2 points

QUESTION 18

The Fed controls the money supply in the U.S. economy through its ability to influence bank reserves and the money creating power of commercial banks.

True

False

2 points

QUESTION 19

1. Other things equal, when the Fed raises the reserve requirement, the banking system's excess reserves will fall, the deposit expansion multiplier will decline, and the money supply will decrease.

True

False

2 points

QUESTION 20

1. The Board of Governors of the Federal Reserve is:

a.

elected by Congress, and each governor serves a 7-year term

b.

elected by Congress, and each governor serves a 4-year term.

c.

appointed by the president, and each governor serves a 14-year term.

d.

elected by Congress, and each governor serves a 10-year term.

e.

appointed by the president, and each governor serves a 7-year term.

2 points

QUESTION 21

1. If you believe that the price of U.S. government bonds will soon fall, you will want to increase your speculative money demand.

True

False

2 points

QUESTION 22

1. For how long is the chairman of the board of governors of the Fed appointed and by whom?

a.

Appointed for two years by all the other governors

b.

Appointed for four years by the president of the United States

c.

Appointed for two years by the governor of the New York district branch

d.

Appointed for two years by the president of the United States

e.

Appointed for four years by all the other governors

2 points

QUESTION 23

1. Suppose you hold $5,000 in cash when the interest rate on bonds is 4 percent. Other things equal, as the bond interest rate declines to 3 percent, you will want to hold more money because the opportunity cost of holding money has decreased.

True

False

2 points

QUESTION 24

1. Which of the following actions of the Fed will increase money supply in the U.S. directly?

a.

Increase the discount rate

b.

Increase the federal funds rate

c.

Ban sales of private mutual funds

d.

Increase the reserve requirement

e.

Purchase U.S. government bonds

2 points

QUESTION 25

1. Which of the following is the ultimate goal of monetary policy?

a.

Free trade

b.

Balanced budget

c.

Economic welfare

d.

Economic growth with price stability

e.

Complete removal of income inequality

2 points

QUESTION 26

1. Which of the following is a function of the Fed?

a.

Determining the level of government spending

b.

Printing foreign currency

c.

Administrating the Social Security fund

d.

Distributing welfare benefits

e.

Ensuring that banks operate in a sound and prudent manner

2 points

QUESTION 27

1. The buying and selling of government bonds by the FOMC constitutes:

a.

sterilization of the money supply

b.

an open market operation.

c.

a change in the reserve requirement.

d.

a discount rate adjustment.

e.

a federal funds adjustment.

2 points

QUESTION 28

1. The FOMC carries out its policies through directives to the bond-trading desk at the:

a.

Los Angeles Fed.

b.

Chicago Fed.

c.

Federal Reserve of Philadelphia.

d.

Federal Reserve Bank of Dallas.

e.

Federal Reserve Bank of New York.

2 points

QUESTION 29

1. The Federal Reserve System was created in 1913, through the Federal Reserve Act, by the:

a.

Congress.

b.

International Monetary Fund.

c.

U.S. President.

d.

State governments.

e.

Judiciary.

2 points

QUESTION 30

1. The Federal Reserve System divides the U.S. into _____ districts.

a.

6

b.

17

c.

12

d.

21

e.

5

2 points

QUESTION 31

1. The desire to keep assets in cash to take advantage of favorable changes in the value of non-cash assets is called the:

a.

transactions demand for money.

b.

speculative demand for money.

c.

risk interest in money.

d.

wealth demand for money.

e.

precautionary demand for money.