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45 Cards in this Set
- Front
- Back
The Board of Governors of the Federal Reserve is part of a larger policy-making group called the |
Federal Open Market Committee. |
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Which of the following is not a major responsibility of the Fed? |
determining tax rates |
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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 __________. |
Bank B; remain constant |
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Open Market Operations are conducted by |
the Federal Reserve Bank of New York. |
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Open market operations are the |
buying and selling of government securities by the Fed. |
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When the federal government incurs a budget deficit, it will |
borrow money from the public by issuing securities. |
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If the Fed wants to increase the money supply through an open market operation, it will |
purchase government securities. |
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An open market purchase by the Fed |
increases the supply of money. |
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Suppose the Fed forecasts a reduction in excess reserve holdings by banks. It might offset the effect of this on the money supply by |
selling government securities. |
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The Fed can change the money supply by changing |
the required reserve ratio |
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When one commercial bank borrows from another commercial bank, it pays the __________ rate. |
federal funds |
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The lower the discount rate relative to the federal funds rate, the more likely a commercial bank will borrow from |
the Fed instead of another commercial bank. |
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Which of the following will increase the money supply? |
a decrease in the required reserve ratio |
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To decrease the money supply, the Fed may |
increase the required reserve ratio. |
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When Bank A obtains a loan from the Fed, the |
bank’s reserves increase. |
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When the Fed increases the required reserve ratio, a bank's |
excess reserves are decreased. |
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Which of the following actions is most likely to lead to an increase in the money supply? |
Fed purchases of government securities |
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The lower the required reserve ratio, |
the larger the simple deposit multiplier. |
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Which of the following will lower the money supply? |
an open market sale |
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An open market __________ by the Fed increases the money supply; a(n) __________ in the required reserve ratio increases the money supply. |
purchase; decrease |
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The Federal Reserve System is the |
central bank of the United States. |
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The Board of Governors of the Federal Reserve is comprised of |
seven persons, each appointed to a fourteen-year term. |
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The United States is divided into __________ Federal Reserve districts, each with a district bank. |
twelve |
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When commercial banks need more Federal Reserve Notes, |
they call their Federal Reserve District Bank, which delivers the requested amount. |
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The funds the Fed receives from selling government securities are |
removed from the economy altogether. |
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If the Fed purchases government securities from a commercial bank, which of the following will happen? |
a and d |
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An "open market operation" is said to occur when the Fed |
buys or sells government securities. |
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If banks are currently holding zero excess reserves and the Fed lowers the required reserve ratio, which of the following will happen? |
Banks will have positive excess reserves. |
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The word that best describes the relationship between the required reserve ratio and the money supply is |
inverse |
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When a commercial bank borrows from the Fed, |
the bank can make more loans. |
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When the Fed purchases securities from a bank, it __________ reserves and ____________ the money supply. |
increases; increases |
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An open market sale by the Fed will |
reduce the money supply |
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The discount rate is the interest rate |
the Fed charges when it lends reserves to banks. |
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Open market purchases of government securities |
banks charge their loan customers. |
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The Fed has been called "the lender of last resort" because it |
serves as the last place to acquire loans for banks suffering cash management, or liquidity, problems. |
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Which of the following Fed actions will increase the money supply? |
open market purchases of Treasury notes |
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The banking system currently holds $20 billion in required reserves and zero excess reserves. The Fed lowers the required reserve ratio from 20 percent to 12.5 percent. Assuming that there are no cash leakages, the resulting change in checkable deposits (or the money supply) is |
$60 billion. |
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If a bank has no excess reserves and is approached by a creditworthy customer applying for a loan, the bank will be able to grant the loan if it |
b or c |
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A decrease in the required reserve ratio __________ the money supply; an open market purchase __________ the money supply. |
increases; increases |
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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 __________. |
buys; Fed; reserves |
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Every time the Fed buys or sells on the open market, the __________ changes. |
money supply |
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If the Fed lowers the discount rate at the same time it conducts an open market sale, it follows that |
There is not enough information to answer this question. |
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If the Fed wants to increase the money supply, it can __________ the required reserve ratio, conduct an open market __________, or __________the discount rate. |
lower; purchase; lower |
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If the Fed raises the discount rate at the same time it conducts an open market sale, it follows that the money supply will |
fall. |
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Which of the following is not a monetary policy tool of the Fed? |
income tax rates |