Econ Test 3 -13

25 Questions | By Uisnech | Last updated: Mar 20, 2022 | Total Attempts: 151

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1.

1. The Federal Reserve System is the
- A.
  
  Federal government agency that collects taxes and spends these receipts on tanks, bridges, government employees' salaries, etc.
- B.
  
  Company that delivers packages to your front door.
- C.
  
  Central bank of the United States.
- D.
  
  Federal government agency that collects and disseminates all the economic data that economists are interested in.
2.

2. The Federal Reserve System began operations in
- A.
  
  1834.
- B.
  
  1896
- C.
  
  1914
- D.
  
  1935.
3.

3. The Board of Governors of the Federal Reserve is comprised of
- A.
  
  Seven persons, each appointed to a seven-year term.
- B.
  
  Seven persons, each appointed to a fourteen-year term.
- C.
  
  Fourteen persons, each appointed to a seven-year term.
- D.
  
  Twelve persons, each appointed to a seven-year term.
- E.
  
  Twelve persons, each appointed to a fourteen-year term.
4.

6. Which of the following is not a major responsibility of the Fed?
- A.
  
  Supplying the economy with paper money
- B.
  
  Providing check-clearing services
- C.
  
  Supervising member banks
- D.
  
  Serving as fiscal agent for the Treasury
- E.
  
  All of the above are major responsibilities of the Fed.
5.

7. Which of the following is not a major responsibility of the Fed?
- A.
  
  Controlling the money supply
- B.
  
  Serving as the federal government's banker
- C.
  
  Determining tax rates
- D.
  
  Acting as a lender of last resort
6.

10. When a check is written on an account at Bank A and deposited in Bank B, the reserve account of __________ will rise and reserves of the entire banking system will __________.
- A.
  
  Bank A; rise
- B.
  
  Bank A; remain constant
- C.
  
  Bank B; rise
- D.
  
  Bank B; remain constant
7.

97. Here is how an open market sale works: A commercial bank __________ government securities to (from) the Fed, which lowers the bank's deposits at the __________ and __________ the bank's __________.
- A.
  
  Buys; Fed; lowers; reserves
- B.
  
  Sells; Treasury; raises; reserves
- C.
  
  Sells; Fed; raises; reserves
- D.
  
  Buys; Treasury; lowers; liabilities
- E.
  
  None of the above
8.

96. Here is how an open market purchase works: The Fed __________ government securities to (from) a commercial bank, which raises the bank's deposits at the __________ and increases the bank's __________.
- A.
  
  Sells; Fed; reserves
- B.
  
  Buys; Fed; reserves
- C.
  
  Buys; Treasury; discount loans
- D.
  
  Sells; Treasury; required reserve ratio
- E.
  
  Buys; Fed; liabilities
9.

95. The most important responsibility of the Fed is to
- A.
  
  Clear checks.
- B.
  
  Supervise member banks.
- C.
  
  Serve as fiscal agent for the U.S. Treasury.
- D.
  
  Control the money supply.
10.

94. The president of the ________________________ holds a permanent seat on the FOMC.
- A.
  
  United States
- B.
  
  Federal Reserve District Bank of New York
- C.
  
  Federal Reserve District Bank of San Francisco
- D.
  
  U.S. Senate banking committee
- E.
  
  None of the above
11.

72. Which of the following Fed actions will decrease the money supply?
- A.
  
  An open market purchase of Treasury bills
- B.
  
  An increase in the required reserve ratio
- C.
  
  A decrease in the discount rate
- D.
  
  All of the above
- E.
  
  None of the above
12.

71. Which of the following Fed actions will increase the money supply?
- A.
  
  Open market purchases of Treasury notes
- B.
  
  An increase in the required reserve ratio
- C.
  
  An increase in the discount rate
- D.
  
  All of the above
- E.
  
  None of the above
13.

72. Which of the following Fed actions will decrease the money supply?
- A.
  
  An open market purchase of Treasury bills
- B.
  
  An increase in the required reserve ratio
- C.
  
