1. Refer to the balance sheet for Bank X to answer questions 1. -4:
2. Bank X - Balance Sheet
3. Assets:Liabilities:
4. Reserves:CheckableDeposits$90,000,000
5. Vault Cash$900,000
6. Deposit with theFed$10,000,000
7. Loans Outstanding:
8. MortgageLoans$32,000,000
9. BusinessLoans23,000,000
10. PersonalLoans21,000,000
11. U.S. GovernmentSecurities3,100,000
12. Total LoansOutstanding$79,100,000
13. TotalAssets$90,000,000
15. 1. Assuming an10%reserve ratio,required reservesfor Bank X total:
18. A.$9,000,000
19. B.$9,900,000
20. C.$10,800,000
21. D.$90,000,000

0.5 points

QUESTION 2

1. 2. Assuming an 10% reserve ratio, Bank X hasexcess reservesof:
2. A.$100,000
3. B.$1,000,000
4. C.$1,900,000
5. D.$0

0.5 points

QUESTION 3

1. If Bank X receives a new deposit of $80,000, how much would Bank X be able to loan out? (assuming current excess reserves = $0).
2. A.$1,000
3. B.$8,000
4. C.$72,000
5. D.$72

0.5 points

QUESTION 4

1. If Bank X receives a new deposit of $80,000, how much does Bank X have to keep on reserve?(assuming current excess reserves = $0).
2. A.$1,000
3. B.$8,000
4. C.$72,000
5. D.$72

0.5 points

QUESTION 5

1. The functions of the Fed include:
2. A.setting tariff rates
3. B.supervising and regulating banking institutions
4. C.printing paper money
5. D.All of the above

0.5 points

QUESTION 6

1. The functions of the Fed include:
2. A.providing check-clearing services
3. B.holding banks' reserves
4. C.Both of the above
5. D.Neither of the above

0.5 points

QUESTION 7

1. A bank in need of reserves:
2. A.will usually borrow from the Federal Reserve System
3. B.as a last resort, may borrow reserves from other banks
4. C.Both of the above
5. D.Neither of the above

0.5 points

QUESTION 8

1. The Fed:
2. A.directly controls the money supply by printing currency
3. B.influences the money supply by changing the monetary base
4. C.Both of the above
5. D.Neither of the above

0.5 points

QUESTION 9

1. Currency in circulation plus bank reserves is:
2. A.M1
3. B.M2
4. C.Monetary base
5. D.None of the above

0.5 points

QUESTION 10

1. When the Fed makes a sale:
2. A.the monetary base increases
3. B.the monetary base decreases
4. C.the monetary base doesn't change
5. D.All of the above are possible

0.5 points

QUESTION 11

1. If the monetary base increases by $400 million and the money supply increases by $1,000 million, the actual money multiplier is:
2. A.4.0
3. B.2.5
4. C.2.0
5. D.0.40

0.5 points

QUESTION 12

1. Open market operations:
2. A.refers to the Fed acting as lender of last resort for banks
3. B.refers to the Fed buying and selling U.S. government securities in the open market
4. C.is the Fed's most important monetary policy tool
5. D.Both b. and c.

0.5 points

QUESTION 13

1. If the Fed buys U.S. government securities in the open market:
2. A.bank reserves will increase
3. B.monetary base will decrease
4. C.the money supply will decrease
5. D.All of the above

0.5 points

QUESTION 14

1. If the Fed sells U.S. government securities in the open market:
2. A.bank reserves will increase
3. B.monetary base will increase
4. C.the money supply will decrease
5. D.All of the above

0.5 points

QUESTION 15

1. If the Fed lowers the reserve ratio:
2. A.banks would have excess reserves
3. B.banks would be able to make new loans
4. C.the money supply would increase
5. D.All of the above

0.5 points

QUESTION 16

1. When a bank borrows from other banks, the interest rate charged is the:
2. A.discount rate
3. B.prime rate
4. C.federal funds rate
5. D.bank rate

0.5 points

QUESTION 17

1. When a bank borrows from the Fed, the interest rate charged is the:
2. A.discount rate
3. B.prime rate
4. C.federal funds rate
5. D.bank rate

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QUESTION 18

1. When a bank borrows from other banks:
2. A.the borrowing bank has more reserves
3. B.the lending bank has fewer reserves
4. C.the money supply is not changed
5. D.All of the above

0.5 points

QUESTION 19

1. When a bank borrows from the Fed:
2. A.the Fed is injecting new reserves into the financial system
3. B.the money supply decreases
4. C.Both of the above
5. D.Neither of the above

0.5 points

QUESTION 20

1. To increase the money supply, the Fed:
2. A.would raise the federal funds rate
3. B.would lower the discount rate
4. C.would raise the discount rate
5. D.Both a. and b. above

0.5 points

QUESTION 21

1. The Fed can increase the money supply by:
2. A.raising the discount rate
3. B.raising the required-reserve ratio
4. C.buying U.S. government securities in the open market
5. D.All of the above

0.5 points

QUESTION 22

1. The primary cause of the recession that began in December of 2007 was:
2. A.the 55% drop in the Dow Jones Industrial Average from October of 2007 to March of 2009
3. B.the credit crisis arising from the bursting of the housing bubble
4. C.the price increases for oil and other commodities
5. D.All of the above

0.5 points

QUESTION 23

1. Foreign investors were willing to invest in mortgage-backed securities because the mortgage-backed securities:
2. A.appeared to be low-risk
3. B.had received favorable ratings issued by highly respected credit rating agencies
4. C.Both of the above
5. D.Neither of the above

0.5 points

QUESTION 24

1. The low short-term interest rates from 2002 to 2004:
2. A.encouraged the use of adjustable rate mortgages
3. B.temporarily slowed the housing bubble by discouraging leveraging
4. C.Both of the above
5. D.Neither of the above

0.5 points

QUESTION 25

1. In response to the recession of 2001:
2. A.the Fed began a low-interest rate policy which it continued through 2004
3. B.the Fed refused to lower interest rates for fear of triggering inflation
4. C.the Fed urged Congress to impose new trade restrictions to protect American jobs
5. D.None of the above

0.5 points

QUESTION 26

1. Leveraging:
2. A.is investing with borrowed money
3. B.increased the financing available for mortgage lending and thus contributed to rising home prices
4. C.increased the impact of the bursting of the housing bubble because the deleveraging contributed to falling home prices
5. D.All of the above

0.5 points

QUESTION 27

1. Prior to the development of the housing bubble, most mortgages:
2. A.were 30-year fixed rate loans
3. B.required a down payment of at least 3% or mortgage insurance if the 3% down payment requirement were not met
4. C.Both of the above
5. D.Neither of the above

0.5 points

QUESTION 28

1. The 1995 modification of the Community Reinvestment Act:
2. A.compelled banks to increase their mortgage lending to lower-income households
3. B.caused banks to make their mortgage lending standards more strict
4. C.Both of the above
5. D.Neither of the above

0.5 points

QUESTION 29

1. All the participants who contributed to the housing bubble:
2. A.were caught up in irrational exuberance
3. B.assumed that home prices would keep rising
4. C.Both of the above
5. D.Neither of the above

0.5 points

QUESTION 30

1. The Chair of the Federal Reserve Board of Governors is:
2. A.Hillary Clinton
3. B.Jerome Powell
4. C.Timothy Geithner
5. D.Lawrence Summers