Econ(Money and banking ) below are the 50 question needed.

econ_money_and_banking.docx

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Question 12 ptsWhich of the following men has NOT served as Chairman of the Board of Governors? 

Which of the following men has NOT served as Chairman of the Board of Governors?

	Arthur Burns
	Alan Greenspan

	Paul Volcker
	Milton Friedman

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Question 22 ptsWhich of the following statements is correct? 

Which of the following statements is correct?

	The boards of directors of the district banks are all local bankers.
	Federal Reserve district banks pay dividends on their earnings to member banks.

	Federal Reserve district banks are owned by the government.
	Member banks receive no return on the stock they own in Federal district banks.

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Question 32 ptsDuring the time William McChesney Martin was chair of the Fed, free reserves were used 

During the time William McChesney Martin was chair of the Fed, free reserves were used

	as neither an indicator nor as a target.
	as an indicator, but not as a target.

	as both an indicator and as a target.
	as a target, but not as an indicator.

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Question 42 ptsThe interest rate the Fed charges on loans to depository institutions is known as 

The interest rate the Fed charges on loans to depository institutions is known as

	the Fed loan rate.
	the federal funds rate.

	the discount rate.
	the interbank clearing rate.

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Question 52 ptsMost economists believe that a zero rate of unemployment 

Most economists believe that a zero rate of unemployment

	is inconsistent with a well-functioning economy.
	would result in a better functioning economy.

	is obtainable with the correct monetary policy.
	is obtainable only if the inflation rate is also zero.

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Question 62 ptsWhich of the following Federal Reserve district banks was NOT a major population center at the time the Fed was created? 

Which of the following Federal Reserve district banks was NOT a major population center at the time the Fed was created?

	Richmond
	New York

	Chicago
	San Francisco

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Question 72 ptsUnder narrow banking, 

Under narrow banking,

	banks would make loans only from bank equity.
	banks would not be allowed more than one branch.

	federal deposit insurance would be eliminated.
	banks would not be allowed to make any risky loans.

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Question 82 ptsNegotiable certificates of deposit were developed in order to 

Negotiable certificates of deposit were developed in order to

	circumvent interest rate regulations on deposits.
	compete for loan business that had been going to the commercial paper market.

	increase assets that were acceptable as collateral for discount loans.
	circumvent reserve requirements.

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Question 92 ptsIn response to the shocks to the economy in the early 2000s, the Fed articulated what approach to monetary policy? 

In response to the shocks to the economy in the early 2000s, the Fed articulated what approach to monetary policy?

	Targeting nonborrowed reserves
	Risk management

	Monetarism
	Inflation targeting

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Question 102 ptsDuring World War II 

During World War II

	the Board of Governors was temporarily disbanded.
	the Fed agreed to hold interest rates on short-term Treasury securities at low levels.

	the Fed agreed not to buy Treasury securities.
	the Fed was not allowed to make discount loans.

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Question 112 ptsDuring the early 1980s, regulators kept many insolvent or nearly insolvent thrifts from being closed by 

During the early 1980s, regulators kept many insolvent or nearly insolvent thrifts from being closed by

	underestimating the value of goodwill that thrifts carried on their books as an asset.
	allowing many assets to be carried on the books at face value rather than market value.

	reducing the face value of many mortgages to current market value.
	allowing them to pay interest rates to depositors that were below the going market rates.

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Question 122 ptsRequired reserves are equal to 

Required reserves are equal to

	checkable deposits divided by the required reserve ratio.
	the required reserve ratio divided by checkable deposits.

	the required reserve ratio times checkable deposits.
	excess reserves divided by total reserves.

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Question 132 ptsA $10 million open market sale will decrease the reserves of the banking system by 

A $10 million open market sale will decrease the reserves of the banking system by

	$10 million times the money multiplier.
	$10 million.

	$10 million divided by the money multiplier.
	an amount between $0 and $10 million, depending on the fraction of the sale the public wishes to hold as currency.

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Question 142 ptsThe members of Federal Reserve district bank boards of directors appointed by the Board of Governors are known as 

The members of Federal Reserve district bank boards of directors appointed by the Board of Governors are known as

	Class B directors.
	Class C directors.

	Class A directors.
	Class D directors.

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Question 152 ptsIf the federal funds rate was above the discount rate, 

If the federal funds rate was above the discount rate,

	the reserve supply curve would become vertical.
	reserves would decline, causing the two to become equal.

	banks would choose not to borrow from the Fed.
	banks would want to borrow as much as they could from the Fed.

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Question 162 ptsOn the books of the Fed the difference between borrowed reserves and discount loans is equal to 

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.

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Question 172 ptsWhen deposit withdrawals exceed reserves, which of the following is NOT a way in which banks bear the cost? 

When deposit withdrawals exceed reserves, which of the following is NOT a way in which banks bear the cost?

	Borrowing from the Fed
	Borrowing in the federal funds market

	Buying securities
	Calling in loans

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Question 182 ptsThe Fed 

The Fed

	controls discount policy more completely than it controls open market operations.
	must abide by discount rates set by Congress.

	controls discount policy completely, just as it controls open market operations.
	controls discount policy less completely than it controls open market operations.

