Question 1

Monetary policy actions by the Fed are

Accepted Answer

A)   more effective in a restrictive direction than they are in an expansionary direction.
B)   more effective in an expansionary direction than they are in a restrictive direction.
C)   equally effective in both expansionary and restrictive directions.
D)   only effective when coupled with ﬁscal policy actions.

Question 2

When commercial banks borrow from the Federal Reserve Banks, they decrease their excess reserves and their money-creating
potential.

Accepted Answer

A) True 
 B)False

Question 3

In traditional monetary policy, if the Fed targeted a lower federal funds rate, then it was pursuing a restrictive monetary policy.

Accepted Answer

A) True 
 B)False

Question 4

The interest rate that banks charge one another on overnight loans is called the

Accepted Answer

A)   discount rate.
B)   prime lending rate.
C)   overnight lending rate.
D)   federal funds rate.

Question 5

Which of the following would not be a consequence of negative interest rates?

Accepted Answer

A)   People's deposits in banks would have shrinking balances over time.
B)   Reduced bank reserves that could cause a contraction in the economy.
C)   People would want to put more money in banks.
D)   People would rather hold cash than bank deposits.

Question 6

Which of the following tools of monetary policy is ﬂexible and able to affect bank reserves quickly and by relatively speciﬁc amounts?

Accepted Answer

A)   the discount rate
B)   the reserve ratio
C)   open-market operations
D)   the federal funds rate

Question 7

The major purpose of the Federal Reserve buying government securities in open-market operations is to

Accepted Answer

A)   increase interest rates.
B)   raise money for government spending.
C)   reduce the excess reserves of banks.
D)   allow banks to increase their lending.

Question 8

Which of the following actions by the Fed would cause the money supply to increase?

Accepted Answer

A)   purchases of government bonds from banks
B)   an increase in the reserve requirement
C)   an increase in the discount rate
D)   sales of government bonds to the public

Question 9

The increase in excess reserves that occurred as a result of the mortgage debt crisis

Accepted Answer

A)   was offset by restrictive monetary policy.
B)   rendered open-market operations ineffective.
C)   caused the Fed to set a negative nominal interest rate target for the federal funds rate.
D)   prevented the Fed from taking any further action to increase the money supply.

Question 10

Refer to the given market-for-money diagrams. The total demand for money is shown by

Accepted Answer

A)    D1D _ { 1 }D1​ 
B)    D2\mathrm { D } _ { 2 }D2​ 
C)    D3D _ { 3 }D3​ 
D)   S.

Question 11

Open-market operations include

Accepted Answer

A)   changes in the reserve ratio.
B)   repos and reverse repos.
C)   paying interest on excess reserves held at Federal Reserve Banks.
D)   changes in the discount rate.

Question 12

Item in Balance Sheet  Amount  1)  Treasury Deposits $7 2)  Reserves of Commercial Banks 31 3)  Federal Reserve Notes 275 4)  Loans to Commercial Banks 1 5)  All Other Assets 64 6)  Securities 255 7)  All Other Liabilities and Net Worth 7\begin{array} { | l | c | } \hline { 	ext { Item in Balance Sheet } } & 	ext { Amount } \\hline 	ext { 1)  Treasury Deposits } & \$ 7 \\hline 	ext { 2)  Reserves of Commercial Banks } & 31 \\hline 	ext { 3)  Federal Reserve Notes } & 275 \\hline 	ext { 4)  Loans to Commercial Banks } & 1 \\hline 	ext { 5)  All Other Assets } & 64 \\hline 	ext { 6)  Securities } & 255 \\hline 	ext { 7)  All Other Liabilities and Net Worth } & 7 \\hline\end{array} Item in Balance Sheet  1)  Treasury Deposits  2)  Reserves of Commercial Banks  3)  Federal Reserve Notes  4)  Loans to Commercial Banks  5)  All Other Assets  6)  Securities  7)  All Other Liabilities and Net Worth ​ Amount $7312751642557​​  The table shows items and ?gures taken from a consolidated balance sheet of the 12 Federal Reserve Banks. All ?gures are in billions of dollars. In this balance sheet, there would be assets of

Accepted Answer

A)   $246 billion.
B)   $313 billion.
C)   $320 billion.
D)   $387 billion.

Question 13

Accepted Answer

A)   an increase in the discount rate
B)   purchases of U.S. securities by the Fed in the open market
C)   sales of U.S. securities by the Fed in the open market
D)   an increase in the reserve ratio

Question 14

Refer to the given market-for-money diagrams. The asset demand for money is shown by

Accepted Answer

A)    D1D _ { 1 }D1​ 
B)    D2D _ { 2 }D2​ 
C)    D3D _ { 3 }D3​ 
D)   S.

Question 15

Explain what is meant by a collateralized money loan. Provide an example.

Accepted Answer

A money loan is said to be collateralize...

Question 16

Upon which of the following industries is a restrictive monetary policy likely to be most effective?

Accepted Answer

A)   furniture
B)   clothing
C)   food processing
D)   residential construction

Question 17

Assume that U.S. National Bank has no excess reserves and that the reserve ratio is 20 percent. If U.S. National borrows $5 million from a Federal Reserve Bank through a repo transaction, it can expand its loans by a maximum of

Accepted Answer

A)   $5 million.
B)   $1 million.
C)   $25 million.
D)   $0.

Question 18

Which of the following is correct? When the Federal Reserve buys government securities from the public, the money supply

Accepted Answer

A)   contracts and commercial bank reserves increase.
B)   expands and commercial bank reserves decrease.
C)   contracts and commercial bank reserves decrease.
D)   expands and commercial bank reserves increase.

