ECO201 Chapter 13 Exam Solution
• Question 1
1 out of 1 points
If the Fed wants to increase the money supply, it can __________ the
... [Show More] required reserve ratio, conduct an open market __________, or __________the discount rate.
Selected Answer: d.
lower; purchase; lower
Answers: a.
lower; purchase; raise
b.
lower; sale; raise
c.
raise; sale; lower
d.
lower; purchase; lower
e.
raise; purchase; raise
• Question 2
0 out of 1 points
Which of the following will increase the money supply?
Selected Answer: b.
an open market sale
Answers: a.
increasing the required reserve ratio
b.
an open market sale
c.
raising the discount rate relative to the federal funds rate
d.
none of the above
• Question 3
0 out of 1 points
The Federal Open Market Committee (FOMC) is composed of the seven members of the Board of Governors,
Selected Answer: a.
four Federal Reserve District Bank presidents who rotate on an annual basis, and the head of the Senate Banking Committee.
Answers: a.
four Federal Reserve District Bank presidents who rotate on an annual basis, and the head of the Senate Banking Committee.
b.
the president of the New York Federal Reserve District Bank, and four of the remaining 11 Federal Reserve District Bank presidents who rotate on an annual basis.
c.
and five state governors who rotate on an annual basis.
d.
and the Secretary of the Treasury.
• Question 4
1 out of 1 points
In controlling the nation's money supply, the Fed is obligated to seek the advice of
Selected Answer: e.
none of the above
Answers: a.
the Congress.
b.
the President of the United States.
c.
the Treasury.
d.
a and b
e.
none of the above
• Question 5
1 out of 1 points
The original boundaries for the Federal Reserve districts were determined based on
Selected Answer: c.
trade boundaries.
Answers: a.
Congressional district boundaries.
b.
population distributions obtained from the census.
c.
trade boundaries.
d.
state lines.
e.
none of the above
• Question 6
1 out of 1 points
To decrease the money supply, the Fed may sell government securities or lower taxes.
Selected Answer: False
Answers: True
False
• Question 7
0 out of 1 points
When the Fed increases the required reserve ratio, a bank's
Selected Answer: d.
excess reserves are decreased.
Answers: a.
required reserves are unaffected.
b.
required reserves are increased.
c.
required reserves are decreased.
d.
excess reserves are decreased.
e.
b and d
• Question 8
1 out of 1 points
If the Fed purchases government securities from Bank A, __________ in the banking system __________ and the money supply __________.
Selected Answer: d.
reserves; rise; rises
Answers: a.
reserves; rise; falls
b.
excess reserves; fall; rises
c.
reserves; fall; falls
d.
reserves; rise; rises
e.
excess reserves; rise; falls
• Question 9
1 out of 1 points
When commercial banks borrow from other commercial banks, the immediate impact is that reserves in the banking system
Selected Answer: c.
are unaffected.
Answers: a.
increase.
b.
decrease.
c.
are unaffected.
d.
first decrease, then increase.
e.
first increase, then decrease.
• Question 10
1 out of 1 points
An open market __________ by the Fed increases the money supply; a(n) __________ in the required reserve ratio increases the money supply.
Selected Answer: a.
purchase; decrease
Answers: a.
purchase; decrease
b.
sale; increase
c.
purchase; increase
d.
sale; decrease
• Question 11
1 out of 1 points
The Board of Governors of the Federal Reserve is part of a larger policy-making group called the
Selected Answer: d.
Federal Open Market Committee.
Answers: a.
Senate Banking Committee.
b.
American Banking Association.
c.
Federal Deposit Insurance Corporation.
d.
Federal Open Market Committee.
• Question 12
0 out of 1 points
Which of the following will decrease the money supply?
Selected Answer: a.
an increase in the discount rate (relative to the federal funds rate)
Answers: a.
an increase in the discount rate (relative to the federal funds rate)
b.
an increase in the required reserve ratio
c.
an open market purchase by the Fed
d.
a and b
e.
a, b, and c
• Question 13
1 out of 1 points
A Federal Reserve Bank is located in which of the following cities?
