Chap016 - Chapter 16 The Fed Money and Credit Chapter 16...

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Chapter 16 - The Fed, Money, and Credit Chapter 16 The Fed, Money, and Credit Multiple Choice Questions 1. While the Fed can influence the money stock, the ratio of currency to deposits in the country at any given time is determined a. By the Treasury b. Jointly by the Treasury and the Fed c. Only by lending institutions which provide banking services d. Only by the actions of the Treasury Department E . By the public, as households and businesses hold money in the form they prefer Difficulty: Easy 2. Assume many more stores agree to accept credit cards. Which of the following will be a likely outcome? a. The money multiplier will decrease B . The money multiplier will increase c. Money supply will decrease, given a fixed monetary base d. The currency-deposit ratio will increase e. The reserve ratio will decrease Difficulty: Medium 3. The assumption that banks hold less excess reserves and consumers hold less currency when market interest rates increase implies that a. The size of the money multiplier decreases as interest rates rise b. The Fed has total control over the supply of money C . Changes in money supply occur as economic conditions change d. Monetary policy is totally ineffective e. None of the above Difficulty: Medium 16-1
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Chapter 16 - The Fed, Money, and Credit 4. The relationship between the stock of money and the monetary base is a. Determined solely by the reserve-deposit ratio b. Determined solely by the currency-deposit ratio c. Between zero and one D . The money multiplier e. The income velocity of money Difficulty: Easy 5. High-powered money a. Earns more interest than other forms of money B . Consists of currency and bank reserves c. Consists of currency and demand deposits at banks d. Includes time and demand deposits held at banks e. Is created whenever the Fed sells Treasury bills Difficulty: Easy 6. The size of the money multiplier a. Cannot be influenced by actions of the Fed b. Declines with a decrease in high-powered money c. Decreases as the currency-deposit ratio decreases D . Increases as the reserve ratio decreases e. Increases as the reserve requirement is increased Difficulty: Medium 7. The money multiplier will increase if a. The Fed decides to buy government securities b. The Fed decides to sell government securities C . Consumers decide to hold less currency relative to deposits d. Consumers decide to hold more currency relative to deposits e. The Fed increases the reserve requirement Difficulty: Medium 16-2
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Chapter 16 - The Fed, Money, and Credit 8. Other things remaining the same, the smaller the currency-deposit ratio, a. The larger the reserve ratio b. The smaller the reserve ratio C . The larger the money multiplier d. The smaller the money multiplier e. The larger the monetary base Difficulty: Medium 9. The reserve ratio is likely to increase whenever A . Uncertainty about the net flow of bank deposits increases b. The market interest rate increases c. The Fed lowers reserve requirements d. The Fed increases the discount rate
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This note was uploaded on 12/05/2011 for the course ECON 201 taught by Professor Dr.matin during the Spring '09 term at Charleston.

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Chap016 - Chapter 16 The Fed Money and Credit Chapter 16...

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