Exam 2 - a-‘t gmussisg‘swusazfij“ Veesw 52R MULTIPLE CHOICE Choose the one alternative that BEST COMPLETES the statement or answers the

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Unformatted text preview: a-‘t gmussisg‘swusazfij“ Veesw 52R MULTIPLE CHOICE. Choose the one alternative that BEST COMPLETES the statement or answers the question. 1) A bank's liabilities represent it's? @purce of funds 5 return on borrowed funds C) total amount of loans D) use of funds E) none of the above 2) The Fed requires banks to keep reserves against which type(s) of deposit? @eakable deposits ) government securities C) savings deposits D) small time deposits E) a and (2 above 3) Which of the following is not a bank liability? A) small time deposits B) checkable deposits C) government securities loans and d above 4) Which of the following is a bank liability A) discount loans Bf government securites 9’ reserves D) savings deposits @and d above 5) Which of the following are bank assets? A) checkable deposits B) reserves C) loans D) governement securites @fl but —a- are assets 6) Which of the following represents the greatest source of profit for for a bank? A) reserves B) physical property ’- C) capital (9) loans E) checkable deposits 7) Nontransacfion deposits include? A) small time deposits B) savings deposits C) discount loans D) checkable deposits ® and b above 8) Which of the follong represents a bank‘s legal reserves? A) currency in circulation and reserves [ deposits at the Fed and vault cash C) Vault cash and loans to other banks D) vault cash and US government securities E) US government securities and deposits at the Fed 9) In Slovenia, the reserve requirment is 20% on checkable deposits and 10% savings deposits. If Bose deposits 100 Cronnin in his savings account, then the banks required reserves are: A) 30 Cronnin B) 20 Cronnin @O Cronnin D) none of the above are correct 10) Summarize the net effect of the following Bank transactions on bank reserves: a. customers deposit $1000 in checking accounts meexawithdraw$250 from“ savings accounts c. customers buy $500 worth of certificates of deposit '1!“ 'n; l . A) reserves increase by $250 \‘ 1' L M" ‘ / '9") V B) reserves increase by $500 / l 1" G , ELL/3:7 @eserves increase by $1,250 D) reserves increase by $750 1/ 0 ’3 Wives increase by $1,000 11) Liquidity management relates to at banks ability to? @ eet depositors‘ Withdrawals oduce profits on liquid assets C) make loans D) attract deposits and make loans E) maintain reserve requirements and capital 12) The most significant change in the economic environment that has altered the demand for financial products during the past 50 years is? A) improvements in multimedia communications B) deregulaton of banking C) the Glass-Stegall Act V D interest rate volitity E) the arrival of large time deposits 13) The rapid growth of the commercial paper market since the early 19703 has? fiduced the number of potential loans made by banks to businesses ‘ B) increased the cost of borrong money for most businesses C) increased bank profitablity D) given bank's a new source of funds E) enabled the growth of capital markets 14) How has the growth of Money market mutual funds since 1980 effected banks? A) denied banks some of their traditional loan customers B) decreased the cost of funds for banks C) increased the level of loans a bank can make {"lifiaken away potential deposits from banks E) made asset management easier 15) Which of the following is not a funtion of the 12 Federal Reserve Banks? A) Currency management and selling US government securites Check clearning D) Making discount loans E) Examining member banks 16) The Federal Open Market Committee makes monetary policy by? A) establishing reserve requirements B) establish the discount loan rate ,/”\ . , ,VI'CELes‘tabhshmg the Federal Funds Target Rate D) controlling the value of the US dollar E) conducting open market operations 17) The Federal Funds Target Rate is? ‘ W the rate that banks charge each other to borrow excess reserves ",B)’the rate use to make loans to a banks best customers rate that the Fed wants banks to charge each other to borrow excess reserves “ \~_’¢-‘ D) the rate that the Fed charges banks to borrow Fed reserves E) none of the above is correct 18) Which of the following is not a tool of monetary policy A) open market operations B) reserve requirments @Federal Funds Target rate D) discount loans E) all are tools of monetary policy 19) What is the most important tool of monetary policy pen market operations ) discount loans C) reserve requinnents D) Federal Funds Target rate 20) The Open Market Trading Desk conducts an open market purchase of $100 million from the banking system? The reserve requirement is 20%. What is the change in the monetary base? A) decrease of $80 million in reserves B) no change in the monetary base C) decrease of $100 million in reserves x/ D):>increase of $100 million in reserves 1 \/ E) increase of $80 million in reserves 21) The banking system repays $500 million in discount loans. Which of the following correctly reflects the tansactions on the Fed Balance sheet (F E O [email protected] increase by $500 million and discount loans decrease by $500 million a} m B) government securities