The primary policy tool used by the Fed to meet its monetary policy goals is:
Click the card to flip 👆
1 / 30
Terms in this set (30)
If the Federal Reserve were to buy dollars by selling yen the result would be to _____ the supply of U.S. dollars and _____ the exchange rate in terms of the number of yen per U.S. dollar.D. Decrease; raiseFrom October 1983 to July 1993 the Federal Reserve targetedB. Borrowed reservesRecently oil prices have risen in the U.S, generating concerns that inflation may increase. If the Fed wishes to ensure that inflation does not get out of hand the Fed could:D. Lower the target money supply growth rate.The Fed changes reserve requirements from 10% to 14%, thereby eliminating $750 million in excess reserves. The total change in deposits (with no drains) would be (rounded)C. $5.357 billionThe Fed increases bank reserves in the system by $75 million. If there are no drains the expected change in bank deposits isC. $750 millionIf the Fed is targeting interest rates and money demand increases an appropriate policy response would be toC. Buy U.S. Treasury securities from government bond dealersThe Federal Reserve does all but which one of the following?E. Insure depositsThe discount rate is the rate thatE. The Federal Reserve charges on loans to commercial banksThe Fed offers three types of discount window loans. _______ credit is offered to small institutions with demonstrable patterns of financing needs, _______ credit is offered for short term temporary funds outflows, and _______ credit may be offered at a higher rate to troubled institutions with more severe liquidity problems.D. Seasonal; primary; secondaryBefore 2003 the discount window loan rate was setA. below the target fed funds rateA decrease in reserve requirements could lead to a(n)D. Both A and BA. Increase in bank lending B. Increase in the money supplyBank A has an increase in deposits of $20 million dollars and all bank reserve requirements are 10%. Bank A loans out the full amount of the deposit increase that is allowed. This amount winds up deposited in Bank B. Bank B lends out the full amount possible as well, and this amount winds up deposited in Bank C. What is the total increase in deposits resulting from these three banks? ␣ ␣B. $54.20 millionThe Fed changes reserve requirements from 10% to 7%, thereby creating $900 million in excess reserves. The total change in deposits (with no drains) would beC. $12,857 millionIf the Fed wishes to stimulate the economy it could I. Buy U.S. government securities II. Raise the discount rate III. Lower reserve requirementsA. I and III onlySuppose the Fed buys $2 billion worth of yen from commercial bank currency traders in exchange for $2 billion in deposit accounts at the Federal Reserve. Which of the following would occur as a result, ceteris paribus? I. The value of the dollar against the yen would rise II. The U.S. money supply would increase III. U.S. interest rates would fallD. II and III onlyThe major monetary policy making arm of the Federal Reserve is theE. None of the aboveIn the area of bank supervision, which of the following are functions of the Federal Reserve Banks? I. Examinations of state member banks II. Approval of member bank and bank holding company acquisitions III. Deposit insuranceB. I and II onlyThe Check 21 Act effective in October 2004 does which of the following?D. Authorizes the use of an electronic image to facilitate paperless check clearingA bank has $770 million in checkable deposits. The bank has $85 million in reserves. The banks required reserves are _____________ and its excess reserves are _____________.E. $77 million ; $8 millionThe Fed increases the money supply. The effect of the increase should be to I. Increase consumption spending II. Reduce business investment III. Increase nominal GDPD. I and III only