Selected Answer: e.
all of the above
Answers: a.
St. Louis, Missouri
b.
Richmond, Virginia
c.
Atlanta, Georgia
d.
San Francisco, California
e.
all of the above
• Question 14
1 out of 1 points
The Board of Governors of the Federal Reserve is comprised of
Selected Answer: d.
seven persons, each appointed to a fourteen-year term.
Answers: a.
twelve persons, each appointed to a seven-year term.
b.
seven persons, each appointed to a seven-year term.
c.
fourteen persons, each appointed to a seven-year term.
d.
seven persons, each appointed to a fourteen-year term.
e.
twelve persons, each appointed to a fourteen-year term.
• Question 15
1 out of 1 points
Every time the Fed buys or sells on the open market, the __________ changes.
Selected Answer: c.
money supply
Answers: a.
budget deficit
b.
income tax rate
c.
money supply
d.
a and b
e.
a, b, and c
• Question 16
1 out of 1 points
The most important responsibility of the Fed is to
Selected Answer: c.
control the money supply.
Answers: a.
clear checks.
b.
supervise member banks.
c.
control the money supply.
d.
serve as fiscal agent for the U.S. Treasury.
• Question 17
1 out of 1 points
Assuming no cash leakages and no excess reserves held by banks, a required reserve ratio of 0 percent would mean that the simple deposit multiplier is
Selected Answer: e.
infinity.
Answers: a.
10.
b.
0.
c.
100.
d.
1.
e.
infinity.
• Question 18
1 out of 1 points
The Federal Open Market Committee (FOMC) meets on the first Tuesday of each month.
Selected Answer: False
Answers: True
False
• Question 19
1 out of 1 points
Under free banking, banks are regulated by the Federal Reserve.
Selected Answer: False
Answers: True
False
• Question 20
0 out of 1 points
If the Fed lowers the discount rate (relative to the federal funds rate), banks will (likely) borrow __________ from the Fed, which will __________ reserves in the banking system, and eventually __________ the money supply.
Selected Answer: d.
more; decrease; raise
Answers: a.
less; decrease; lower
b.
more; increase; raise
c.
the same amount; not change; lower
d.
more; decrease; raise
e.
none of the above
• Question 21
1 out of 1 points
Exhibit 13-2
Federal Reserve Action Effect on the Money Supply
Raise the required reserve ratio (1)
Raise the discount rate (2)
Lower the required reserve ratio (3)
Conduct open market sale (4)
Lower the discount rate (5)
Conduct open market purchase (6)
Refer to Exhibit 13-2. What word (up or down) should go in the place of blank (1) and blank (2), respectively?
Selected Answer: d.
down; down
Answers: a.
down; up
b.
up; up
c.
up; down
d.
down; down
• Question 22
0 out of 1 points
If reserves increase by $7 million and the required reserve ratio is 12%, what is the resulting change in checkable deposits (or the money supply), assuming that there are no cash leakages and that banks hold zero excess reserves?
Selected Answer: a.
$0.84 million
Answers: a.
$0.84 million
b.
$58.33 million
c.
$5.83 million
d.
$7.95 million
• Question 23
1 out of 1 points
The major policy-making group within the Fed is the __________ Committee.
Selected Answer: b.
Federal Open Market
Answers: a.
Federal Reserve Banking
b.
Federal Open Market
c.
Federal Reserve Tax
d.
Federal Reserve Decision-Making
e.
Regional Bank
• Question 24
1 out of 1 points
The Board of Governors of the Federal Reserve serves on a larger policy-making group called the House Banking Committee.
Selected Answer: False
Answers: True
False
• Question 25
1 out of 1 points
The word that best describes the relationship between the required reserve ratio and the money supply is
Selected Answer: d.
inverse.
Answers: a.
direct.
b.
roundabout.
c.
constant.
d.
inverse. [Show Less]