The Federal Reserve System: d. makes decisions subject to the approval of Congre

Question

The Federal Reserve System:

d.  makes decisions subject to the approval of Congress.

If all banks are subject to a uniform 25% reserve requirement and demand deposits are the only form of money, a $1,000 open market sale by the Fed would cause the money supply to:

d.  increase by $4,000.

Demand deposits are essentially:

d.  not legally required to be available sooner than 30 days after a check is presented to a bank.

Money is NOT:

d.  the exclusive means of holding wealth.

During a period of price stability our money supply performs:

d.  some of its jobs very poorly.

Citizens in the United States are not concerned with the financial well being of their bank due to which of the following?

d.  The improvement in the reputation of bankers

The transactions demand for money is related to money functioning as a:

d.  medium of exchange.

Suppose the banking system has no excess reserves, a reserve requirement ratio of 10%, and $50 billion of required reserves. What is the total checkable deposits in the banking system?

e.  $650 billion

Statement I: A strong case can be made to designate M2 as our basic money supply, rather than M1. Statement II: The Federal Reserve watches M2 more closely than it watches M1.

d.  Both statements are false.

During the course of a bad recession the Fed would probably be doing each of the following, except:

d.  lowering the discount rate.

Which statement is true?

a.  has regional Federal Reserve Banks that make most of the decisions. b.  makes decisions subject to the approval of the President. c.  makes its major policy decisions in its Open Market Committee.

d.  makes decisions subject to the approval of Congress.

If all banks are subject to a uniform 25% reserve requirement and demand deposits are the only form of money, a $1,000 open market sale by the Fed would cause the money supply to:

a.  increase by $1,000. b.  decrease by $1,000. c.  decrease by $4,000.

d.  increase by $4,000.

Demand deposits are essentially:

a.  coins and currency. b.  based on gold deposits in the Fed. c.  checkable deposits.

d.  not legally required to be available sooner than 30 days after a check is presented to a bank.

Money is NOT:

a.  a medium of exchange. b.  a standard of value. c.  a store of value.

d.  the exclusive means of holding wealth.

During a period of price stability our money supply performs:

a.  all of its jobs very well. b.  some of its jobs very well. c.  all of its jobs very poorly.

d.  some of its jobs very poorly.

Citizens in the United States are not concerned with the financial well being of their bank due to which of the following?

a.  The stability of the economy b.  The FDIC c.  Government regulation of the banking sector

d.  The improvement in the reputation of bankers

The transactions demand for money is related to money functioning as a:

a.  standard of deferred payment. b.  measure of value. c.  store of value.

d.  medium of exchange.

Suppose the banking system has no excess reserves, a reserve requirement ratio of 10%, and $50 billion of required reserves. What is the total checkable deposits in the banking system?

a.  $50 billion b.  $500 billion c.  $450 billion d.  $550 billion

e.  $650 billion

Statement I: A strong case can be made to designate M2 as our basic money supply, rather than M1. Statement II: The Federal Reserve watches M2 more closely than it watches M1.

a.  Statement I is true and statement II is false. b.  Statement II is true and statement I is false. c.  Both statements are true.

d.  Both statements are false.

During the course of a bad recession the Fed would probably be doing each of the following, except:

a.  selling securities on the open market. b.  lowering interest rates. c.  lowering reserve requirements.

d.  lowering the discount rate.

Which statement is true?

a.  Actual reserves - required reserves = excess reserves. b.  Required reserves - actual reserves = excess reserves. c.  Required reserves + actual reserves = excess reserves. d.  None of the statements are true.

Explanation / Answer

1: B

2: C

3: C

4: B

5: A

6: C

7: D

8: B

9: C

10: B

11: A

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