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Monetary Quiz

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14-1. The use of money and credit controls to achieve macroeconomic goals is: Fiscal policy. → Monetary policy. Supply-side policy. Eclectic policy. | 14-2. Which of the following is responsible for buying and selling of government securities to influence reserves in the banking system? Twelve Federal Reserve banks The Executive Branch of government → The Federal Open Market Committee The Board of Governors of the Federal Reserve | 14-3. Which of the following represents the money multiplier? Required reserve ratio × total deposits Total reserves - required reserves (Total reserves - required reserves) × multiplier → 1 ÷ (required reserve ratio) | 14-4. Suppose the banks in the Federal Reserve System have $200 billion in …show more content…

| 14-7. When a bank is deficient in reserves, it can go to the federal funds market to borrow what it needs from another bank. | 14-10. The open market operations are conducted daily and do not have as large undesirable effects as altering the reserve requirement; as such, they are the Fed's favored tool. | 14-9. When a bank borrows money from the Fed, the bank's balance sheet has an equal increase in liabilities which includes loans from the Fed and assets which includes the additional reserves. | 14-11. When the Fed wishes to increase the reserves of the member banks, it: → Buys securities. Raises the reserve requirement. Raises the discount rate. Sells securities. | 14-12. Tony buys a bond in the amount of $500 with a promised interest rate of 15 percent. If the market interest rate decreases to 5 percent, Tony can sell his bond for up to: $500. $250. → $1,500. $1,250. | 14-13. The Fed can decrease the federal funds rate by: Selling bonds. → Buying bonds which causes market interest rates to fall. Simply announcing a lower rate since the Fed has direct control of this interest rate. Changing the money multiplier. | 14-14. If the Fed wishes to increase the money supply it could: → Lower the discount rate. Raise the minimum reserve ratio. Sell securities on the open market. Issue more bonds. | 14-15. In order to increase the money supply the Fed can: Raise

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