 million; $0
B)  $770 million; $85 million
C)  $89 million; $21 million
D)  $685 million; $8.5 million
E)  $77 million; $8 million

Question 11

Suppose that oil prices hit an all-time high of $200 a barrel,driving U.S. inflation up to 7 percent per year. At the same time,weak U.S. growth and increasing foreign competition have generated unacceptably high levels of unemployment in the United States. You are the chair of the Federal Reserve. What do you suggest?

Accepted Answer

This is a very difficult scenario for th...

Question 12

In the aftermath of the 2007 financial crisis,the Fed used several programs to increase liquidity,including ________.

Accepted Answer

A)  expansion of the discount window
B)  setting up the Term Auction Facility
C)  lending to investment banks
D)  purchase of long-term treasury bonds
E)  All of these choices are correct. E

Question 13

If the Fed wishes to stimulate the economy,it could
I. buy U.S. government securities.
II. raise the discount rate.
III. lower reserve requirements.

Accepted Answer

A)  I and III only
B)  II and III only
C)  I and II only
D)  II only
E)  I,II,and III

Question 14

Countries with independent central banks are subject to political pressure to conduct monetary policies with short-term expectations.

Accepted Answer

A) True 
 B)False

Question 15

How do Federal Reserve Banks generate income? Do they require supplemental funding from Congress?

Accepted Answer

-Interest earned on government securitie...

Question 16

The Check 21 Act,effective in October 2004,does which of the following?

Accepted Answer

A)  Allows bank customers to better take advantage of bank float
B)  Requires banks to immediately clear all customer deposits
C)  Prohibits the Fed from being involved in check clearing to prevent unfair competition with private check clearing agencies
D)  Authorizes the use of an electronic image to facilitate paperless check clearing
E)  Eliminates all fees on checking

Question 17

One of the objectives of the FOMC is to formulate policies to promote 100 percent employment.

Accepted Answer

A) True 
 B)False  False

Question 18

Which of the following is not a goal of monetary policy?

Accepted Answer

A)  Moderate long-term interest rates.
B)  Stable interest rates.
C)  High employment.
D)  Stable prices.
E)  All of these choices are correct.

Question 19

If the FOMC wished to generate faster economic growth,they could issue a policy directive to the Federal Reserve Board Trading Desk to purchase U.S. government securities.

Accepted Answer

A) True 
 B)False

Question 20

Ceteris paribus,if the Fed was targeting the quantity of money supplied and money demand dropped,the Fed would likely ________. If the Fed was instead targeting interest rates and money demand dropped,the Fed would likely ________.

Accepted Answer

A)  increase the money supply; do nothing
B)  do nothing; decrease the money supply
C)  decrease the money supply; do nothing
D)  do nothing; increase the money supply
E)  increase the money supply; decrease the money supply

Exam 4: The Federal Reserve System, monetary Policy, and Interest Rates

Why did the Fed switch from increasing rates prior to 2007 to reducing interest rates in 2007 and 2008?

Correct Answer
verified
The growing problems in the housing mark...
View Answer

Is there a trade-off between controlling domestic inflation and maintaining a sustainable pattern of international trade?

Correct Answer
verified
Yes. If the United States curtails money...
View Answer

About 34 percent of all U.S. banks are members of the Federal Reserve System.

Correct Answer
verified

Correct Answer
verified

Currently the Fed sets monetary policy by targeting

Correct Answer
verified

If the Fed is targeting interest rates and money demand increases,an appropriate policy response would be to

Correct Answer
verified

The Fed increases bank reserves in the system by $75 million. If there are no drains,the expected change in bank deposits is

Correct Answer
verified

A decrease in reserve requirements could lead to an

Correct Answer
verified

The major asset of the Federal Reserve is currency outside banks and the major liability is U.S. Treasury securities.

Correct Answer
verified
False

A bank has $770 million in checkable deposits. The bank has $85 million in reserves. The bank's required reserves are and its excess reserves are .

Correct Answer
verified

Correct Answer
verified
This is a very difficult scenario for th...
View Answer

In the aftermath of the 2007 financial crisis,the Fed used several programs to increase liquidity,including ________.

Correct Answer
verified
E

If the Fed wishes to stimulate the economy,it could I. buy U.S. government securities. II. raise the discount rate. III. lower reserve requirements.

