ECON 201 Lecture Notes - Lecture 17: Excess Reserves, Federal Open Market Committee, Open Market Operation
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QUESTION 31
The Board of Governors of the Federal Reserve System is
composed of seven members who are appointed by the President and approved by the Senate. | ||
composed of 12 members of the Senate and the U.S. House of Representatives. | ||
elected by the general public. | ||
composed of representatives from the country's 12 largest commercial banks. |
1.11 points
QUESTION 32
The Fed is said to be the "lender of last resort" in that
it charges a higher interest rate to borrowers than does any other bank. | ||
it functions as the government's bank only when commercial banks fail to do so. | ||
it makes loans to individuals whom commercial banks do not believe are credit-worthy. | ||
it stands ready to lend to any depository institution that it has decided should not fail. |
1.11 points
QUESTION 33
The Federal Reserve System acts as the government's fiscal agent by
providing checking account services for the government. | ||
preparing the budget the President presents to Congress every year. | ||
determining how to finance a deficit. | ||
auditing taxpayers. |
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QUESTION 34
The Federal Reserve System was established in which year?
1913. | ||
1929. | ||
1865. | ||
1941. |
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QUESTION 35
By serving as the lender of last resort,
the Fed provides check clearing services. | ||
the Fed aids in the sale of government securities. | ||
the Fed supervises depository institutions. | ||
the Fed can prevent bank failures. |
1.11 points
QUESTION 36
Depository institutions must
use and pay for the services of the Federal Reserve System. | ||
set their interest rates according to schedules established by the Federal Reserve System. | ||
keep a certain percentage of their deposits as reserves. | ||
turn over a percentage of their profits to the Federal Reserve System as payment for services provided by the Fed. |
1.11 points
QUESTION 37
The Federal Reserve System has
50 district banks. | ||
24 district banks. | ||
12 district banks. | ||
7 district banks. |
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QUESTION 38
The part of the Federal Reserve System (the Fed) that holds the reserve balances of depository institutions is
the Board of Governors. | ||
the Federal Advisory Committee. | ||
the Federal Open Market Committee. | ||
the Federal Reserve district banks. |
1.11 points
QUESTION 39
The potential for a financial breakdown at one financial institution to spread throughout the financial system is known as a
systemic risk. | ||
liquidity risk. | ||
lending risk. | ||
moral hazard. |
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QUESTION 40
A system in which depository institutions hold reserves that are less than the amount of total deposits is called
fiat money banking. | ||
required reserve banking. | ||
fractional reserve banking. | ||
central banking system. |
1.11 points
QUESTION 41
Total reserves of private banks are
all customer deposits. | ||
the minimum amount banks need to hold against time deposits. | ||
federal reserve notes. | ||
deposits held at the Fed and vault cash. |
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QUESTION 42
A statement of assets and liabilities of any business entity is called
a cash flow statement. | ||
an income statement. | ||
a balance sheet. | ||
a statement of net worth. |
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QUESTION 43
Which of the following actions has no effect on the total money supply?
The Federal Open Market Committee buys government securities. | ||
There is a transfer of deposits from one bank to another bank. | ||
There is change in the money multiplier. | ||
The Federal Open Market Committee sells government securities. |
1.11 points
QUESTION 44
Given a required reserve ratio of 20 percent, a commercial bank that has received a new deposit of $100 can make additional loans of
$80. | ||
$0. | ||
$400. | ||
$20. |
1.11 points
QUESTION 45
The Federal Open Market Committee has responsibility for
appointing members to the Board of Governors of the Federal Reserve system. | ||
issuing orders to buy or sell government securities for the Fed. | ||
advising the Treasury Department on monetary policy. | ||
printing money. |
Q1. The total resource cost of goods and services produced by the U. S. economy is known as a. real GDP b. personal income c. national wealth d. national income Q2. The difference between GDP and final sales equals a. depreciation b. exports c. imports d. net inventory change Q3. Current disposable income can be adjusted for price changes and population changes to yield real per capita disposable income. a. true b. false Q4. If a lawn service mows your grass, it is included in the GDP. a. true b. false Q5. In national income accounting, grain fed to a hog at a commercial hog farm is considered a(n) a. final good b. intermediate good c. consumer good d. capital consumption allowance Q6. Imports constitute a minus figure in national income accounting. a. true b. false Q7. The total value added in the production of a final good a. exceeds the price of the final good b. equals the price of the final good c. exceeds the total payments made to owners of productive resources used in the production d. both (b) and (c) Q8. The GDP is reported on a monthly basis by the Department of Commerce. a. true b. false Q9. Transfer payments are added to NI in the process of determining personal income. a. true b. false Q10. U.S. gross domestic product is converted to U.S. gross national product by a. adding the value of output produced by U.S.-owned resources in foreign countries b. subtracting the value of output produced by U.S.