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plugin-exam_3 - Econ 302 Banking and Monetary Policy...

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Econ 302 Name ____________________________________________ Banking and Monetary Policy Professor Abrams 2008 Spring - Exam #3 Directions: Circle the letter and mark the answer sheet for the best answer t o each of the following 40 questions. The test will be returned to you. Please mark both the test and the answer sheet. Good Luck MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The Fed uses three policy tools to manipulate the money supply: ________, which affect reserves and the monetary base; changes in ________, which affect the monetary base; and changes in ________, which affect the money multiplier. A) open market operations; borrowed reserves; margin requirements B) borrowed reserves; open market operations; margin requirements C) borrowed reserves; open market operations; reserve requirements D) open market operations; borrowed reserves; reserve requirements 2) The primary indicator of the Fed's stance on monetary policy is A) the federal funds rate. B) the growth rate of M2. C) the discount rate. D) the growth rate of the monetary base. 3) In the market for reserves, when the federal funds interest rate is below the discount rate, the supply curve of reserves is 4) In the market for reserves, an open market ________ the supply of reserves, raising the federal funds interest rate, everything else held constant. 5) Suppose on any given day the prevailing equilibrium federal funds rate is below the Federal Reserve's federal funds target rate. If the Federal Reserve wishes for the federal funds rate to be at their target level, then the appropriate action for the Federal Reserve to take is a ________ open market ________, everything else held constant.
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