Question 1

Lowering the required reserve ratio __________ the simple deposit multiplier which will __________ the economy's money supply.

Accepted Answer

Lowering the required reserve ratio decreases the amount of reserves banks are required to hold, which increases the simple deposit multiplier. This, in turn, increases the money supply in the economy.

Question 2

The simple deposit multiplier is

Accepted Answer

The simple deposit multiplier is calculated as the reciprocal of the required reserve ratio. Therefore, choice A is the correct answer.

Question 3

Suppose that the current federal funds rate is above the federal funds target rate.In order to lower the federal funds rate the Fed will ________________ securities on the open market which will ________________ the supply of reserves in the market for reserves,pushing the rate closer to the target rate.

Accepted Answer

The Federal Reserve purchases securities on the open market to increase the supply of reserves in the banking system. This action puts downward pressure on the federal funds rate, moving it closer to the target rate.

Question 4

In its current execution of monetary policy,the Fed does not usually have a specific _____________ target,but rather it tries to target a specific ________________.

Accepted Answer

The Federal Reserve typically targets the federal funds rate rather than a specific money supply target. This approach allows for more direct control over short-term interest rates, influencing economic activity and inflation.

Question 5

A required reserve ratio of 7 percent gives rise to a simple deposit multiplier of

Accepted Answer

The simple deposit multiplier is calculated as 1 divided by the required reserve ratio. Here, it is 1 / 0.07 = 14.29.

Question 6

If reserves increase by $7 million and the required reserve ratio is 12%,what is the resulting change in checkable deposits (or the money supply),assuming that there are no cash leakages and that banks hold zero excess reserves?

Accepted Answer

The money multiplier is 1 divided by the reserve ratio, which is 1/0.12 = 8.33. The change in checkable deposits is the increase in reserves multiplied by the money multiplier: $7 million * 8.33 = $58.33 million.

Question 7

Raising the required reserve ratio __________ the simple deposit multiplier which will __________ the economy's money supply.

Accepted Answer

The answer of Raising the required reserve ratio __________ the...

Question 8

A required reserve ratio of 12 percent gives rise to a simple deposit multiplier of

Accepted Answer

The simple deposit multiplier formula is 1/required reserve ratio. So, in this case, the simple deposit multiplier would be 1/0.12 = 8.33.

Question 9

The term auction facility (TAF)program was instituted by the Federal Reserve to deal with the ________________________.This program gave banks ____________ options when it comes to borrowing from the Fed.

Accepted Answer

The Term Auction Facility (TAF) was introduced by the Federal Reserve in response to the financial crisis of 2007-2009 to provide banks with more options for borrowing, aiming to improve liquidity in the banking system.

Question 10

If reserves increase by $4 million and the required reserve ratio is 8%,what is the resulting change in checkable deposits (or the money supply),assuming that there are no cash leakages and that banks hold zero excess reserves?

Accepted Answer

The money multiplier is 1 divided by the reserve ratio, which is 1/0.08 = 12.5. Therefore, an increase in reserves of $4 million results in an increase in checkable deposits of 12.5 * $4 million = $50 million.

Question 11

Which of the following describes a change that the Federal Reserve made in response to the financial crisis of 2007-2009?

Accepted Answer

The Federal Reserve extended the lender of last resort function to institutions other than banks in response to the financial crisis of 2007-2009. The Fed also implemented a number of other measures to address the crisis, but none of these are reflected in the other answer choices. The Fed expanded the range of assets eligible for open market operations, including mortgage-backed securities and agency debt, and it did not limit its open market operations to buying Treasury securities from banks. Additionally, the Fed did not discontinue its term auction facility (TAF) program during the crisis, though it did reduce the frequency of TAF auctions over time.

Question 12

Suppose that the current federal funds rate is below the federal funds target rate.In order to raise the federal funds rate the Fed will ________________ securities on the open market which will ________________ the supply of reserves in the market for reserves,pushing the rate closer to the target rate.

Accepted Answer

Selling securities on the open market decreases the supply of reserves in the market for reserves, which puts upward pressure on the federal funds rate, moving it closer to the target rate.

