5. (TCO 7) A bank temporarily short of required reserves may be able to remedy t

Question

5. (TCO 7) A bank temporarily short of required reserves may be able to remedy this situation by (Points : 1)
borrowing funds in the federal funds market.
granting new loans.
shifting some of its vault cash to its reserve account at the Federal Reserve.
buying bonds from the public.


6. (TCO 7) When a bank loan is repaid, the supply of money (Points : 1)
is constant, but its composition will have changed.
is decreased.
is increased.
may either increase or decrease.


7. (TCO 7) The transactions demand for money is most closely related to money functioning as a (Points : 1)
unit of account.
medium of exchange.
store of value.
measure of value.


8. (TCO 7) If the quantity of money demanded exceeds the quantity supplied (Points : 1)
the supply-of-money curve will shift to the left.
the demand-for-money curve will shift to the right.
the interest rate will rise.
the interest rate will fall.


9. (TCO 7) The discount rate is the interest (Points : 1)
rate at which the central banks lend to the U.S. Treasury.
rate at which the Federal Reserve Banks lend to commercial banks.
yield on long-term government bonds.
rate at which commercial banks lend to the public.


10. (TCO 7) A restrictive monetary policy is designed to shift the: (Points : 1)
aggregate demand curve rightward.
aggregate demand curve leftward.
aggregate supply curve rightward.
aggregate supply curve leftward.


11. (TCO 7) What are the two significant characteristics of the fractional reserve banking system? (Points : 5)



12. (TCO 7) Which tool of monetary policy is most important? Why is this more important than the other tools?

Explanation / Answer

5 borrowing funds in the federal funds market. 6 is increased. 7 Medium of exchange 8 The interest rate will rise. 9 rate at which the Federal Reserve Banks lend to commercial banks. 10 aggregate demand curve leftward. 11 The two characteristics of federal reserves banking are as follows:1. Money creation and reserves 2. Bank panics and regulations. 12

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