Question 19

When the reserve requirement is increased,

Accepted Answer

A)   required reserves are changed into excess reserves.
B)   the excess reserves of banks are increased.
C)   a single commercial bank can no longer lend dollar-for-dollar with its excess reserves.
D)   the excess reserves of banks are reduced.

Question 20

Accepted Answer

A)   increase the interest rate from 3 percent to 9 percent.
B)   increase the money supply from $100 to $120.
C)   decrease the money supply from $120 to $100.
D)   decrease the interest rate from 9 percent to 3 percent.

Exam 16: Interest Rates and Monetary Policy

Explain what is meant by a collateralized money loan. Provide an example.

Correct Answer
verified
A money loan is said to be collateralize...
View Answer

Open-market operations include

Correct Answer
verified

Which of the following actions by the Fed would cause the money supply to increase?

Correct Answer
verified

The interest rate that banks charge one another on overnight loans is called the

Correct Answer
verified

Assume that U.S. National Bank has no excess reserves and that the reserve ratio is 20 percent. If U.S. National borrows $5 million from a Federal Reserve Bank through a repo transaction, it can expand its loans by a maximum of

Correct Answer
verified

Correct Answer
verified

The major purpose of the Federal Reserve buying government securities in open-market operations is to

Correct Answer
verified

When commercial banks borrow from the Federal Reserve Banks, they decrease their excess reserves and their money-creating potential.

Correct Answer
verified

Which of the following would not be a consequence of negative interest rates?

Correct Answer
verified

Upon which of the following industries is a restrictive monetary policy likely to be most effective?

Correct Answer
verified

When the reserve requirement is increased,

Correct Answer
verified

Monetary policy actions by the Fed are

Correct Answer
verified

Correct Answer
verified

$Refer to the given market-for-money diagrams. The asset demand for money is shown by A) D _ { 1 } B) D _ { 2 } C) D _ { 3 } D) S.$ Refer to the given market-for-money diagrams. The asset demand for money is shown by

Correct Answer
verified

The increase in excess reserves that occurred as a result of the mortgage debt crisis

Correct Answer
verified

In traditional monetary policy, if the Fed targeted a lower federal funds rate, then it was pursuing a restrictive monetary policy.

Correct Answer
verified

Correct Answer
verified

Which of the following is correct? When the Federal Reserve buys government securities from the public, the money supply

Correct Answer
verified

$Refer to the given market-for-money diagrams. The total demand for money is shown by A) D _ { 1 } B) \mathrm { D } _ { 2 } C) D _ { 3 } D) S.$ Refer to the given market-for-money diagrams. The total demand for money is shown by

Correct Answer
verified

Which of the following tools of monetary policy is ﬂexible and able to affect bank reserves quickly and by relatively speciﬁc amounts?

Correct Answer
verified

Exam 16: Interest Rates and Monetary Policy

Explain what is meant by a collateralized money loan. Provide an example.

Correct AnswerverifiedA money loan is said to be collateralize...View AnswerShow Answer

Open-market operations include

Correct AnswerverifiedShow Answer

Which of the following actions by the Fed would cause the money supply to increase?

Correct AnswerverifiedShow Answer

The interest rate that banks charge one another on overnight loans is called the

Correct AnswerverifiedShow Answer

Assume that U.S. National Bank has no excess reserves and that the reserve ratio is 20 percent. If U.S. National borrows $5 million from a Federal Reserve Bank through a repo transaction, it can expand its loans by a maximum of

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The major purpose of the Federal Reserve buying government securities in open-market operations is to

Correct AnswerverifiedShow Answer

When commercial banks borrow from the Federal Reserve Banks, they decrease their excess reserves and their money-creating potential.

Correct AnswerverifiedShow Answer

Which of the following would not be a consequence of negative interest rates?

Correct AnswerverifiedShow Answer

Upon which of the following industries is a restrictive monetary policy likely to be most effective?

Correct AnswerverifiedShow Answer

When the reserve requirement is increased,

Correct AnswerverifiedShow Answer

Monetary policy actions by the Fed are

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the given market-for-money diagrams. The asset demand for money is shown by

Correct AnswerverifiedShow Answer

The increase in excess reserves that occurred as a result of the mortgage debt crisis

Correct AnswerverifiedShow Answer

In traditional monetary policy, if the Fed targeted a lower federal funds rate, then it was pursuing a restrictive monetary policy.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is correct? When the Federal Reserve buys government securities from the public, the money supply

Correct AnswerverifiedShow Answer

Refer to the given market-for-money diagrams. The total demand for money is shown by

Correct AnswerverifiedShow Answer

Which of the following tools of monetary policy is ﬂexible and able to affect bank reserves quickly and by relatively speciﬁc amounts?

Correct AnswerverifiedShow Answer

Correct Answer
verified
A money loan is said to be collateralize...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

$Refer to the given market-for-money diagrams. The asset demand for money is shown by A) D _ { 1 } B) D _ { 2 } C) D _ { 3 } D) S.$ Refer to the given market-for-money diagrams. The asset demand for money is shown by

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

$Refer to the given market-for-money diagrams. The total demand for money is shown by A) D _ { 1 } B) \mathrm { D } _ { 2 } C) D _ { 3 } D) S.$ Refer to the given market-for-money diagrams. The total demand for money is shown by

Correct Answer
verified

Correct Answer
verified