Mhw6ANS - MHW6 ANSWERS TO SELECTED QUESTIONS IN RED...

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MHW6 – ANSWERS TO SELECTED QUESTIONS IN RED CAPITALS Question 1 If the required reserve ratio is equal to 10 percent, a single bank can increase its loans up to a maximum amount equal to 52 its excess reserves. 12 10 times its excess reserves. 2 its total reserves. 7 10 percent of its excess reserves. 73 % Students All Correct 71 Question 2 If the Fed injects reserves into the banking system and they are held as excess reserves, then the money supply 23 increases by a multiple of the initial increase in reserves. 2 increases by only one-half the initial increase in reserves. 35 does not change. 13 increases by only the initial increase in reserves. 73 % Students All Correct 47 Question 3 Open market operations undertaken to offset undesired changes in reserves are called 4
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offsetting operations. 59 defensive operations 8 dynamic operations 4 open market operations 75 % Students All Correct 78 Question 4 During the bank panics of the Great Depression the currency ratio 1 Response decreased slightly. 50 increased sharply. 3 increased slightly. 21 decreased sharply. 75 % Students All Correct 66 Question 5 The interest rate charged on overnight loans of reserves between banks is the 1 Response prime rate. 65 federal funds rate. 1 Response Treasury bill rate. 8 discount rate. 75
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% Students All Correct 86 Question 6 When an individual sells a $100 bond to the Fed, she may either deposit the check she receives or cash it for currency. In both cases 6 high-powered money decreases. 10 reserves increase. 8 reserves decrease. 51 high-powered money increases. 75 % Students All Correct 68 Question 7 When banks borrow money from the Federal Reserve, these funds are called 1 Response Treasury funds. 6 federal funds. 3 federal loans. 64 discount loans. 74 % Students All Correct 86 Question 8 The Fed does not tightly control the monetary base because it does not completely control 12 the discount rate. 51
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borrowed reserves. 2 open market sales. 10 open market purchases. 75 % Students All Correct 68 Question 9 The opportunity cost of holding excess reserves is 9 the prime rate. 47 the federal funds rate. 2 the Treasury bill rate. 17 the discount rate. 75 % Students All Correct 62 Question 10 The effect of an open market purchase on reserves differs depending on how the seller of the bonds keeps the proceeds. If the proceeds are kept in ________, the open market purchase has no effect on reserves; if the proceeds are kept as ________, reserves increase by the amount of the open market purchase. 1 Response deposits; deposits 65 currency; deposits 7 deposits; currency 0 currency; currency 73
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% Students All Correct 89 Question 11 The monetary liabilities of the Federal Reserve include 8 government securities and reserves. 9
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Mhw6ANS - MHW6 ANSWERS TO SELECTED QUESTIONS IN RED...

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