Question 13

When the Federal Open Market Committee (FOMC)votes on policy,they do so

Accepted Answer

The FOMC votes on policy in the order of the chair first, followed by the vice chair, and then the remaining FOMC members in alphabetical order.

Question 14

Suppose that the Fed undertakes an open market sale,selling $1 million worth of securities to a bank.If the required reserve ratio is 8%,checkable deposits (or the money supply),would _______________ by ________________ million,assuming that there are no cash leakages and that banks hold zero excess reserves.

Accepted Answer

The required reserve ratio is 8%, so the bank must keep 8% of the $1 million sale as reserves. This leaves $920,000 that the bank can lend out, which increases checkable deposits (or the money supply) by $920,000. However, since the Fed is selling securities worth $1 million, this decreases the bank's reserves by $1 million, which means the bank must reduce its lending by $1 million. Therefore, the overall change in checkable deposits is a decline of $1 million, or $12.5 million (since the required reserve ratio is 8%).

Question 15

Suppose that the Fed undertakes an open market purchase of $5 million worth of securities from a bank.If the required reserve ratio is 12%,what is the resulting change in checkable deposits (or the money supply),assuming that there are no cash leakages and that banks hold zero excess reserves?

Accepted Answer

The money multiplier is 1/required reserve ratio, which is 1/0.12 = 8.33. The change in checkable deposits is the money multiplier times the open market purchase: 8.33 * $5 million = $41.67 million.

Question 16

Suppose that the Fed undertakes an open market sale,selling $3 million worth of securities to a bank.If the required reserve ratio is 11%,checkable deposits (or the money supply),would _______________ by ________________ million,assuming that there are no cash leakages and that banks hold zero excess reserves.

Accepted Answer

The required reserve ratio is 11%, which means that the bank must hold 11% of the checkable deposits as reserves. An open market sale of $3 million worth of securities means that the bank's reserves decrease by $3 million x 11% = $0.33 million. As the bank can now lend out this amount, the money supply decreases by the same amount, i.e. $0.33 million = $27 million. Therefore, the correct answer is C, "decline; $27".

Question 17

Suppose that the Fed undertakes an open market purchase of $1 million worth of securities from a bank.If the required reserve ratio is 9%,what is the resulting change in checkable deposits (or the money supply),assuming that there are no cash leakages and that banks hold zero excess reserves?

Accepted Answer

The money multiplier is 1/required reserve ratio = 1/0.09 = 11.11. The change in checkable deposits is the money multiplier times the initial change in reserves, which is $1 million * 11.11 = $11.11 million.

Question 18

-Refer to Exhibit 13-1.Suppose that the Federal Reserve conducts open market operations by purchasing $1,000 worth of government securities from Bank A.At the end of this process of money creation,what is the total amount of new checkable deposits?

Accepted Answer

The answer of 
-Refer to Exhibit 13-1.Suppose that the Federal...

Question 19

A bank is reserve deficient when

Accepted Answer

A bank is reserve deficient when its reserves fall short of the level determined by the required reserve ratio. This means that the bank does not have enough reserves to meet the minimum reserve requirement set by the Federal Reserve. When a bank is reserve deficient, it may have to borrow funds from other banks or from the Federal Reserve to meet its reserve requirements.

Question 20

When a bank repays a _________________ loan,the Fed _____________________ the bank's reserve account.

Accepted Answer

When a bank repays a discount loan, the Federal Reserve subtracts the repayment from the bank's reserve account, effectively reducing the amount of reserves the bank has on deposit with the Fed.

Quiz 13: The Federal Reserve System

Lowering the required reserve ratio the simple deposit multiplier which will the economy's money supply.

The simple deposit multiplier is

Suppose that the current federal funds rate is above the federal funds target rate.In order to lower the federal funds rate the Fed will securities on the open market which will the supply of reserves in the market for reserves,pushing the rate closer to the target rate.

In its current execution of monetary policy,the Fed does not usually have a specific _ target,but rather it tries to target a specific ____.