-owned resources in foreign countries c. subtracting the value of output produced in the United States by foreign-owned resources d. both (a) and (c) Q11. Final sales are always larger than the GDP. a. true b. false Q12. Because of the value of things produced inside households, (building your own desk, mowing your own lawn, etc.) a. the GDP value is automatically adjusted upward to reflect this b. the GDP value is automatically adjusted downward to reflect this c. Official GDP is surely smaller than true total output d. Official GDP is surely larger than true total output Q13. A government surplus may trigger a decline in the money supply. a. true b. false Q14. Real wages are determined by multiplying money wages by the CPI. a. true b. false Q15. The more volatile the inflation rate, the weaker the money supply as a standard of deferred payment. a. true b. false Q16. An increase in the money supply always causes an increase in the price level. a. true b. false Q17. Your nominal wages rose during the same period from $200 a week to $260. By how much did your real income rise? a. 30 percent b. 16.7 percent c. 8.33 percent d. 12 percent Q18. In the past 10 years or so, average real wages of U.S. workers in nonagricultural industries have a. increased about 40 percent b. increased slightly c. remained about the same d. declined Q19. If a new cash deposit creates excess reserves of $5,000 and the required reserve ratio is 10 percent, the banking system can increase the money supply by a maximum of a. $50,000 b. $500 c. $5,000 d. $4,500 Q20. The effect of a change in the money supply on economic activity may be offset by a change in velocity. a. true b. false Q21. The current base period for the CPI is a. 1967 b. 1977 c. 1982Ć¢ĀĀ1984 d. 1990 Q22. In the circular flow, an increase in the money supply tends to result when a. planned I equals planned S b. planned I is less than planned S c. planned I is greater than planned S d. there is a surplus government budget Q23. COLA is a form of indexation. a. true b. false Q24. The total checkable deposits a bank may have can be determined by dividing its reserves by the reserve requirement. a. true b. false Q25. The Financial Services Modernization Act a. reinforced the Glass Steagall Act b. prevented mergers of banks c. eliminated barriers between banks, brokerage houses, and insurance companies d. eliminated all banking regulations Q26. Each Federal Reserve Bank has its own board of directors. a. true b. false Q27. The most frequently used tool of U.S. monetary policy is a. the discount rate b. the reserve requirement c. open-market operations d. moral suasion Q28. When the Fed conducts open-market operations, it primarily uses a. Treasury bills b. long-term U.S. government bonds c. bonds of publicly traded corporations d. overnight loans of major banks Q29. The Board of Governors of the Federal Reserve System has a. 6 members b. 7 members c. 1 member from each Federal Reserve Bank d. 20 members Q30. If the Fed desires to increase checkable deposits, it may lower the reserve requirement. a. true b. false Q31. The interest rate at which banks borrow excess reserves from each other is known as the a. prime rate b. federal funds rate c. discount rate d. T-bill rate Q32. If member banks need to borrow reserves, they must do so through the discount window. a. true b. false Q33. The Fed Chairman appears before Congress semi-annually to present the Monetary Policy Report. a. true b. false Q34. In terms of the total number of payments, which of the following comprises the largest share? a. cash b. personal checks c. debit cards d. credit cards Q35. By buying government securities, the Federal Open Market Committee adds to member banks' reserves. a. true b. false Q36. More than 50 percent of commercial banks in the United States belong to the Federal Reserve System. a. true b. false Q37. The Federal Reserve System is built around a. 4 regional banks b. 6 regional banks c. 12 district banks d. 1 bank with several branches Q38. The time lags lead monetarists to contend that monetary policy is counterproductive. a. true b. false Q39. The marginal propensity to consume is a. the fraction of an increase in income that would be spent on consumer goods b. the additional desire people have for consumer goods c. the fraction of a person's total income normally spent for consumer goods d. the change in consumption resulting from a $1 change in the price level Q40. The consumption function shows a. how fast the economy is consuming its capital b. that the amount of national income determines the rate at which the economy consumes its resources c. that households' incomes determine how much the households will spend for consumer goods d. the rate at which people actually use up their consumer goods Q41. In the simple Keynesian model, if output exceeds aggregate expenditures, a. there will be no response from businesses b. inventories will decrease and businesses will increase output c. inventories will increase and businesses will increase output d. inventories will increase and businesses will decrease output Q42. If planned construction investment increases by $30 billion and the MPC is two-thirds, total output will increase by a. $30 billion b. $20 billion c. $45 billion d. $90 billion Q43. "A given change in business investment will cause a larger change in equilibrium output." This statement describes an important Keynesian concept called the a. multiplier effect b. marginal propensity to consume c. marginal propensity to invest d. consumption function Q44. In the multiplier formula, 1/MPS equals the multiplier. a. true b. false Q45. The classical economists held that chronic unemployment was likely. a. true b. false Q46. As income increases, the absolute level of planned consumption will increase. a. true b. false Q47. The new classical school contends that government fiscal policy is better than monetary policy in controlling inflation. a. true b. false Q48. Higher price levels are associated with lower aggregate expenditure at every level of income. a. true b. false Q49. Any time that planned leakages exceed planned injections, the economy will expand. a. true b. false Q50. According to the Keynesian model, increased foreign spending for U.S. goods is likely to a. reduce total employment in the United States b. increase total employment in the foreign country c. reduce total output in the United States d. increase total output in the United States |