7) Open market operations are A) seldom used by the Federal Reserve because they

ID: 1210849 • Letter: 7

Question

7) Open market operations are

A) seldom used by the Federal Reserve because they have such a large impact on bank Reserves.

B) seldom used by the Federal Reserve because they have little impact on bank reserves.

C) used frequently by the Federal Reserve but not as often as changes in the discount rate.

D) the primary method used by the Federal Reserve to alter bank reserves

9) In 1913, Congress and the President envisioned that the Fed would have broad control of

A) open market operations. B) discount loans.

C) most aspects of the money supply. D) most aspects of money and the banking system.

13) If the Federal Reserve sells $20 million worth of government securities and the M1 multiplier is 2.5. Bank

reserves will

A) fall by $20 million. B) rise by $20 million.

C) fall by $50 million. D) rise by $50 million

E) fall by $16 million. F) fall by $8 million.

14) When the Federal Reserve buys $200 worth of government securities, the money supply

A) rises by $200. B) rises by more than $200.

C) falls by $200. D) falls by more than $200.

17) When the Fed receives an inflow of Federal Reserve notes from commercial banks, its

A) assets rise. B) liabilities decline.

C) liabilities increase. D) assets decline.

18) If the reserve requirement on checkable deposits is .25, the ratio of currency held by the public to demand

deposits is .15, the ratio of time deposits to demand deposits is 3, the reserve requirement on time deposits is 0,

and the ratio of excess reserves to demand deposits is 0, then the demand deposit multiplier is

A) 5. B) 4. C) 3.33. D) 2.5.

(7) The correct answer is option (A).

(9) The correct answer is option (A).

(13) The correct answer is option (A)

(14) The correct answer is option (C)

(17) The correct answer is option (A)

(18) The correct answer is option (D)

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