Question 1

In the United States, paper currency is printed at the

Accepted Answer

A)  Bureau of Engraving and Printing.
B)  Federal Reserve District banks.
C)  U.S.Mint.
D)  U.S.Treasury.

Question 2

The three members of the commission that originally drew up the boundaries of the Federal Reserve Districts and the locations of the district banks were the

Accepted Answer

A)  Comptroller of the Currency, the Secretary of the Treasury, and the Secretary of Agriculture.
B)  Secretary of State, the Secretary of the Treasury, and the Speaker of the House of Representatives.
C)  Secretary of State, the Secretary of Commerce, and the Vice President.
D)  Secretary of the Treasury, the Secretary of Commerce, and the Vice President.

Question 3

The Federal Reserve System

Accepted Answer

A)  is the central bank of the United States.
B)  controls the money supply.
C)  is the lender of last resort.
D)  handles the sale of U.S.Treasury securities.
E)  all of the above

Question 4

When a check is written on an account at Bank A and deposited in Bank B, the reserve account of __________ will rise and reserves of the entire banking system will __________.

Accepted Answer

A)  Bank A; rise
B)  Bank A; remain constant
C)  Bank B; rise
D)  Bank B; remain constant

Question 5

The Fed can change the money supply by changing

Accepted Answer

A)  the required reserve ratio.
B)  marginal income tax rates.
C)  federal excise taxes.
D)  unemployment benefits.

Question 6

The discount rate is sometimes also known as the primary credit rate.

Accepted Answer

A) True 
 B)False

Question 7

A bank is reserve deficient when

Accepted Answer

A)  its reserves fall short of the level determined by the required reserve ratio.
B)  its excess reserves are greater than its required reserves.
C)  its required reserves are greater than its excess reserves.
D)  it purchases government securities from the Fed.

Question 8

The president of the Federal Reserve Bank of ________________ holds a permanent seat on the _________________________.

Accepted Answer

A)  New York; Board of Governors of the Federal Reserve System
B)  Washington D.C.; FOMC
C)  San Francisco; FOMC
D)  New York; FOMC
E)  Washington D.C.; Board of Governors of the Federal Reserve System

Question 9

The sale of government securities by the Fed

Accepted Answer

A)  decreases the supply of money.
B)  increases the supply of money.
C)  decreases the demand for money.
D)  increases the demand for money.

Question 10

Suppose that the Fed undertakes an open market sale, selling $3 million worth of securities to a bank. If the required reserve ratio is 11%, checkable deposits (or the money supply) , would _______________ by ________________ million, assuming that there are no cash leakages and that banks hold zero excess reserves.

Accepted Answer

A)  rise; $27
B)  decline; $33
C)  decline; $27
D)  rise; $33

Question 11

Which of the following Fed actions will decrease the money supply?

Accepted Answer

A)  an open market purchase of Treasury bills
B)  an increase in the required reserve ratio
C)  a decrease in the discount rate relative to the federal funds rate
D)  all of the above
E)  none of the above

Question 12

Which of the following is not a major responsibility of the Fed?

Accepted Answer

A)  controlling the money supply
B)  serving as the federal government's banker
C)  determining tax rates
D)  acting as a lender of last resort

Question 13

A required reserve ratio of 7 percent gives rise to a simple deposit multiplier of

Accepted Answer

A)  14.29.
B)  83.33.
C)  1.43.
D)  93.
E)  7.

Question 14

Which of the following will decrease the money supply?

Accepted Answer

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 15

When the Fed increases the required reserve ratio, a bank's

Accepted Answer

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 16

Use the simple deposit multiplier to help show why the money supply increases when the Fed lowers the required reserve ratio (r).

Accepted Answer

The used to determine the simp...

Question 17

Members of the Board of Governors of the Federal Reserve are appointed by the President and approved by the Senate to serve a 14-year term.

Accepted Answer

A) True 
 B)False

Question 18

The required reserve ratio is set by the

Accepted Answer

A)  U.S.Congress.
B)  President of the United States.
C)  Secretary of the Treasury.
D)  Federal Reserve.
E)  Director of Monetary Affairs.

Question 19

To limit political influence on Fed policy, the terms of the Fed Board of Governors are staggered so that one new appointment is made every four years to coincide with the presidential elections.

Accepted Answer

A) True 
 B)False

Question 20

The word that best describes the relationship between the required reserve ratio and the money supply is

Accepted Answer

A)  direct.
B)  constant.
C)  inverse.
D)  roundabout.

Exam 13: The Federal Reserve System

The discount rate is sometimes also known as the primary credit rate.

Correct AnswerverifiedShow Answer

To limit political influence on Fed policy, the terms of the Fed Board of Governors are staggered so that one new appointment is made every four years to coincide with the presidential elections.

Correct AnswerverifiedShow Answer

The word that best describes the relationship between the required reserve ratio and the money supply is

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In the United States, paper currency is printed at the

Correct AnswerverifiedShow Answer

The Federal Reserve System

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The president of the Federal Reserve Bank of ________________ holds a permanent seat on the _________________________.

Correct AnswerverifiedShow Answer

The sale of government securities by the Fed

Correct AnswerverifiedShow Answer

Which of the following is not a major responsibility of the Fed?

Correct AnswerverifiedShow Answer

A required reserve ratio of 7 percent gives rise to a simple deposit multiplier of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Fed can change the money supply by changing

Correct AnswerverifiedShow Answer

When a check is written on an account at Bank A and deposited in Bank B, the reserve account of __________ will rise and reserves of the entire banking system will __________.

Correct AnswerverifiedShow Answer

When the Fed increases the required reserve ratio, a bank's

Correct AnswerverifiedShow Answer

The required reserve ratio is set by the

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Which of the following Fed actions will decrease the money supply?

Correct AnswerverifiedShow Answer

The three members of the commission that originally drew up the boundaries of the Federal Reserve Districts and the locations of the district banks were the

Correct AnswerverifiedShow Answer

Use the simple deposit multiplier to help show why the money supply increases when the Fed lowers the required reserve ratio (r).

Correct AnswerverifiedThe used to determine the simp...View AnswerShow Answer

A bank is reserve deficient when

Correct AnswerverifiedShow Answer

Members of the Board of Governors of the Federal Reserve are appointed by the President and approved by the Senate to serve a 14-year term.

Correct AnswerverifiedShow Answer

Which of the following will decrease the money supply?

Correct AnswerverifiedShow Answer

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The president of the Federal Reserve Bank of holds a permanent seat on the _________.

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When a check is written on an account at Bank A and deposited in Bank B, the reserve account of will rise and reserves of the entire banking system will .

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