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| 1 | |
A central bank's liabilities include: |
| | A) | securities held by the central bank. |
| | B) | foreign exchange reserves held by the central bank. |
| | C) | loans to commercial banks by the central bank. |
| | D) | commercial bank reserve deposits in the central bank. |
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| 2 | |
Securities held by a central bank are part of the bank's |
| | A) | assets. |
| | B) | liabilities. |
| | C) | reserve holdings. |
| | D) | None of the above is correct. |
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| 3 | |
When the Fed issues additional discount loans, holding everything else constant, the Fed's: |
| | A) | assets and liabilities both rise. |
| | B) | assets and liabilities both decline. |
| | C) | assets rise and its liabilities fall. |
| | D) | assets fall and its liabilities rise. |
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| 4 | |
The Fed controls the federal funds rate primarily by adjusting which component of its assets? |
| | A) | securities |
| | B) | reserves |
| | C) | foreign exchange reserves |
| | D) | currency |
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| 5 | |
The Fed controls the federal funds rate primarily by adjusting which component of its liabilities? |
| | A) | securities |
| | B) | reserves |
| | C) | the government account |
| | D) | currency |
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| 6 | |
The monetary base consists of: |
| | A) | currency held by the public only. |
| | B) | currency held by the public + checkable deposits. |
| | C) | reserves only. |
| | D) | currency held by the public + reserves. |
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| 7 | |
Reserves consists of: |
| | A) | vault cash only. |
| | B) | deposits at Fed only. |
| | C) | vault cash + deposits at Fed. |
| | D) | None of the above is correct. |
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| 8 | |
Which of the following is not a part of the monetary base? |
| | A) | vault cash |
| | B) | currency in the hands of the public |
| | C) | reserve deposits at the Fed |
| | D) | checkable deposits |
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| 9 | |
When the Fed expands the money supply: |
| | A) | both its liabilities and its assets increase. |
| | B) | both is liabilities and its assets decrease. |
| | C) | its liabilities increase and its assets decrease. |
| | D) | its liabilities decrease and its assets increase. |
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| 10 | |
Which of the following does not directly increase the Fed's liabilities? |
| | A) | an open market security purchase |
| | B) | an increase in the volume of discount loans. |
| | C) | the purchase of additional foreign exchange by the Fed. |
| | D) | an increase in the ratio of currency to deposits. |
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| 11 | |
Bank reserves are: |
| | A) | an asset for banks and for the Fed. |
| | B) | a liability for banks and for the Fed. |
| | C) | an asset for banks and a liability for the Fed. |
| | D) | a liability for banks and an asset for the Fed. |
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| 12 | |
If there are no offsetting transactions, a foreign exchange purchase by the Fed will cause the monetary base to: |
| | A) | rise. |
| | B) | fall. |
| | C) | remain unchanged. |
| | D) | change in an unpredictable manner. |
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| 13 | |
If the Fed increases the amount of discount loans, the Fed's assets will ____________ and its liabilities will _____________. |
| | A) | increase; increase |
| | B) | decrease; decrease |
| | C) | increase; decrease |
| | D) | decrease; increase |
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| 14 | |
The maximum amount of money that may be created by an individual bank is the bank's: |
| | A) | excess reserves. |
| | B) | total reserves. |
| | C) | required reserves. |
| | D) | excess reserves x simple deposit expansion multiplier. |
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| 15 | |
Suppose that currency holdings remain constant and that banks hold no excess reserves, If the reserve requirement is 10%, a $500,000 open market purchase by the Fed will cause the money supply to: |
| | A) | increase by a maximum of $500,000. |
| | B) | increase by a maximum of $5,000,000. |
| | C) | decrease by a maximum of $500,000. |
| | D) | decrease by a maximum of $5,000,000. |
| | E) | None of the above is correct. |
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| 16 | |
A given change in the monetary base will have a larger impact on the money supply when: |
| | A) | banks hold a larger proportion of excess reserves. |
| | B) | the public holds a smaller proportion of their wealth in currency and a larger proportion of their wealth in checkable deposits. |
| | C) | the reserve requirement is higher. |
| | D) | None of the above is correct. |
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| 17 | |
One of the difficulties faced by the Fed in controlling the money supply is that the Fed: |
| | A) | can control the monetary base, but the size of the money supply is also affected by the decisions of households and banks. |
| | B) | has little control over the monetary base even though it has tight control over the money multiplier. |
| | C) | has no control of influence over either the monetary base or the money multiplier. |
| | D) | None of the above is correct. |
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