Chapter 17 Monetary Policy and Inflation

| November 9, 2018

12)
To increase the money supply using the reserve requirements, what would the Fed
typically do?
A)
increase the reserve requirement for banks
B)
reduce the reserve requirement for banks
C)
make each bank set its own reserve levels
D)
let each bank get more currency from the Treasury

13)
To decrease the money supply using the reserve requirements, what would the Fed
typically do?
A)
raise the reserve requirement for banks
B)
reduce the reserve requirement for banks
C)
make each bank voluntarily set its own reserve levels
D)
let each bank get less currency from the Treasury

14)
If the Federal Reserve wanted to change the money supply in the economy, it
would be least likely to
A)
buy bonds on the open market.
B)
sell bonds on the open market.
C)
change the level of reserves required to be held by banks.
D)
change the federal funds rate.

15)
By raising the discount rate, the Federal Reserve ________ banks from borrowing
more reserves.
A)
encourages
B)
discourages
C)
prohibits
D)
short-changes

16)
A change in the reserve requirement is used infrequently by the Fed because it
A)
is disruptive to the banking system.
B)
does not influence the money supply.
C)
does not affect bank reserves.
D)
does not affect the money multiplier.

17)
The rate of interest charged to commercial banks by the Fed for loans is called
the ________ rate.
A)
federal funds
B)
discount
C)
prime
D)
commercial paper

18)
The federal funds rate is the interest rate that
A)
the Fed charges to banks that borrow from it.
B)
banks charge the Fed for using their reserves.
C)
the Fed pays on bank reserves.
D)
banks charge each other for borrowed money.

19)
An increase in the discount rate
A)
reduces the cost of reserves borrowed from the Fed.
B)
signals the Fed’s desire to increase the money supply.
C)
signals the Fed’s desire to lend increased reserves to banks.
D)
increases the cost of reserves borrowed from the Fed.

20)
A decrease in the discount rate
A)
reduces the cost of borrowing from the Fed.
B)
signals the Fed’s desire to decrease the money supply.
C)
signals the Fed’s desire to reduce lending to commercial banks.
D)
increases the cost of reserves borrowed from the Fed.

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