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Exam 12: Money Creation and the Federal Reserve

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Question 61

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If the Fed wanted to use all three of its primary tools to increase the money supply,it should:

A) raise the reserve requirement,lower the discount rate,and conduct an open market sale.
B) raise the reserve requirement,raise the discount rate,and conduct an open market sale.
C) lower the reserve requirement,raise the discount rate,and conduct an open market purchase.
D) lower the reserve requirement,lower the discount rate,and conduct an open market purchase.

E) All of the above
F) A) and B)

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Question 62

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Experience in this country and abroad suggests that independent central banks are better at fighting inflation than are politically controlled banks.

A) True
B) False

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Question 63

Multiple Choice

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The Federal Reserve rarely uses control of:

If the reserve requirement is 2.5% and a bank initially receives $30,000 in deposits from the Fed,then the maximum amount of money that the banking system can create is:

When you deposit cash in your bank,the net change in M1 is equal to the size of your deposit.

The Federal Open Market Committee oversees the buying and selling of government securities.

The Chairman of the Board of Governors is appointed for a _____ renewable term.

The two types of reserves are federal reserves and required reserves.

The target federal funds rate is the Fed's primary approach to monetary policy.

Sometimes the Fed's goals conflict,and the Fed must emphasize one goal over another.Which of the following is a goal of the Fed that does NOT conflict with its goal of full employment?

The Fed works independently of political parties.

Which of the following is correct?

Assume the reserve requirement is 10% and no excess reserves are held.If an initial cash deposit of $10,000 is made,the money supply has the potential to increase by:

All of these actions are performed by the Federal Reserve regional banks EXCEPT:

When liabilities exceed assets,a bank has negative equity.

The Federal Reserve System resulted from a compromise between those who wanted a massive central bank and those who wanted no central bank.

Which of the following is NOT a policy tool of the Federal Reserve?

In September 2012,the Argentinian central bank increased its benchmark interest rate via open market operations.The Argentinian central bank must have sold securities.

New deposits of $1 billion are placed in a bank.The reserve requirement is 20%.How much does the money supply increase,assuming no leakages?

About 10% of U.S.dollars are held outside the United States.