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Multiple Choice Quiz
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1
Which of the following instruments of Fed monetary policy involves the buying or selling of U.S. government securities in the open market in order to influence the level of bank reserves?
A)open-market operations
B)discount-rate policy
C)reserve-requirements policy
D)none of the above
2
Which of the following instruments of Fed monetary policy involves setting the interest rate at which commercial banks and other depository institutions can borrow reserves from one of the Federal Reserve banks?
A)open-market operations
B)discount-rate policy
C)reserve-requirements policy
D)none of the above
3
The Fed primarily operates by setting a short-term target for the _______.
A)federal funds rate
B)required reserve ratio
C)discount rate
D)none of the above.
4
The interest rate charged by the Federal Reserve when a bank borrows from one of the 12 regional banks is called the _______.
A)federal funds rate
B)required reserve ratio
C)discount rate
D)none of the above.
5
The route by which changes in the supply of money are translated into changes in output, employment, prices, and inflation is called:
A)the money-supply multiplier.
B)the required reserve ratio.
C)the monetary transmission mechanism.
D)none of the above.
6
The vast holdings of dollars outside the border of the United States:
A)can be influenced by actions of the Fed.
B)can affect the ability of the Fed to meet its ultimate objectives.
C)is of no concern to the Fed as it sets monetary policy.
D)answers A and B.
7
Each federal reserve bank:
A)distributes coin and currency.
B)operates a nation-wide payments system.
C)supervises and regulates banks in its district.
D)does all of the above.
8
The largest asset of the Federal Reserve Banks is:
A)member bank reserves.
B)U.S. government securities.
C)gold certificates.
D)Federal Reserve notes.
9
A reduction in reserve requirements of member banks tends to counter a recession by:
A)raising interest rates.
B)increasing excess reserves.
C)reducing excess reserves.
D)decreasing outstanding loans.
10
Fed open-market sales of government securities are made to:
A)to big corporations.
B)to commercial banks.
C)to private investors.
D)only recognized large dealers in government bonds.





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