1. The Federal Funds Rate is set by the Federal Reserve on the first business day of each month by faxing the rate to the member banks of each Federal Reserve District.
A. True
B. False

2. The Federal Reserve is a single Central bank located on Wall Street in New York City.
A. True
B. False

3. Which of the following is NOT true about the Federal Reserve System?
A. Terms of service of the members of the Board of Governors are longer than the number of years that a two-term President of the United States would serve.
B. The Federal Reserve System is the nation's central bank and is comprised of 12 Federal Reserve Banks that serve as bankers' banks.
C. Some of the main functions of the Federal Reserve System include the authority to control the money supply, to issue currency, to set reserve requirements, and to hold reserves.
D. While Congress controls the actions of the Federal Reserve, the President has the authority to appoint and remove private banks from the Federal Reserve System.

4. Which of the following is NOT true about restrictive monetary policy?
A. A restrictive monetary policy seeks to raise the federal funds rate.
B. A restrictive monetary policy seeks to expand the money supply.
C. A restrictive monetary policy seeks to raise the Federal Funds Rate by selling government bonds or raising the reserve requirement ratio or increasing the discount rate.
D. A restrictive monetary policy is used when the government is concerned about suddenly increasing inflation.

5. Which of the following statements is NOT true about contractionary fiscal policy?
A. Contractionary fiscal policy consists of reductions in government spending or increases in taxes.
B. Contractionary fiscal policy can include both reductions in government spending or increases in taxes.
C. Contractionary fiscal policy seeks to shift the Aggregate Demand curve to the right.
D. Contractionary fiscal policy is used when the government seeks to reduce suddenly surging inflation.

6. The Federal Reserve creates money by printing the amount of desired new money and distributing it via armored trucks and high-security railways to Federal Reserve District Banks.
A. True
B. False

7. If the Fed feared a looming recession was just around the corner, which of the following actions would it "NOT" consider?
A. The Fed would raise the discount rate.
B. In order to influence prevailing commercial interest rates to fall, the Fed would buy large amounts of government securities.
C. In order to expand the money supply (which influences prevailing commercial interest rates to fall), the Fed would either buy large volumes of government bonds, lower the reserve requirement or cut the discount rate.
D. The Fed would seek to expand the money supply because, in so doing, the federal funds rate would fall and that would stimulate commercial interest rates to fall.

8. Which of the following statements is NOT true about the ability of the Federal Reserve System to expand the money supply?
A. The Federal Reserve System uses the fractional nature of the banking system to create money in order to expand the money supply.
B. The money multiplier defines the relationship between new excess reserves throughout the banking system and the creation of money by banks in the system. It is calculated by dividing the number 1 by the Required Reserve Ratio. [1/rr].
C. If the required reserve ratio is 20%, then $80 billion in new excess reserves will create $400 billion in bank system lending throughout the entire banking system.
D. If the reserve requirement is 100%, then the banks can generate 100% in new excess reserves.

9. Which of the following is NOT true about the tools of monetary policy?
A. The Fed can alter the money supply through open market operations, changes in the reserve ratio or adjustments to the discount rate.
B. Lowering the reserve ratio would expand the money supply.
C. Raising the discount rate would restrict the money supply.
D. Adjusting the reserve requirement is the most important day-to-day method for controlling the nation's money supply.

10. If the Federal Reserve wishes to hold off a feared recession, it will sell large volumes of government bonds.
A. True
B. False

Question

1.  The Federal Funds Rate is set by the Federal Reserve on the first business day of each month by faxing the rate to the member banks of each Federal Reserve District.
A. True
B. False
 
2. The Federal Reserve is a single Central bank located on Wall Street in New York City.
A. True
B. False
 
3. Which of the following is NOT true about the Federal Reserve System?
A. Terms of service of the members of the Board of Governors are longer than the number of years that a two-term President of the United States would serve.
B. The Federal Reserve System is the nation's central bank and is comprised of 12 Federal Reserve Banks that serve as bankers' banks.
C. Some of the main functions of the Federal Reserve System include the authority to control the money supply, to issue currency, to set reserve requirements, and to hold reserves.
D. While Congress controls the actions of the Federal Reserve, the President has the authority to appoint and remove private banks from the Federal Reserve System.
 
4. Which of the following is NOT true about restrictive monetary policy?
A. A restrictive monetary policy seeks to raise the federal funds rate.
B. A restrictive monetary policy seeks to expand the money supply.
C. A restrictive monetary policy seeks to raise the Federal Funds Rate by selling government bonds or raising the reserve requirement ratio or increasing the discount rate.
D. A restrictive monetary policy is used when the government is concerned about suddenly increasing inflation.
 
5. Which of the following statements is NOT true about contractionary fiscal policy?
A. Contractionary fiscal policy consists of reductions in government spending or increases in taxes.
B. Contractionary fiscal policy can include both reductions in government spending or increases in taxes.
C. Contractionary fiscal policy seeks to shift the Aggregate Demand curve to the right.
D. Contractionary fiscal policy is used when the government seeks to reduce suddenly surging inflation.
 