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Question 192 ptsIn 1971 money market mutual funds were introduced as an alternative to 

In 1971 money market mutual funds were introduced as an alternative to

	repurchase agreements.
	commercial paper.

	Treasury bills.
	bank deposits.

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Question 202 ptsThe Federal Deposit Insurance Corporation Improvement Act of 1991 

The Federal Deposit Insurance Corporation Improvement Act of 1991

	abolished the FSLIC.
	introduced a system of coinsurance for deposit insurance.

	eliminated the too-big-to-fail doctrine.
	authorized risk-based deposit insurance premiums.

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Question 212 ptsThe Treasury was in conflict with Alan Greenspan early in the Bush administration because the Treasury 

The Treasury was in conflict with Alan Greenspan early in the Bush administration because the Treasury

	wanted the Fed to make fighting inflation its top priority.
	wanted the Fed to raise interest rates.

	wanted the Fed to lower the required reserve ratio.
	wanted the Fed to pursue an expansionary monetary policy.

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Question 222 ptsThe Fed had particular difficulty during the 1970s in attempting to control both the federal funds rate and monetary aggregates because 

The Fed had particular difficulty during the 1970s in attempting to control both the federal funds rate and monetary aggregates because

	actions of the nonbank public made the money multiplier very unstable.
	the federal funds rate is inherently unstable.

	of fluctuations in consumer and business spending.
	of the impact of the savings-and-loan crisis.

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Question 232 ptsMost of the earnings that the Fed receives on interest from government securities are 

Most of the earnings that the Fed receives on interest from government securities are

	reinvested in new government securities.
	retained for future open market operations.

	shared by members of the Board of Governors.
	returned to the Treasury.

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Question 242 ptsWhich of the following cities contains a Federal Reserve bank? 

Which of the following cities contains a Federal Reserve bank?

	Los Angeles
	Dallas

	Pittsburgh
	Seattle

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Question 252 ptsAn ATS account 

An ATS account

	is the name given to NOW accounts outside of New England.
	were used during the Great Depression by depositors who had lost faith in conventional checking accounts.

	converts a corporation's checking account balance at the end of the day into an overnight RP.
	are negotiable certificates of deposit of less than $100,000.

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Question 262 ptsWhen households and businesses substitute Treasury bills, commercial paper, and repurchase agreements for short-term bank deposits in their portfolios, they are 

When households and businesses substitute Treasury bills, commercial paper, and repurchase agreements for short-term bank deposits in their portfolios, they are

	decreasing both their liquidity and return.
	sacrificing return for liquidity.

	increasing both their liquidity and return.
	sacrificing liquidity for return.

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Question 272 ptsWhat do we need to add to Federal Reserve currency in circulation and bank reserves in order to arrive at the monetary base? 

What do we need to add to Federal Reserve currency in circulation and bank reserves in order to arrive at the monetary base?

	U.S. government securities
	Treasury currency in circulation

	Discount loans to banks
	Checkable deposits in commercial banks

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Question 282 ptsThe Fed 

The Fed

	has been obliged since 1980 to make whatever discount loans are requested by any depository institution.
	extends discount loans at its discretion.

	will make a discount loan only if it appears certain that the institution requesting the loan would fail without it.
	is obliged to make whatever discount loans are requested by banks that are members of the Federal Reserve System.

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Question 292 ptsPrimary credit is only a backup source of funds for health banks since 

Primary credit is only a backup source of funds for health banks since

	the secondary credit rate pays 0.5% more.
	restrictions as to its use limit its benefits.

	banks must seek funds from other sources prior to requesting a discount loan.
	the primary credit rate is set 1% above the federal funds rate.

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Question 302 ptsWhich of the following statements is correct? 

Which of the following statements is correct?

	The Fed has difficulty covering its normal expenses, but is reluctant to ask Congress for money.
	The Fed is dependent on the annual appropriations it receives from Congress.

	At one time the Fed made substantial profits, but falling interest rates have greatly reduced them.
	The Fed's profits are substantial, even when compared to the largest U.S. corporations.

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Question 312 ptsDiscount loans in the form of primary credit tend 

Discount loans in the form of primary credit tend

	to increase the money supply by increasing the money multiplier.
	not to affect the money supply.

	to increase the money supply by increasing bank reserves.
	to decrease the money supply by increasing bank liabilities.

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Question 322 ptsThe weakness of the Fed's actions during the banking crisis of the early 1930s resulted in 

The weakness of the Fed's actions during the banking crisis of the early 1930s resulted in

	the introduction of a federal system of deposit insurance.
	the establishment of the savings-and-loan industry.

	a change in the law restricting its ability to make discount loans.
	the elimination of reserve requirements on demand deposits.

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Question 332 ptsFederal Reserve districts 

Federal Reserve districts

	have equal populations.
	cut across state and economic boundaries.

	conform to state boundaries.
	group together economically similar states.

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Question 342 ptsWhy are there periodic increases in borrowing in the banking system? 

Why are there periodic increases in borrowing in the banking system?

	Trading volume on the New York Stock Exchange peaks periodically.
	Payments on discount loans are due periodically.

