Econ test 3. ch. 16
The major objective of the Federal Reserve System is to:
help in generating stabilization policies for the economy.
One uniquely American aspect of central banking is that:
the United States has 12 central banks rather than one.
The Federal Reserve banks are owned by:
All decisions of the Fed are subject to approval by:
none of the above
Decisions regarding purchases and sales of securities by the Fed are made by:
Federal Open Market Committee.
Which of the following is most frequently used when the Fed is attempting to adjust the money supply?
Open market operations
The Fed's purchases and sales of government securities are called:
open market operations.
Which of the following is the Fed's most common way to change the money supply?
Open market operations
Considering open market operations, which of the following observations is incorrect?
it is potentially the most powerful tool to control the supply of money.
Which of the following is not a function of the Federal Reserve System?limiting the national debt
limiting the national debt
If the Fed sells a U.S. government bond to a bank, what is the effect on the money supply?
It will shrink
When the Fed wants to expand the money supply through open market operations, it:
purchases government securities from member banks.
If the Federal Open Market Committee (FOMC) decides to expand the money supply, then:
it will issue directions to purchase U.S. government securities, thus putting more reserves in the hands of banks.
When the Fed purchases government securities from a commercial bank, the bank:
receives reserves that can be used to make additional loans.
The money supply contracts when the Fed:
sells government securities
Which of the following actions of the Fed is likely to lead to a decrease in the money supply?
An increase in reserve requirements
If the Fed buys a U.S. government bond from a member of the public,
the banking system has more reserves and the money supply tends to grow.
If your economics professor buys a U.S. government bond from you, the effect will be to ____ banking reserves and ____ the money supply.
not change, not change
If you sell your economics professor a U.S. government bond, the effect will be to ____ banking reserves and ____ the money supply.
not change; not change
When the Fed buys a U.S. government security:
the volume of loans issued by the banking system increases and investment will tend to increase.