6. The Federal Reserve creates money by printing the amount of desired new money and distributing it via armored trucks and high-security railways to Federal Reserve District Banks.
A. True
B. False
 
7. If the Fed feared a looming recession was just around the corner, which of the following actions would it "NOT" consider?
A. The Fed would raise the discount rate.
B. In order to influence prevailing commercial interest rates to fall, the Fed would buy large amounts of government securities.
C. In order to expand the money supply (which influences prevailing commercial interest rates to fall), the Fed would either buy large volumes of government bonds, lower the reserve requirement or cut the discount rate.
D. The Fed would seek to expand the money supply because, in so doing, the federal funds rate would fall and that would stimulate commercial interest rates to fall.
 
8. Which of the following statements is NOT true about the ability of the Federal Reserve System to expand the money supply?
A. The Federal Reserve System uses the fractional nature of the banking system to create money in order to expand the money supply.
B. The money multiplier defines the relationship between new excess reserves throughout the banking system and the creation of money by banks in the system. It is calculated by dividing the number 1 by the Required Reserve Ratio. [1/rr].
C. If the required reserve ratio is 20%, then $80 billion in new excess reserves will create $400 billion in bank system lending throughout the entire banking system.
D. If the reserve requirement is 100%, then the banks can generate 100% in new excess reserves.
 
9. Which of the following is NOT true about the tools of monetary policy?
A. The Fed can alter the money supply through open market operations, changes in the reserve ratio or adjustments to the discount rate.
B. Lowering the reserve ratio would expand the money supply.
C. Raising the discount rate would restrict the money supply.
D. Adjusting the reserve requirement is the most important day-to-day method for controlling the nation's money supply.
 
10. If the Federal Reserve wishes to hold off a feared recession, it will sell large volumes of government bonds.
A. True
B. False

		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.

		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.

		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.

		1913.
		1929.
		1865.
		1941.

		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.

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		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.

		50 district banks.
		24 district banks.
		12 district banks.
		7 district banks.

		the Board of Governors.
		the Federal Advisory Committee.
		the Federal Open Market Committee.
		the Federal Reserve district banks.

		fiat money banking.
		required reserve banking.
		fractional reserve banking.
		central banking system.

		all customer deposits.
		the minimum amount banks need to hold against time deposits.
		federal reserve notes.
		deposits held at the Fed and vault cash.

		a cash flow statement.
		an income statement.
		a balance sheet.
		a statement of net worth.

		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.

		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.

		a corporation.
		a government owned enterprise.
		a government subsidized entity.
		a government-sponsored enterprise.

		an overnight securitization operation.
		a repurchase agreement.
		a legal tender.
		a rebate sale.

		systemic risk.
		liquidity risk.
		lending risk.
		moral hazard.

		$80.
		$0.
		$400.
		$20.

		Directive.
		Beige book.
		Bluebook.
		Green book.

		Five years
		Seven years
		Fourteen years
		Life

		loans to banks from the Fed.
		loans by banks to the Fed.
		short-term loans between banks.
		Treasury bills.

		the U.S. Senate.
		the President of the United States.
		the U.S. Treasury Department.
		the Federal Reserve Board of Governors.

		government tax revenue.
		interest on the securities they own.
		fees charged to banks that use their services.
		dividends paid by local banks.

		the Open Market Desk at the Federal Reserve Bank of New York.
		the Open Market Desk at the Federal Reserve Board in Washington, D.C.
		the National Bureau of Economic Research.
		the Federal Open Market Committee.

		President Bush wanted him to resign.
		he reached mandatory retirement age.
		his term as Governor expired.
		his term as Chairman expired.

		describes forecasts for the economy.
		states the target for the federal funds rate.
		discusses the regional economies around the country.
		shows the Fed's balance sheet.

		William McChesney Martin
		Arthur Burns
		Paul Volcker
		G. William Miller

		discount borrowing and lending.
		federal funds purchases and sales.
		discounting.
		open-market operations.

		currency plus transactions deposits.
		vault cash plus reserves held at the Fed.
		required clearing balances plus currency.
		reserves plus currency.

		the impact is too large.
		the Fed needs the approval of Congress to do so.
		it's not legal for the Fed to do so.
		the Fed needs the approval of the President of the United States to do so.

		defensive open-market operations.
		dynamic open-market operations.
		reduced discount loans for profit.
		reduced discount loans for business needs.

		the extra collateral the Fed requires above the value of a discount loan.
		the extra principal a commercial bank requires the Fed to pay when making a discount loan.
		the difference between what an investor pays for a bond and what the investor sells the bond for.
		expected personal grooming for a member of the Board of Governors.

		the Fed's capital stock.
		discount loans.
		the monetary base.
		required clearing balances.

		the reserve ratio.
		velocity.
		high-powered money.
		the money multiplier.

		a no documentation discount loan.
		a haircut.
		a covenant.
		a primary credit discount loan.

		federal funds rate decreases.
		primary credit discount rate decreases.
		primary credit discount rate increases.
		federal funds rate increases.

		defensive open-market operations.
		dynamic open-market operations.
		discount loans for profit.
		discount loans for business needs.

		required clearing balances.
		reserve requirements.
		excess reserves.
		non-transaction deposits.

		pay interest in the form of earnings credits.
		count as reserves and can be used to meet reserve requirements.
		pay interest equal to the federal funds rate minus one percent.
		are required to be held against transactions deposits.