STDQs_13_

STDQs_13_ - 120 The discount rate is the rate that the a...

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The discount rate is the rate that the a. Treasury pays on savings bonds. b. Fed charges member banks. c. Fed charges on government securities. d. Fed charges the Treasury for sales of securities. ANS: B DIF: Easy TOP: Other Methods of Monetary Control 121. Currently, in the United States, you can expect the discount rate to be a. used often to change the money supply. b. raised in periods of recession. c. fixed at the bank rate. d. adjusted to follow market rates of interest. ANS: D DIF: Moderate TOP: Other Methods of Monetary Control 122. If the Fed lends to member banks, what happens to reserves and the money supply? a. Reserves increase and the money supply decreases. b. Both increase. c. Reserves decrease and the money supply increases. d. Both decrease. ANS: B DIF: Easy TOP: Other Methods of Monetary Control 123. If the Fed raises the discount rate, what happens to reserves and the money supply? a. Reserves increase and the money supply decreases. b. Both increase. c. Reserves decrease and the money supply increases. d. Both decrease. ANS: D DIF: Easy TOP: Other Methods of Monetary Control 124. The reason that the Fed does not actively use discount rate policy to control the money supply is because the Fed a. acts when a majority of member banks agree on policy and the banks rarely agree. b. earns interest on discounting and cannot afford to lose the revenue. c. does not know how banks will respond to discount rate changes. d. has been directed by Congress to set the discount rate at a permanent level. ANS: C DIF: Moderate TOP: Other Methods of Monetary Control 125. If the Fed decreases the discount rate, what happens to reserves and the money supply? a. Reserves increase and the money supply decreases. b. Both increase. c. Reserves decrease and the money supply increases. d. Both decrease. ANS: B DIF: Easy TOP: Other Methods of Monetary Control 126. If the Fed raises the reserve requirement on deposits from 15 percent to 20 percent, what would happen to the money supply? a.
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This note was uploaded on 05/29/2008 for the course ECON 201 taught by Professor Joyce during the Spring '07 term at Drexel.

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STDQs_13_ - 120 The discount rate is the rate that the a...

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