Impacts of federal reserve on money stock

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Reference no: EM13174475

1) A bank can lend out its excess reserves but not its required reserves.

A) True

B) False


2) A bank creates money when it

A) gets new checkable deposits which creates excess reserves for the bank

B) has a loan paid off, which creates excess reserves for the bank

C) makes a loan from its excess reserves

D) holds back excess reserves because of an increase in the required reserve ratio

E) gets more excess reserves because of a decrease in the required reserve ratio


3)A decrease in the discount rate by the Federal Reserve causes the money stock to expand.

A)True

B)False


4)An increase in the discount rate by the Federal Reserve causes the money stock to expand.

A)True

B)False


5)When the Fed purchases government securities, it:

A)has no effect on either the money supply or the discount rate

B) uses discounting operations to influence margin requirements.

C) automatically raises the discount rate.

D) decreases banks' reserves and makes possible a decrease in the money supply

E) increases banks' reserves and makes possible an increase in the money supply.


6) The federal funds rate is the interest rate that:

A) the government charges banks to borrow money

B) the Fed charges banks to borrow money

C) the federal government pays to borrow money

D) federally chartered banks charge their customers for commercial loans.

E) banks charge other banks for short-term loans.


7)In a system in which all banks have a uniform reserve requirement, the money multiplier is equal to 1 divided by the required reserve ratio.

A)True

B)False


8)The discount rate is the interest rate charged by:

A) major banks to their best customers

B) banks for overnight loans to other banks

C) the fed on loans of resrves to banks

D) banks for loans of less than 24 hours


9)Because the banking system operates using fractional reserves,

A) the money multiplier is greater than one.

B) excess reserves are equal to zero.

C) required reserves are equal to 100 percent

D)banks can loan out only their required reserves

E) the money multiplier must be equal to zero.


10)Assume a simplified banking system in which all banks are subject to a uniform reserve requirement of 20 percent and checkable deposits are the only from of money. A bank that received a new checkable deposit of $10,000 would be able to extend new loans up to a maximum of:

A) $2,000

B) $8,000

C) $9,000

D) $10,000

Reference no: EM13174475

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