Home > Class 11 Biology > Quizzes > Money, Banking, and Financial Markets Practice Test: Tools for Monetary Policy (U.S.)
Money, Banking, and Financial Markets Practice Test: Tools for Monetary Policy (U.S.)
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The Federal Reserve (Fed) uses three main tools to implement monetary policy in the US: Open market operations: Buying or selling federal government bonds Discount rate: Changing the discount rate, which affects how much banks loan Reserve requirements: Changing reserve requirements  Other tools the Fed uses include: Term Auction Facility: Provides financial institutions with access to Fed dollars to alleviate short-term cash needs Term Securities Lending Facility: Allows institutions to swap out mortgage-backed CDOs in exchange for U.S. Treasuries  The Fed controls the monetary policy... Show more
Money, Banking, and Financial Markets Practice Test: Tools for Monetary Policy (U.S.)
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25 Questions

1. In the market for reserves, if the federal funds rate is between the discount rate and the interest rate paid on excess reserves, a ________ in the reserve requirement decreases the demand for reserves, ________ the federal funds interest rate, everything else held constant.
2. Everything else held constant, in the market for reserves, when the federal funds rate is 5%, lowering the discount rate from 5% to 4%
3. Everything else held constant, in the market for reserves, decreases in the interest rate paid on excess reserves affect the federal funds rate
4. When good weather speeds the check-clearing process, float tends to ________ causing the Fed to initiate ________ open market ________.
5. When bad storms slow the check-clearing process, float tends to ________ causing the Fed to initiate defensive open market ________.
6. In the market for reserves, if the federal funds rate is between the discount rate and the interest rate paid on excess reserves, a decline in the reserve requirement ________ the ________ curve of reserves and causes the federal funds interest rate to fall, everything else held constant.
7. If Treasury deposits at the Fed are predicted to increase, the manager of the trading desk at theNew York Fed bank will likely conduct ________ open market operations to ________ reserves.
8. If the Fed wants to temporarily inject reserves into the banking system, it will engage in
9. The Fed uses three policy tools to manipulate the money supply: ________, which affect reserves and the monetary base; changes in ________, which affect the monetary base; and changes in________, which affect the money multiplier.
10. The European System of Central Banks signals the stance of its monetary policy by setting a target for the
11. Everything else held constant, in the market for reserves, when the federal funds rate is 1%, increasing the interest rate paid on excess reserves from 1% to 2%
12. If float is predicted to decrease because of good weather, the manager of the trading desk at theNew York Fed bank will likely conduct ________ open market operations to ________ reserves.
13. Everything else held constant, in the market for reserves, when the demand for federal funds intersects the reserve supply curve on the vertical section, increasing the discount rate
14. The Federal Reserve has had the authority to vary reserve requirements since the
15. The interest rate charged on overnight loans of reserves between banks is the
16. In the market for reserves, if the federal funds rate is between the discount rate and the interest rate paid on excess reserves, a ________ in the reserve requirement ________ the demand for reserves, lowering the federal funds interest rate, everything else held constant.
17. If float is predicted to decrease because of unseasonably good weather, the manager of the trading desk at the Federal Reserve Bank of New York will likely conduct a ________ open market ________ of securities.
18. Suppose, at a given federal funds rate, there is an excess demand for reserves in the federal funds market. If the Fed wants the federal funds rate to stay at that level, then it should undertake an open market ________ of bonds, everything else held constant. If the Fed does nothing, however, the federal funds rate will ________.
19. Open market purchases ________ reserves and the monetary base thereby ________ the money supply.
20. The Fed can offset the effects of an increase in float by engaging in
21. Which of the following special lending facilities set up by the Federal Reserve is reserve neutral?
22. The Fedʹs discount lending is of three types: ________ is the most common category; ________ is given to a limited number of banks in vacation and agricultural areas; ________ is given to banks that have experienced severe liquidity problems.
23. Suppose on any given day there is an excess supply of reserves in the federal funds market. If the Federal Reserve wishes to keep the federal funds rate at its current level, then the appropriate action for the Federal Reserve to take is a ________ open market ________, everything else held constant.
24. Everything else held constant, in the market for reserves, increases in the discount rate affect the federal funds rate
25. Everything else held constant, in the market for reserves, when the supply for federal funds intersects the reserve demand curve on the downward sloping section, decreasing the interest rate paid on excess reserves

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