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ECO 4223 FINAL EXAM QUESTIONS AND ANSWERS WITH SOLUTIONS 2024
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ECO 4223 FINAL EXAM QUESTIONS ANDANSWERS WITH SOLUTIONS 2024
If 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 system with fractional-reserve banking:
A. All banks must hold reserves equal to a fraction of their loans
B. All banks must hold reserves equal to a fraction of their deposits - ANSWER B
In a 100% reserve banking system, if a customer deposits $100 currency into a bank, then the money
supply:
A. increases $100
B. remains the same - ANSWER B
If the ratio of reserves to deposits (rr) increases, while the ratio of currency to deposits (cr) is constant,
and the monetary base (B) is constant, then:
A. The money supply increases
B. The money supply decreases - ANSWER B
To reduce the money supply, the Fed:
A. buys government bonds
B. sells government bonds - ANSWER B
When the Fed makes and open-market sale, it:
A. increases the monetary base
B. decreases the monetary base - ANSWER B
, To prevent banks from using excess reserves to make loans that would increase the money supply, 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 remained the same,
then:
A. The money supply would fall but not by as much as it would have fallen if the reserve-deposit ratio
has risen
B. The money supply would fall but not by as much as it would have fallen if the reserve-deposit ratio
has fallen - ANSWER A
The most frequently used tool for monetary policy:
A. open-market operations
B. changes in discount rate - ANSWER A
When the Fed increases the interest rate, it pays banks on their reserves and:
A. the reserve-deposit ratio increases
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