(Solution) If the Fed buys securities worth $10 million, then (Points : 1) a) bank reserves will increase by $10 million. b) bank reserves will decrease by $10...
1. If the Fed buys securities worth $10 million, then (Points : 1)
a) bank reserves will increase by $10 million.
b) bank reserves will decrease by $10 million.
c) currency in circulation will increase by $10 million.
d) bank holdings of securities increase by $10 million.
Question 2. The size of the money multiplier depends upon all of the following EXCEPT (Points : 1)
a) the required reserve ratio.
b) the currency-deposit ratio.
c) excess reserves relative to deposits.
d) the discount rate.
Question 3. The percentage of deposits that banks must hold as reserves is called the (Points : 1)
a) percentage rate.
b) required reserve ratio.
c) Fed rate.
d) discount rate.
Question 4. The Fed's portfolio of securities consists principally of (Points : 1)
a) municipal bonds.
b) corporate bonds.
c) U.S. Treasury obligations.
d) obligations of foreign governments.
Question 5. Open market operations generally involve (Points : 1)
a) the Fed making discount loans to depository institutions.
b) the Fed buying and selling common stock in order to affect the liquidity of the stock market.
c) the Fed buying and selling U.S. government securities.
d) private investors buying and selling securities directly on exchanges, rather than through brokers.
Question 6. Most of the increase in the monetary base between 2007 and 2012 was due to increases in: (Points : 1)
b) bank deposits
c) excess reserves
d) Treasury bills
Question 7. What is the maximum amount a bank can lend? (Points : 1)
a) its total reserves
b) its excess reserves
c) its excess reserves divided by the required reserve ratio
d) the value of its checkable deposits times the required reserve ratio
Question 8. The interest rate the Fed charges on loans to depository institutions is known as (Points : 1)
a) the federal funds rate.
b) the Fed loan rate.
c) the discount rate.
d) the interbank clearing rate.
Question 9. If the Fed purchases $1 million in securities from the nonbank public, the monetary base will rise by $1 million (Points : 1)
a) if the public holds the proceeds as currency.
b) if the public deposits the proceeds as checkable deposits.
c) if the public deposits the proceeds with the Treasury in a monetary base account.
d) whether the public holds the proceeds as currency or deposits them as checkable deposits.
Question 10. Which of the following accurately describes the relationship between excess reserves and checkable deposits following the financial crisis of 2007-2009? (Points : 1)
a) Excess reserves declined as the excess reserve ratio returned to near zero.
b)Excess reserves rose to nearly one-third of checkable deposits.
c) Excess reserves approached the same level as checkable deposits.
d) Excess reserves exceeded checkable deposits.
This question was answered on: May 23, 2022
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