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ECO 4223 Final Exam Questions And Accurate Answers
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ECO 4223 Final Exam Questions And Accurate AnswersIf currency held by the public equals $100 billion, reserves held by banks equal $50
billion and bank deposits equal $500 billion, then the money supply equals:
A. 150 billion
B. 650 Billion - Answer A
In a fractional-reserve banking system:
A. All banks are required to hold reserves in an amount equal to a fraction of their loans
B. All banks are required to hold reserves in an amount equal to a fraction of their
deposits - Answer B
In 100% reserve banking system, if customer deposit $100 of currency to bank, the
money supply:
A. rises by $100
B. stays the same - Answer B
The following information is used to answer the next question:
If rr rises but cr remains the same, and B remains the same then
A. Money supply rises
B. Money supply falls - Answer B
To reduce the money supply, the Fed:
A. buys government bonds
B. sells government bonds - Answer B
When the Fed conducts an open-market sale it:
, A. increases the monetary base
B. decreases the monetary base - Answer B
To discourage banks from borrowing excess reserves and making loans that would
generate additional money, the Fed could conduct open-market _______ and ______ the
interest rate paid on bank reserves:
A. Sales; raise
B. purchases; lower - Answer A
If the fed wishes to increase the money supply it should:
A. decrease the discount rate
B. increase the discount rate - Answer A
Direct loans made to member banks by the Fed are called:
A. discount loans
B. federal funds loans - Answer B
The interest rate charged on loans by the Federal Reserve to banks is called:
A. Federal funds rate
B. Discount rate - Answer B
If the monetary base fell and the currency-deposit ratio rose but the reserve ratio stayed
the same, then:
A. The money supply would fall but less than it would have if the reserve-deposit ratio
has fallen
B. The money supply would decrease but less than it would have if the reserve-deposit
ratio had risen
Choice A
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