increase by $500 million and discount loans decrease by $500 million ‘ “‘tfieserves decrease by $500 million and discount loans decrease by $500 million D) currency in circulation decreases by $500 million and reserves increase by $500 million E) none are correct 22) The Open Market Trading Desk Sells $513 in bonds to the banking system. The reserve requirement is 20%. If banks keep no excess reserves and the public does holds no currency, then what is the final (long run) effect of this transaction? ‘ @eckable deposits will be reduced by $253 lg can {L “=3 WM”— 3) loans will decrease by $53 q C) checkable deposits will be increased by $508 “l” KM ()3 o [I D) reserves will increase by $5B E) c and d above Use the following information to answer questions 23—25. Checkable deposits $250 B Savings deposits $150 B US Government securites $200 B Required reserves $25 B Excess reserves $10 B 5 Currrency in circulation $200 B 23) What is the value of the monetary base? A) 235 B 2 b 5 , x a ‘ B) $285 B _ J] C) $435 B D) $185 B E) $200 B 24) What is the currency deposit ratio? ‘3 A) 0.33 l B) .8 ‘ ' “'l P C) 0.5 J / I,“ D) 0.31 ’Z Q )6 E) none of the above are correct (I 25) Determine the excess reserve ratio. A 0.022 ’ \ O W B) 0.175 / c9 5 7» D) 0.025 Whom? of the above are correct Use the following data to answer questions 26—29 required reserve ratio 20% excess reserve ratio 12% currency ratio 8% monetary base $20 B 26) What is the value of the money multiplier L 0% _. Z 7 M... v . A) 5 f L! C) 2.5 1 , O K ,/—-7‘ ‘ A mm 'OggrR-AQKX ~ ’ k [GUYJJL 4 O E) none of the above are correct 27) What is the value of the money supply? A)100B Z0 x7_7 :3 r 3) 4B \ 0503 N @2003 E) no answer is within $5 B of the correct answer 28) Assume reserves decrease by $1 B and the ratios remain unchanged. What is the change in checkable deposits? A) —5 B [3C 0 : B)+SB @2513 D)—2.7B ’26 \ E)+2.SB A / t r' v 2.— v@\{/\/ 3? ft \ ’ / .. “Mm-vam- 29) Assume reserves decrease by $1 B and the ratios remain unchanged. What is the change in currency in r d A) -O.216 B B) -04 B EC) ‘ 0.2 B D +0.4 B E) +0.2 B 30) The Fed Funds rate currently exceeds the Federal Funds Target Rate. Choose the correctly drawn graph that indicates this situation. -...... '5) none of the above 31) Which action would cause the reserves demand curve to decrease (shift left)? I anks decide to hold less excess reserves B) an increase in the Fed Funds Target Rate ,Qa decrease in Borrowed Reserves V 5’ increase in the the reserve requirement E) an increase in Borrowed Reserves 32) The Fed increases currency in circulation by $250 M, nonborrowed reserves increase by $350 M, and discount loans are reduced by $400 M. Which of the following occurs: monetary base decreases C i 2‘ @he reserves supply curve shifts right C) the federal funds rate would decrease e reserves supply curve shifts left E) none of the above are correct 33) The change associated with a decrease in the supply of reserves is: A) a decrease in the Fed Funds Target rate B) an increase in the Fed Funds Target rate C) an increase in the discount rate F increase in the Fed Funds rate ‘\ A» \V/ E) none of the above are correct 34) The Federal Funds Target Rate equals the Federal Funds Rate. The Federal Open Market Committee has decided to decrease the tartet rate by 1/4 point. What type of transacfion(s ) will the open market trading desk execute tomrnorrow? v”. ) C) open maket purchases efensive transaction E) open market sales 35) What action(s) would the open market trading desk take to correct an unwanted increase in the demand for reserves? @conduct a open market purchases ' @Necrease the level of borrowed reserves C) increase the level of currency in circulation D) make additional discount loans E) lower the reserve requirement 36) Currently the Fed Funds Target rate is 3.5% and the Fed Funds rate is 3.44% . The banking system borrows $10 B in discount loans. How would you describe the subsequent actions by the open market trading desk? @ they would be defensive transactions B) they would conduct open market purchases C) the would raise the reserve requirements D) all the above and b only 37) According to the figure below, the Fed Funds Rate is: 94$ 6:25 5. 96? 5735 E) none of the above 39) The monetary base consists of: A) currency in circulation and vault cash B) borrowed and nonbon'ed reserves C) deposits at the Fed, currency outstanding, and vault cash in circulation, vault cash and deposits at the Fed E) currency outstanding and vault cash 40) Assume the demand for reserves remains constant. The actions of the open market trading desk have increased the supply of reserves. What will happen to short term nominal interest rates? A) changing the supply of reserves has no effect on the nominal interest rate ecrease C) remain unchanged D) increase ...
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This note was uploaded on 01/10/2012 for the course ECON 3313 taught by Professor Staff during the Fall '08 term at Oklahoma State.

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Exam 2 - a-‘t gmussisg‘swusazfij“ Veesw 52R MULTIPLE CHOICE Choose the one alternative that BEST COMPLETES the statement or answers the

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