A required reserve ratio of 7 percent gives rise to a simple deposit multiplier of

If reserves increase by $7 million and the required reserve ratio is 12%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

Raising the required reserve ratio the simple deposit multiplier which will the economy's money supply.

A required reserve ratio of 12 percent gives rise to a simple deposit multiplier of

The term auction facility (TAF) program was instituted by the Federal Reserve to deal with the ____________.This program gave banks options when it comes to borrowing from the Fed.

If reserves increase by $4 million and the required reserve ratio is 8%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

Which of the following describes a change that the Federal Reserve made in response to the financial crisis of 2007-2009?

Suppose that the current federal funds rate is below the federal funds target rate.In order to raise the federal funds rate the Fed will securities on the open market which will the supply of reserves in the market for reserves,pushing the rate closer to the target rate.

When the Federal Open Market Committee (FOMC) votes on policy,they do so

Suppose that the Fed undertakes an open market sale,selling $1 million worth of securities to a bank.If the required reserve ratio is 8%,checkable deposits (or the money supply) ,would _ by __ million,assuming that there are no cash leakages and that banks hold zero excess reserves.

Suppose that the Fed undertakes an open market purchase of $5 million worth of securities from a bank.If the required reserve ratio is 12%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

Suppose that the Fed undertakes an open market sale,selling $3 million worth of securities to a bank.If the required reserve ratio is 11%,checkable deposits (or the money supply) ,would _ by __ million,assuming that there are no cash leakages and that banks hold zero excess reserves.

Suppose that the Fed undertakes an open market purchase of $1 million worth of securities from a bank.If the required reserve ratio is 9%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

-Refer to Exhibit 13-1.Suppose that the Federal Reserve conducts open market operations by purchasing $1,000 worth of government securities from Bank A.At the end of this process of money creation,what is the total amount of new checkable deposits?

A bank is reserve deficient when

When a bank repays a _ loan,the Fed _____ the bank's reserve account.

Quiz 13: The Federal Reserve System

Lowering the required reserve ratio __________ the simple deposit multiplier which will __________ the economy's money supply.

The simple deposit multiplier is

In its current execution of monetary policy,the Fed does not usually have a specific _____________ target,but rather it tries to target a specific ________________.

A required reserve ratio of 7 percent gives rise to a simple deposit multiplier of

If reserves increase by $7 million and the required reserve ratio is 12%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

Raising the required reserve ratio __________ the simple deposit multiplier which will __________ the economy's money supply.

A required reserve ratio of 12 percent gives rise to a simple deposit multiplier of

The term auction facility (TAF) program was instituted by the Federal Reserve to deal with the ________________________.This program gave banks ____________ options when it comes to borrowing from the Fed.

If reserves increase by $4 million and the required reserve ratio is 8%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

Which of the following describes a change that the Federal Reserve made in response to the financial crisis of 2007-2009?

When the Federal Open Market Committee (FOMC) votes on policy,they do so

Suppose that the Fed undertakes an open market purchase of $5 million worth of securities from a bank.If the required reserve ratio is 12%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

Suppose that the Fed undertakes an open market purchase of $1 million worth of securities from a bank.If the required reserve ratio is 9%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

-Refer to Exhibit 13-1.Suppose that the Federal Reserve conducts open market operations by purchasing $1,000 worth of government securities from Bank A.At the end of this process of money creation,what is the total amount of new checkable deposits?

A bank is reserve deficient when

When a bank repays a _________________ loan,the Fed _____________________ the bank's reserve account.

Lowering the required reserve ratio the simple deposit multiplier which will the economy's money supply.

In its current execution of monetary policy,the Fed does not usually have a specific _ target,but rather it tries to target a specific ____.

Raising the required reserve ratio the simple deposit multiplier which will the economy's money supply.

The term auction facility (TAF) program was instituted by the Federal Reserve to deal with the ____________.This program gave banks options when it comes to borrowing from the Fed.

When a bank repays a _ loan,the Fed _____ the bank's reserve account.