  A decrease in the discount rate
- D.
  
  All of the above
- E.
  
  None of the above
14.

Federal Reserve Action Effect on the Money Supply Raise the required reserve ratio (1) Raise the discount rate (2) Lower the required reserve ratio (3) Conduct open market sale (4) Lower the discount rate (5) Conduct open market purchase (6) 118. Refer to Exhibit 13-2. What word (up or down) should go in the place of blank (1) and blank (2), respectively?
- A.
  
  Up; up
- B.
  
  Up; down
- C.
  
  Down; up
- D.
  
  Down; down
15.

Federal Reserve Action Effect on the Money Supply Raise the required reserve ratio (1) Raise the discount rate (2) Lower the required reserve ratio (3) Conduct open market sale (4) Lower the discount rate (5) Conduct open market purchase (6) Refer to Exhibit 13-2. What word (up or down) should go in the place of blank (3) and blank (4), respectively?
- A.
  
  Up; up
- B.
  
  Up; down
- C.
  
  Down; up
- D.
  
  Down; down
16.

Federal Reserve Action Effect on the Money Supply Raise the required reserve ratio (1) Raise the discount rate (2) Lower the required reserve ratio (3) Conduct open market sale (4) Lower the discount rate (5) Conduct open market purchase (6) 120. Refer to Exhibit 13-2. What word (up or down) should go in the place of blank (5) and blank (6), respectively?
- A.
  
  Up; up
- B.
  
  Up; down
- C.
  
  Down; up
- D.
  
  Down; down
17.

121. In the United States, paper currency is printed at the
- A.
  
  Bureau of Engraving and Printing.
- B.
  
  Federal Reserve District banks.
- C.
  
  U.S. Mint.
- D.
  
  U.S. Treasury
18.

122. Which of the following is not a monetary policy tool of the Fed?
- A.
  
  Open market operations
- B.
  
  The required reserve ratio
- C.
  
  The discount rate
- D.
  
  The term auction facility (TAF) program
- E.
  
  Income tax rates
19.

112. The president of the Federal Reserve Bank of ________________ holds a permanent seat on the _________________________.
- A.
  
  New York; Board of Governors of the Federal Reserve System
- B.
  
  Washington D.C.; FOMC
- C.
  
  San Francisco; FOMC
- D.
  
  New York; FOMC
- E.
  
  Washington D.C.; Board of Governors of the Federal Reserve System
20.

110. The Fed is intended to be controlled by
- A.
  
  The President of the United States.
- B.
  
  Congress.
- C.
  
  The President of the United States and Congress, jointly.
- D.
  
  None of the above
21.

109. If the Fed purchases government securities from Bank A, __________ in the banking system __________ and the money supply __________.
- A.
  
  Reserves; fall; falls
- B.
  
  Reserves; rise; falls
- C.
  
  Reserves; rise; rises
- D.
  
  Excess reserves; fall; rises
- E.
  
  Excess reserves; rise; falls
22.

86. If reserves rise by $1 million, what is the dollar difference between the maximum change in checkable deposits when the required reserve ratio is 10 percent and when it is 15 percent?
- A.
  
  $10 million
- B.
  
  $3.33 million
- C.
  
  $2 million
- D.
  
  $5 million
23.

87. Which of the following will lower the money supply?
- A.
  
  Lowering the discount rate
- B.
  
  Raising the required reserve ratio
- C.
  
  An open market purchase
- D.
  
  An open market sale
- E.
  
  A and d
24.

88. The __________ rate is the interest rate one bank pays another bank for a loan.
- A.
  
  Discount
- B.
  
  Mortgage
- C.
  
  Reserve requirement
- D.
  
  Federal funds
- E.
  
  Bank-borrowing
25.

89. An open market __________ by the Fed increases the money supply; a(n) __________ in the required reserve ratio increases the money supply.
- A.
  
  Sale; decrease
- B.
  
  Purchase; increase
- C.
  
  Sale; increase
- D.
  
  Purchase; decrease