HW 7 - ihw7 Return to Assessment List Part 1 of 1 -...

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Unformatted text preview: ihw7 Return to Assessment List Part 1 of 1 - Question 1 of 50 43.0/ 50.0 Points 1.0/ 1.0 Points In recent years, the Federal Reserve has conducted policy by setting a target for A. bank reserves. B. the monetary growth rate. C. the exchange rate. D. the federal funds rate. Answer Key: D Question 2 of 50 When the Fed conducts open market purchases, 1.0/ 1.0 Points A. it buys Treasury securities, which increases the money supply. B. it buys Treasury securities, which decreases the money supply. C. it borrows from member banks, which increases the money supply. D. it lends money to member banks, which decreases the money supply. Answer Key: A Question 3 of 50 The Federal Open Market Committee is made up of 1.0/ 1.0 Points A. 5 of the 12 presidents of the Federal Reserve Regional banks, and the 7 members of the Board of Governors. B. 7 of the 12 presidents of the Federal Reserve Regional banks, and the 5 members of the Board of Governors. C. the 12 presidents of the Federal Reserve Regional banks, and the Chair of the Board of Governors. D. the 12 presidents of the Federal Reserve Regional banks, and the 7 members of the Board of Governors. Answer Key: A Question 4 of 50 1.0/ 1.0 Points When the Fed conducts open market purchases, bank reserves A. increase and banks can increase lending. B. increase and banks must decrease lending. C. decrease and banks can increase lending. D. decrease and banks must decrease lending. Answer Key: A Question 5 of 50 Which of the following is correct? 1.0/ 1.0 Points A. The Federal Reserve has 14 regional banks. The Board of Governors has 12 members who serve 7-year terms. B. The Federal Reserve has 12 regional banks. The Board of Governors has 7 members who serve 14-year terms. C. The Federal Reserve has 12 regional banks. The Board of Governors has 14 members who serve 7-year terms. D. None of the above is correct. Answer Key: B Question 6 of 50 When a bank loans out $1,000, the money supply 1.0/ 1.0 Points A. does not change. B. decreases. C. increases. D. may do any of the above. Answer Key: C Question 7 of 50 0.0/ 1.0 Points Which of the following is NOT a channel of monetary policy (a way in which monetary policy affects the economy)? A. investment and purchase of consumer durables and housing B. exchange rates and exports and imports C. wealth and consumption D. banks willingness to lend E. all ARE channels Answer Key: B Question 8 of 50 Today, bank runs are 1.0/ 1.0 Points A. uncommon because of the high required reserve ratio. B. uncommon because of FDIC deposit insurance. C. common because of the low required reserve ratio. D. common because the FDIC is nearly bankrupt. Answer Key: B Question 9 of 50 An increase in the U.S. interest rate 1.0/ 1.0 Points A. induces firms to invest more. B. induces households to increase consumption. C. shifts money demand to the right. D. leads to the appreciation of the U.S. exchange rate. Answer Key: D Question 10 of 50 1.0/ 1.0 Points Refer to Table 16-2. If $1,000 is deposited into the First Bank of Mason City, A. total reserves will initially increase by $200. B. liabilities will decrease by $1,000. C. assets will increase by $1,000. D. required reserves will increase by $800. Answer Key: C Question 11 of 50 Federal Reserve Banks are owned by 1.0/ 1.0 Points A. the U.S. government. B. banks that are members of the Federal Reserve System. C. the governments of the states in which they are located. D. private citizens who own stock in them. Answer Key: B Question 12 of 50 Members of the Board of Governors 1.0/ 1.0 Points A. are appointed by the U.S. president, while presidents of the Federal Reserve regional banks are appointed by the banks' boards of directors. B. are appointed by the banks' boards of directors while the presidents of the Federal Reserve regional banks are appointed by the U.S. president. C. and the presidents of the Federal Reserve regional banks are appointed by the U.S. president. D. and the presidents of the Federal Reserve regional banks are appointed by the banks' boards of directors. Answer Key: A Question 13 of 50 Under a fractional reserve banking system, banks 1.0/ 1.0 Points A. hold more reserves than deposits. B. generally lend out a majority of the funds deposited. C. cause the money supply to fall by lending out reserves. D. All of the above are correct. Answer Key: B Question 14 of 50 1.0/ 1.0 Points If you deposit $100 into a demand deposit at a bank, this action by itself A. does not change the money supply. B. increases the money supply. C. decreases the money supply. D. has an indeterminate effect on the money supply. Answer Key: A Question 15 of 50 1.0/ 1.0 Points When the fed is unable to lower interest rates any further, we are in A. a liquidity trap B. an expectations trap. C. an accelerator trap D. a political business cycle. Answer Key: A Question 16 of 50 1.0/ 1.0 Points During recessions, banks typically choose to hold more excess reserves relative to their deposits. This