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Exam 14: The Federal Reserve System

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Question 31

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Table 14.2 Monetary Aggregates of the U.S.Financial System $\begin{array}{|l|r|}\hline\text { Item } & \text { Amount } \\\hline \text { Cash held by public } & \text { \$100billion } \\\hline\text { Transactions deposits } & \text { \$300billion } \\\hline\text { Required reserves } & \text { \$30billion } \\\hline\text { Excess reserves } & \text { \$0billion } \\\hline \text { U.S. bonds held by public } & \$ 475 \text { billion }\\\hline \end{array}$ Assume an original balance sheet: The level of total reserves in Table 14.2 is

A) $330 billion.
B) $30 billion.
C) $475 billion.
D) $315 billion.

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Question 32

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The M2 money supply is defined as

A) Currency held by the public plus transactions accounts.
B) M1 plus savings accounts.
C) M1 plus balances in most savings accounts and money market mutual funds.
D) Most balances held in savings accounts and money market mutual funds.

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Question 33

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If the Fed wishes to increase the money supply,it could

Suppose all of the banks in the Federal Reserve System have $500 billion in transactions accounts,the required reserve ratio is 0.30,and there are no excess reserves in the system.If the required reserve ratio is changed to 0.25,the total lending capacity of the system is increased by

Which of the following is not true for members of the Federal Reserve Board of Governors?

Anil buys a bond in the amount of $2,000 with a promised interest rate of 17 percent.If the market interest rate increases to 27 percent,Anil can sell his bond for up to

Which of the following is responsible for buying and selling government securities to influence reserves in the banking system?

Table 14.1 Monetary Aggregates of the U.S.Financial System $\begin{array}{|l|r|}\hline\text { Item } & \text { Amount } \\\hline \text { Cash held by public } & \text { \$250billion } \\\hline\text { Transactions deposits } & \text { \$1,000billion } \\\hline\text { Required reserves } & \text { \$150billion } \\\hline\text { Excess reserves } & \text { \$0billion } \\\hline \text { U.S. bonds held by public } & \$ 1,000 \text { billion }\\\hline \end{array}$ Assume an original balance sheet: Refer to Table 14.1.If the Fed buys $10 billion in bonds from the public,all of the following are true except

Through open market operations,the Fed is able to influence

Is the Federal Reserve insulated from political pressures in any way? Explain.

When the Fed buys bonds,the money supply increases.

Which of the following represents the lending capacity of an entire banking system?

Table 14.1 Monetary Aggregates of the U.S.Financial System $\begin{array}{|l|r|}\hline\text { Item } & \text { Amount } \\\hline \text { Cash held by public } & \text { \$250billion } \\\hline\text { Transactions deposits } & \text { \$1,000billion } \\\hline\text { Required reserves } & \text { \$150billion } \\\hline\text { Excess reserves } & \text { \$0billion } \\\hline \text { U.S. bonds held by public } & \$ 1,000 \text { billion }\\\hline \end{array}$ Assume an original balance sheet: On the basis of the information in Table 14.1,the required reserve ratio is

By raising the required reserve ratio,the Fed

How can the Fed make bonds more attractive as an alternative to holding money,and what is the impact to the money supply?

Table 14.2 Monetary Aggregates of the U.S.Financial System $\begin{array}{|l|r|}\hline\text { Item } & \text { Amount } \\\hline \text { Cash held by public } & \text { \$100billion } \\\hline\text { Transactions deposits } & \text { \$300billion } \\\hline\text { Required reserves } & \text { \$30billion } \\\hline\text { Excess reserves } & \text { \$0billion } \\\hline \text { U.S. bonds held by public } & \$ 475 \text { billion }\\\hline \end{array}$ Assume an original balance sheet: The total money supply (M1) in Table 14.2 is

The Fed can increase the federal funds rate by

Suppose Brian receives a check for $100 from a bank in Atlanta.He deposits the check in his account at a Dallas bank.The Dallas bank will most likely collect the $100 directly from the

The Federal Reserve System was created by

All of the following are tools available to the Fed for controlling the money supply except