Money and Supply

What is the payments system?

            The means by which credit card companies calculate average daily balances for purposes of imposing finance charges

            The means of clearing transactions in the economy by check

            The system by which exchange rates between currencies are determined

            The system for transmitting funds from the U.S. Treasury to local banks for the purpose of making purchases for the federal government

 Government regulation of banks in the United States

            changes slowly over time as knowledge of the best way to organize the system increases.

            has remained essentially unchanged since the early twentieth century.

            generally increases during election campaigns as politicians exploit the public's hostility toward banks.

            changes abruptly in response to periodic financial crises.

 Regulation Q was intended to

            increase the reserves banks would hold against demand deposits.

            eliminate the need for discount loans.

            increase the reserves banks would hold against time deposits.

            maintain banks' profitability by limiting competition for funds.

 Which of the following assumptions made in deriving the simple deposit multiplier is unrealistic?

            The simple deposit multiplier is equal to 1 divided by the required reserve ratio.

            Banks loan out all of their excess reserves.

            The Fed sets the required reserve ratio.

            The Fed is able to affect the level of reserves in the banking system.

Which of the following equations is correct?

            %Δm ≈ %ΔM + %Δ(Bnon + BR)

            %ΔM ≈ %Δm + %Δ(Bnon + BR)

            %ΔM ≈ %Δm + %Δ(Bnon - BR)

            %ΔM ≈ %Δm + %Δ(BR - Bnon)

Flag this Question

What did the Congressional Budget Office estimate the cost of the S&L debacle to be in 1992 dollars?

            $1 trillion

            $100 million

            $3 trillion

            $200 billion

The 1981-1982 recession hurt thrifts by

            raising default rates on mortgages.

            reducing the demand for negotiable CDs.

            lowering interest rates.

            raising interest rates.

 What is the Fedwire used for?

            Sending federal government funds to disaster areas

            Relaying important developments in financial markets to broker-dealers

            Clearing securities transactions

            Relaying important business developments to Federal Reserve officials in Washington

When the Fed lends to depository institutions, the loans are called

            federal funds.

            discount loans.

            repurchase agreements.

            reverse repurchase agreements.

On the books of the Fed the difference between borrowed reserves and discount loans is equal to

            zero; they are the same thing.

            currency in circulation.

            excess reserves.

            required reserves.

Which of the following statements concerning money market deposit accounts is NOT true?

            They are not covered by federal deposit insurance.

            They are not subject to reserve requirements.

            They were not subject to Regulation Q ceilings.

            They generally pay higher interest rates than other bank deposits available to small depositors.

Which of the following statements about the early 1930s is correct?

            The ratio of the money supply to the monetary base was unchanged.

            The monetary base fell to zero during the early 1930s.

            The ratio of the money supply to the monetary base fell.

            The ratio of the money supply to the monetary base rose.

Open market operations involve

            the Fed buying and selling common stock in order to affect the liquidity of the stock market.

            private investors buying and selling securities directly on exchanges, rather than through brokers.

            the Fed buying and selling U.S. government securities.

            the Fed making discount loans to depository institutions.

All of the following are likely to lead to a decrease in the currency-deposit ratio EXCEPT

            higher risk of deposits.

            Increased wealth.

            reduction in anonymity value of cash.

            increased expected return on deposits.

If the Fed sells securities worth $10 million to a commercial bank, the Fed's balance sheet will show

            a decrease in securities held of $10 million and an increase in bank reserves of $10 million.

            an increase in securities held of $10 million and an increase in bank reserves of $10 million.

            an increase in securities held of $10 million and a decrease in bank reserves of $10 million.

            a decrease in securities held of $10 million and a decrease in bank reserves of $10 million.

The crisis involving the Hunt brothers had its greatest impact on the market for

            negotiable certificates of deposit.

            Eurodollars.

            commodity futures.

            commercial paper.

The McCarran-Ferguson Act of 1945

            made insurance companies subject to federal antitrust laws.

            established the FDIC.

            established the FSLIC.

            exempted insurance companies from federal antitrust laws.

Most of the reserves of the banking system are held as

            vault cash.

            deposits accounts with the Fed.

            Treasury securities.

            discount loans.

The most important loss to the economy during the 1980s from the thrift crisis was

            the increase in funds spent to hire more regulators.

            the increase in deposit insurance premiums mandated by new legislation.

            the diversion of savings to less productive investments funded by insured deposits.

            the loss of output represented by the $200 billion spent to pay off depositors of failed thrifts.

NOW accounts were developed in order to

            provide banks with a checkable deposit on which they did not have to pay interest.

            circumvent Regulation Q.

            provide banks with a liquid, interest-earning asset.

            provide banks with a means of earning interest on the funds in their reserve accounts with the Fed.