action A. increases the money multiplier and increases the money supply. B. decreases the money multiplier and decreases the money supply. C. does not change the money multiplier, but increases the money supply. D. does not change the money multiplier, but decreases the money supply. Answer Key: B Question 17 of 50 The New York Federal Reserve Bank 1.0/ 1.0 Points A. president always gets to vote at the FOMC meetings. B. conducts open market transactions. C. is located in the traditional financial center of the United States. D. All of the above are correct. Answer Key: D Question 18 of 50 The Federal Reserve's main source of income is 1.0/ 1.0 Points A. fees charged to banks. B. funds budgeted by Congress. C. fees charged to the public every time they use an ATM. D. income from interest on the government securities it owns. Answer Key: D Question 19 of 50 0.0/ 1.0 Points Liquidity preference refers directly to Keynes' theory concerning A. the effects of changes in money demand and supply on interest rates. B. the effects of changes in money demand and supply on exchange rates. C. the effects of wealth on expenditures. D. the difference between temporary and permanent changes in income. Answer Key: A Question 20 of 50 1.0/ 1.0 Points Which of the following is not a tool of monetary policy? A. open market operations B. reserve requirements C. changing the discount rate D. increasing the deficit Answer Key: D Question 21 of 50 How is money created? 1.0/ 1.0 Points A. The Fed orders the Treasury to print new currency B. The Fed buys outstanding government bonds from bond dealers, who deposit the proceeds in their banks which is `new' money. Banks may lend out the new reserves, creataing new deposits further increasing the money supply C. Congress passes tax cut legislation D. The Fed issues new currency directly Answer Key: B Question 22 of 50 The federal funds rate is the interest rate on 1.0/ 1.0 Points A. loans to banks from the Fed. B. loans by banks to the Fed. C. short-term loans between banks. D. Treasury bills. Answer Key: C Question 23 of 50 0.0/ 1.0 Points The Fed effectively controls the Fed Funds rate by controlling A. the money supply B. the supply of bank reserves C. interest rates D. money demand Answer Key: B Question 24 of 50 1.0/ 1.0 Points When the Federal Reserve conducts open market transactions, it A. issues Federal Reserve notes. B. buys or sells previously issued government bonds from the public. C. lowers the discount rate. D. increases its lending to member banks. Answer Key: B Question 25 of 50 1.0/ 1.0 Points When the interest rate increases, the opportunity cost of holding money A. increases, so the quantity of money demanded increases. B. increases, so the quantity of money demanded decreases. C. decreases, so the quantity of money demanded increases. D. decreases, so the quantity of money demanded decreases. Answer Key: B Question 26 of 50 1.0/ 1.0 Points Which of the following shifts aggregate demand to the left? A. an increase in the price level B. an increase in the money supply C. a decrease in the price level D. a decrease in the money supply Answer Key: D Question 27 of 50 1.0/ 1.0 Points Refer to Table 16-2. If $400 is deposited into the First Bank of Mason City, A. the bank will be able to make additional loans totaling $320. B. excess reserves initially increase by $320. C. required reserves initially increase by $80. D. All of the above are true. Answer Key: D Question 28 of 50 1.0/ 1.0 Points The discount rate is A. the interest rate the Fed charges banks. B. one divided by the difference between one and the reserve ratio. C. the interest rate banks receive on reserve deposits with the Fed. D. the interest rate that banks charge on overnight loans to other banks. Answer Key: A Question 29 of 50 A monetary injection by the Fed 1.0/ 1.0 Points A. increases interest rates and increases aggregate demand. B. increases interest rates and decreases aggregate demand. C. decreases interest rates and decreases aggregate demand. D. decreases interest rates and increases aggregate demand. Answer Key: D Question 30 of 50 1.0/ 1.0 Points Suppose a bank has a 10 percent reserve ratio, $5,000 in deposits, and it loans out all it can given the reserve ratio. A. It has $50 in required reserves and $4,950 in loans. B. It has $500 in required reserves and $4,500 in loans. C. It has $555 in required reserves and $4,445 in loans. D. None of the above is correct. Answer Key: B Question 31 of 50 1.0/ 1.0 Points Which of the following is NOT part of the dual mandate (two goals) of the Federal Reserve? A. price stability B. maximum sustainable employment and growth C. balanced budgets D. all ARE goals of the Fed Answer Key: C Question 32 of 50 Liquidity refers to 1.0/ 1.0 Points A. the relation between the price and interest rate of an asset. B. the risk of an asset relative to its selling price. C. the ease with which an asset is converted into a medium of exchange. D. the sensitivity of investment spending to changes in the interest rate. Answer Key: C Question 33 of 50 0.0/ 1.0 Points If the public decides to hold more currency and fewer deposits in banks, bank reserves A. decrease and the money supply eventually decreases. B. decrease but the money supply does not change. C. increase and the money supply eventually increases. D. increase but the money supply does not change. Answer Key: A Question 34 of 50 Which of the following is the most liquid asset? 