Question
solve the mcq questions: 1-When the Federal Reserve sells a government bond to a bank, reserves in the banking system ________ and the money supply
solve the mcq questions:
1-When the Federal Reserve sells a government bond to a bank, reserves in the banking system ________ and the money supply ________, everything else held constant.
a.increase; increases
b.decrease; increases
c.increase; decreases
d.decrease; decreases
2-The control the Central Bank has in manipulating the money supply by setting the minimum reserve ratio is limited because:
a.Banks can decide to hold more cash than the minimum reserve ratio requires.
b.People might not hold their money in banks, which limits the loanability of that cash.
c.None of the options is correct
d.All options are correct
3-There are two ways in which the Fed can provide additional reserves to the banking system: it can ________ government bonds or it can ________ discount loans to commercial banks.
a.sell; call in
b.sell; extend
c.purchase; call in
d.purchase; extend
4-Everything else held constant, an increase in the required reserve ratio on checkable deposits will cause
a.checkable deposits to rise.
b.the money supply to remain constant.
c.the money supply to rise.
d.the money supply to fall.
5- Discount loans are controlled by:
a.Banks
b.All the options are correct
c.Depositors
d.Fed
6-If the Central Bank increases the minimum reserve ratio that private banks are required to hold, the following will occur:
a.The banks can make fewer loans and the money supply decreases.
b.The banks can make fewer loans and the money supply increases.
c.The banks can make more loans and the money supply decreases.
d.The banks can make more loans and the money supply increases.
7-Required reserve is ___ related to money supply, and currency is ___ related to money supply.
a.Positively, negatively
b.Negatively, positively
c.Positively, positively
d.Negatively, negatively
8-If the Central Bank increases the minimum reserve ratio that private banks are required to hold, the following will occur:
a.The banks can make fewer loans and the money supply decreases.
b.The banks can make more loans and the money supply increases.
c.The banks can make more loans and the money supply decreases.
d.The banks can make fewer loans and the money supply increases.
9-Open market purchases ________ reserves and the monetary base thereby ________ the money supply.
a.lower; lowering
b.raise; lowering
c.raise; raising
d.lower; raising
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