Correct Answer
verified

Countries with independent central banks are subject to political pressure to conduct monetary policies with short-term expectations.

Correct Answer
verified

How do Federal Reserve Banks generate income? Do they require supplemental funding from Congress?

Correct Answer
verified
-Interest earned on government securitie...
View Answer

The Check 21 Act,effective in October 2004,does which of the following?

Correct Answer
verified

One of the objectives of the FOMC is to formulate policies to promote 100 percent employment.

Correct Answer
verified
False

Which of the following is not a goal of monetary policy?

Correct Answer
verified

If the FOMC wished to generate faster economic growth,they could issue a policy directive to the Federal Reserve Board Trading Desk to purchase U.S. government securities.

Correct Answer
verified

Ceteris paribus,if the Fed was targeting the quantity of money supplied and money demand dropped,the Fed would likely . If the Fed was instead targeting interest rates and money demand dropped,the Fed would likely .

Correct Answer
verified

Exam 4: The Federal Reserve System, monetary Policy, and Interest Rates

Why did the Fed switch from increasing rates prior to 2007 to reducing interest rates in 2007 and 2008?

Correct AnswerverifiedThe growing problems in the housing mark...View AnswerShow Answer

Is there a trade-off between controlling domestic inflation and maintaining a sustainable pattern of international trade?

Correct AnswerverifiedYes. If the United States curtails money...View AnswerShow Answer

About 34 percent of all U.S. banks are members of the Federal Reserve System.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Currently the Fed sets monetary policy by targeting

Correct AnswerverifiedShow Answer

If the Fed is targeting interest rates and money demand increases,an appropriate policy response would be to

Correct AnswerverifiedShow Answer

The Fed increases bank reserves in the system by $75 million. If there are no drains,the expected change in bank deposits is

Correct AnswerverifiedShow Answer

A decrease in reserve requirements could lead to an

Correct AnswerverifiedShow Answer

The major asset of the Federal Reserve is currency outside banks and the major liability is U.S. Treasury securities.

Correct AnswerverifiedFalse

A bank has $770 million in checkable deposits. The bank has $85 million in reserves. The bank's required reserves are ________ and its excess reserves are ________.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThis is a very difficult scenario for th...View AnswerShow Answer

In the aftermath of the 2007 financial crisis,the Fed used several programs to increase liquidity,including ________.

Correct AnswerverifiedE

If the Fed wishes to stimulate the economy,it could I. buy U.S. government securities. II. raise the discount rate. III. lower reserve requirements.

Correct AnswerverifiedShow Answer

Countries with independent central banks are subject to political pressure to conduct monetary policies with short-term expectations.

Correct AnswerverifiedShow Answer

How do Federal Reserve Banks generate income? Do they require supplemental funding from Congress?

Correct Answerverified-Interest earned on government securitie...View AnswerShow Answer

The Check 21 Act,effective in October 2004,does which of the following?

Correct AnswerverifiedShow Answer

One of the objectives of the FOMC is to formulate policies to promote 100 percent employment.

Correct AnswerverifiedFalse

Which of the following is not a goal of monetary policy?

Correct AnswerverifiedShow Answer

If the FOMC wished to generate faster economic growth,they could issue a policy directive to the Federal Reserve Board Trading Desk to purchase U.S. government securities.

Correct AnswerverifiedShow Answer

Ceteris paribus,if the Fed was targeting the quantity of money supplied and money demand dropped,the Fed would likely ________. If the Fed was instead targeting interest rates and money demand dropped,the Fed would likely ________.

Correct AnswerverifiedShow Answer

Correct Answer
verified
The growing problems in the housing mark...
View Answer

Correct Answer
verified
Yes. If the United States curtails money...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
False

A bank has $770 million in checkable deposits. The bank has $85 million in reserves. The bank's required reserves are and its excess reserves are .

Correct Answer
verified

Correct Answer
verified
This is a very difficult scenario for th...
View Answer

Correct Answer
verified
E

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
-Interest earned on government securitie...
View Answer

Correct Answer
verified

Correct Answer
verified
False

Correct Answer
verified

Correct Answer
verified

Ceteris paribus,if the Fed was targeting the quantity of money supplied and money demand dropped,the Fed would likely . If the Fed was instead targeting interest rates and money demand dropped,the Fed would likely .

Correct Answer
verified