0.0/ 1.0 Points A. capital goods B. stocks and bonds with a low risk C. stocks and bonds with a high risk D. funds in a checking account Answer Key: D Question 35 of 50 1.0/ 1.0 Points The agency responsible for regulating the money supply in the United States is A. the Comptroller of the Currency. B. the U.S. Treasury. C. the Federal Reserve. D. the U.S. Bank. Answer Key: C Question 36 of 50 The Fed satisfies its Lender of Last Resort when it is 1.0/ 1.0 Points A. closing down failed banks B. selling government bonds to the bank. C. lending reserves to banks with liquidity problems D. lending reserves to insolvent banks Answer Key: C Question 37 of 50 1.0/ 1.0 Points When monetary policy eases before elections to favor incumbent politicians, there is said to be A. credibility. B. an expectations trap. C. a diffusion of power. D. a political business cycle. Answer Key: D Question 38 of 50 The Fed does all except which of the following? 1.0/ 1.0 Points A. conduct monetary policy B. act as a lender of last resort C. convert Federal Reserve Notes into gold D. regulates banks and aspects of the financial system Answer Key: C Question 39 of 50 During the Great Depression in the early 1930s, 1.0/ 1.0 Points A. bank runs closed many banks. B. the Fed decreased reserve requirements. C. the money supply rose sharply. D. both a and c are correct. Answer Key: A Question 40 of 50 Refer to Table 16-2. The reserve ratio is Table 16-2 1.0/ 1.0 Points Assets Required Reserves Loans First Bank of Mason City Liabilities $20.00 Deposits $80.00 $100.00 A. 0 percent. B. 20 percent. C. 80 percent. D. 100 percent. Answer Key: B Question 41 of 50 Currency held by the public 1.0/ 1.0 Points A. and by banks is part of the money supply. B. is part of the money supply, but currency held by banks is not. C. is not part of the money supply, but currency held by banks is. D. or banks is not part of the money supply since it is not included in M1. Answer Key: B Question 42 of 50 On a bank's T-account, 1.0/ 1.0 Points A. both deposits and reserves are assets. B. both deposits and reserves are liabilities. C. deposits are assets, reserves are liabilities. D. reserves are assets, deposits are liabilities. Answer Key: D Question 43 of 50 1.0/ 1.0 Points If the interest rate is above the Fed's target, the Fed should A. buy bonds to increase the money supply. B. buy bonds to decrease the money supply. C. sell bonds to increase the money supply. D. sell bonds to decrease the money supply. Answer Key: A Question 44 of 50 1.0/ 1.0 Points According to liquidity preference theory, if the quantity of money demanded is greater than the quantity supplied, the interest rate will A. increase and the quantity of money demanded will decrease. B. increase and the quantity of money demanded will increase. C. decrease and the quantity of money demanded will decrease. D. decrease and the quantity of money demanded will increase. Answer Key: A Question 45 of 50 Bank runs 1.0/ 1.0 Points A. will affect neither the money supply nor the money multiplier. B. are only a problem for insolvent banks. C. can be neither prevented nor stopped by the Federal Reserve. D. are a problem because banks only hold a fraction of deposits as reserves. Answer Key: D Question 46 of 50 1.0/ 1.0 Points Each of the following helps the Federal Reserve to be independent of the federal government except A. the fourteen-year terms of the governors. B. the establishment of the Fed in the Constitution. C. the staggered terms of the governors. D. the independence of the Fed's income. Answer Key: B Question 47 of 50 1.0/ 1.0 Points According to liquidity preference theory, equilibrium in the money market is achieved by adjustments in A. the price level. B. the interest rate. C. the exchange rate. D. real wealth. Answer Key: B Question 48 of 50 People own or hold money primarily because it 1.0/ 1.0 Points A. has a guaranteed nominal return. B. serves as a store of value. C. can directly be used to buy goods and services. D. functions as a unit of account. Answer Key: C Question 49 of 50 0.0/ 1.0 Points When the Fed engages in open-market operations, the transactions are conducted by A. the Open Market Desk at the Federal Reserve Bank of New York. B. the Open Market Desk at the Federal Reserve Board in Washington, D.C. C. the National Bureau of Economic Research. D. the Federal Open Market Committee. Answer Key: A Question 50 of 50 0.0/ 1.0 Points When the Fed decreases the money supply we expect A. interest rates and stock prices to rise. B. interest rates and stock prices to fall. C. interest rates to rise and stock prices to fall. D. interest rates to fall and stock prices to rise. Answer Key: C ...
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