	Banks must satisfy reserve requirements periodically.
	Banks make their federal tax payments periodically.

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Question 352 ptsDuring 1985 and 1986 the money multiplier 

During 1985 and 1986 the money multiplier

	fell as the required reserve ratio rose.
	fell as the currency-deposit ratio declined.

	rose as the currency-deposit ratio declined.
	remained roughly constant despite a substantial increase in the currency-deposit ratio.

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Question 362 ptsThe Banking Acts of 1933 and 1935 

The Banking Acts of 1933 and 1935

	eliminated the authority of the Board of Governors to set reserve requirements.
	made the Secretary of the Treasury a member of the Board of Governors.

	increased central control of the Federal Reserve System.
	established the Federal Reserve System.

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Question 372 ptsThe first stage in the regulatory process is 

The first stage in the regulatory process is

	a banking crisis.
	regulatory response.

	response by the financial system.
	regulation.

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Question 382 ptsRegulation Q 

Regulation Q

	placed ceilings on allowable interest rates on time and savings deposits.
	prohibited interstate banking.

	broadened the basis on which the Fed could make discount loans.
	required all banks to hold reserves against demand deposits.

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Question 392 ptsWhy do banks avoid holding excess reserves? 

Why do banks avoid holding excess reserves?

	Savers are often reluctant to place their deposits with banks that hold excess reserves.
	The Office of the Comptroller of the Currency monitors excess reserves more closely than any other bank asset.

	The Fed does not pay interest on reserves.
	The Fed levies a 10% penalty on any reserves held above the required level.

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Question 402 ptsWhich groups were opposed to the Bank of the United States? 

Which groups were opposed to the Bank of the United States?

	Northeastern financial interests
	Northeastern industrial interests

	Exporters
	Southern and western agrarian and small-business interests

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Question 412 ptsWhat percentage of all banks in the United States belong to the Federal Reserve System? 

What percentage of all banks in the United States belong to the Federal Reserve System?

	5%
	90%

	33%
	75%

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Question 422 ptsReserve requirements are changed 

Reserve requirements are changed

	more frequently than the discount rate is changed, but less frequently than open market operations are conducted.
	more frequently than open market operations are conducted, but less frequently than the discount rate is changed.

	less frequently than open market operations are conducted and less frequently than the discount rate is changed.
	more frequently than the discount rate is changed and more frequently than open market operations are conducted.

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Question 432 ptsWhich of the following assumptions made in deriving the simple deposit multiplier is unrealistic? 

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

	The Fed is able to affect the level of reserves in the banking system.
	The simple deposit multiplier is equal to 1 divided by the required reserve ratio.

	The Fed sets the required reserve ratio.
	Banks loan out all of their excess reserves.

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Question 442 ptsA rise in market interest rates 

A rise in market interest rates

	encourages banks to take out discount loans and to hold excess reserves.
	encourages banks to take out discount loans, but discourages their holding excess reserves.

	discourages banks from taking out discount loans, but encourages their holding excess reserves.
	discourages banks from taking out discount loans and from holding excess reserves.

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Question 452 ptsMember banks 

Member banks

	have none of the rights typically granted to shareholders of private corporations.
	in practice, receive dividend payments far in excess of the 6% rate specified by law.

	exercise tight control over the Federal Reserve banks.
	are not owners of Federal Reserve banks.

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Question 462 ptsBecause of the bank failures of the early 1930s, many small and medium-sized businesses were 

Because of the bank failures of the early 1930s, many small and medium-sized businesses were

	forced to move from bank loans to bond sales to raise funds.
	forced to move from bank loans to stock sales to raise funds.

	unable to obtain credit.
	forced to rely on government loans for credit.

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Question 472 ptsGovernors of the Fed often do not serve their full fourteen-year terms because 

Governors of the Fed often do not serve their full fourteen-year terms because

	a new President takes office and they are compelled to resign.
	they are removed by the President.

	they can earn higher incomes in private business.
	they are removed by Congress.

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Question 482 ptsIf the account manager finds that the current level of bank reserves is greater than the desired level indicated in the most recent directive from the FOMC, he will 

If the account manager finds that the current level of bank reserves is greater than the desired level indicated in the most recent directive from the FOMC, he will

	order banks to reduce their reserves.
	conduct an open market sale.

	order banks to raise their interest rates in an attempt to get them to loan out more of their reserves.
	conduct an open market purchase.

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Question 492 ptsHow does the Open Market Trading Desk conduct its operations? 

How does the Open Market Trading Desk conduct its operations?

	Over-the-counter electronically with government securities dealers
	Directly with government securities dealers on the floor of the Federal Reserve Bank of New York

	Directly with government securities dealers on the floor of the New York Stock Exchange
	By sending its buy and sell orders to the U.S. Treasury for execution

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Question 502 ptsWhich of the following statements is correct? 

Which of the following statements is correct?

	Both open market purchases and open market sales are contractionary.
	Both open market purchases and open market sales are expansionary.

	Open market purchases are expansionary and open market sales are contractionary.
	Open market purchases are contractionary and open market sales are expansionary.