Reference no: EM131295704

Question 1
M1 is comprised of currency held outside banks + traveler's checks + __________.
A. credit cards
B. savings deposits
C. gold
D. transaction account (checking and debit account) deposits
E. money market mutual funds

Question 2
The amount of required reserves a bank holds depends on the
A. required reserve ratio.
B. demand-deposit ratio.
C. excess-reserve ratio.
D. currency ratio.

Question 3
Reserves held beyond the required amount are called __________ reserves.
A. redundant
B. precautionary
C. excess
D. surplus

Question 4
M2 includes M1 plus all of the following except
A. savings deposits.
B. retail money market mutual funds.
C. short-term U.S. government securities.
D. transaction account (debit and checking) deposits.

Question 5
Which of the following is not a major responsibility of the Fed?
A. controlling the money supply
B. serving as the federal government's banker
C. determining tax rates
D. acting as a lender of last resort

Question 6
Open market operations are the
A. buying and selling of Federal Reserve Notes in the open market.
B. means by which the Fed supplies the economy with currency.
C. means by which the Fed acts as the government's banker.
D. buying and selling of bonds by the Fed.
E. buying and selling of government securities by the Treasury.

Question 7
An open market purchase by the Fed
A. decreases the supply of money.
B. increases the supply of money.
C. decreases the demand for money.
D. increases the demand for money.

Question 8
An "open market operation" is said to occur when the Fed
A. arranges for the merger of two banks.
B. changes the interest rate at which it lends reserves.
C. transfers reserves between banks.
D. buys or sells government securities (or bonds)

Question 9
The interest rate that a commercial bank pays when it borrows from the Fed is the __________ rate.
A. discount
B. exchange
C. federal
D. bank

Question 10
Which of the following will increase the money supply?
A. an increase in the discount rate (relative to the federal funds rate)
B. a decrease in the required reserve ratio
C. an open market sale by the Fed

Question 11
A required reserve ratio of 12 percent gives rise to a simple deposit multiplier of
A. 12.
B. 83.33.
C. 6.67.
D. 8.33.

Question 12
Liquidity refers to
A. the ease with which an asset is converted to the medium of exchange.
B. the measurement of the durability of a good.
C. how many times a dollar circulates in a given year.