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153. Refer to Tazian Banking Statistics. Assuming the only other thing Tazian banks have on their balance sheets
is loans, what is the value of existing loans made by Tazian banks? a. 6,900 million Tazes b. 7,125 million Tazes c. 7,350 million Tazes
d. None of the above is correct. ANS: A PTS: 1 DIF: 2 REF: 29-3 TOP: Reserve ratio MSC: Applicative 154. Refer to Tazian Banking Statistics. Suppose that the Bank of Tazi loaned the banks of Tazi 10 million Tazes.
Suppose also that both the required reserve ratio and the percentage of deposits held as excess reserves stay the same. By how much would the money supply change? a. 250 million Tazes b. 200 million Tazes c. 125 million Tazes
d. None of the above is correct. ANS: B PTS: 1 DIF: 2 REF: 29-3 TOP: Reserve ratio MSC: Applicative 155. Refer to Tazian Banking Statistics. Suppose that the Bank of Tazi purchased 50 million Tazes of Tazian
Treasury Bonds from the banks. Suppose also that both the required reserve ratio and the percentage of deposits held as excess reserves stay the same. By how much does the money supply change? a. 625 million Tazes b. 1,000 million Tazes c. 1,250 million Tazes
d. None of the above is correct. ANS: B PTS: 1 DIF: 2 REF: 29-3 TOP: Reserve ratio MSC: Applicative 156. Refer to Tazian Banking Statistics. Suppose that the Bank of Tazi changes the reserve requirement ratio to 3%.
Assuming that the banks still want to hold the same percentage of excess reserves what is the value of the money supply after the change in the reserve requirement ratio? a. 9,375 million Tazes b. 10,000 million Tazes c. 12,500 million Tazes
d. None of the above is correct to the nearest million medits. ANS: A PTS: 1 DIF: 3 REF: 29-3 TOP: Reserve ratio MSC: Applicative 157. The reserve requirement ratio is 10%. Which of the following pair of changes would both allow a bank to lend
out an additional $10,000?
a. the Fed buys a $10,000 bond from the bank or someone deposits $10,000 in the bank b. the Fed buys a $10,000 bond from the bank or the Fed lends the bank $10,000 c. the Fed sells a $10,000 bond to the bank or someone deposits $10,000 in the bank d. the Fed sells a $10,000 bond to the bank or the Fed lends the bank $10,000 ANS: B PTS: 1 DIF: 2 REF: 29-3 TOP: Reserves MSC: Applicative
158. The money supply increases when the Fed
a. buys bonds. The increase will be larger the smaller the reserve ratio is. b. buys bonds. The increase will be larger the larger the reserve ratio is. c. sells bonds. The increase will be larger the smaller the reserve ratio is. d. sells bonds. The increase will be larger the larger the reserve ratio is. ANS: A PTS: 1 DIF: 2 REF: 29-3 TOP: Monetary tools MSC: Applicative
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159. The money supply decreases if the Fed
a. sells Treasury bonds. The larger the reserve requirement, the larger the decrease will be. b. sells Treasury bonds. The smaller the reserve requirement, the larger the decrease will be. c. buys Treasury bonds. The larger the reserve requirement, the larger the decrease will be. d. buys Treasury bonds. The smaller the reserve requirement, the larger the decrease will be. ANS: B PTS: 1 DIF: 2 REF: 29-3 TOP: Reserve requirement | Money multiplier MSC: Applicative 160. The money supply increases when the Fed
a. lowers the discount rate. The increase will be larger the smaller the reserve ratio is. b. lowers the discount rate. The increase will be larger the larger the reserve ratio is. c. raises the discount rate. The increase will be larger the smaller the reserve ratio is. d. raises the discount rate. The increase will be larger the larger the reserve ratio is. ANS: A PTS: 1 DIF: 2 REF: 29-3 TOP: Monetary tools MSC: Applicative 161. If the Fed wanted to increase the money supply, it would make open market
a. purchases and lower the discount rate. b. sales and lower the discount rate. c. purchases and raise the discount rate. d. sales and raise the discount rate. ANS: A PTS: 1 DIF: 2 REF: 29-3 TOP: Monetary tools MSC: Definitional 162. To increase the money supply, the Fed could
a. sell government bonds. b. increase the discount rate.
c. decrease the reserve requirement. d. None of the above is correct. ANS: C PTS: 1 DIF: 1 REF: 29-3 TOP: Monetary tools MSC: Definitional 163. To increase the money supply, the Fed could
a. sell government bonds. b. decrease the discount rate.
c. increase the reserve requirement. d. None of the above is correct. ANS: B PTS: 1 DIF: 1 REF: 29-3 TOP: Monetary tools MSC: Definitional 164. To decrease the money supply, the Fed could
a. sell government bonds. b. increase the discount rate.
c. increase the reserve requirement. d. All of the above are correct. ANS: D PTS: 1 DIF: 1 REF: 29-3 TOP: Monetary tools MSC: Definitional 165. Which of the following is not a tool of monetary policy?
a. open market operations b. reserve requirements
c. changing the discount rate d. increasing the deficit ANS: D PTS: 1 DIF: 1 REF: 29-3 TOP: Monetary tools MSC: Definitional
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166. Which of the following lists two things that both increase the money supply?
a. the Fed buys bonds and lowers the discount rate b. the Fed buys bonds and raises the discount rate c. the Fed sells bonds and lowers the discount rate d. the Fed sells bonds and raises the discount rate ANS: A PTS: 1 DIF: 2 REF: 29-3 TOP: Reserves MSC: Applicative
167. Which of the following lists two things that both increase the money supply?
a. lower the discount rate, raise the reserve requirement ratio b. lower the discount rate, lower the reserve requirement ratio c. raise the discount rate, raise the reserve requirement ratio d. raise the discount rate, lower the reserve requirement ratio ANS: B PTS: 1 DIF: 2 REF: 29-3 TOP: Monetary tools MSC: Definitional 168. Which of the following lists two things that both increase the money supply?
a. raise the discount rate, make open market purchases b. raise the discount rate, make open market sales
c. lower the discount rate, make open market purchases d. lower the discount rate, make open market sales ANS: C PTS: 1 DIF: 2 REF: 29-3 TOP: Monetary tools MSC: Definitional 169. Which of the following lists two things that both increase the money supply?
a. make open market purchases, raise the reserve requirement ratio b. make open market purchases, lower the reserve requirement ratio c. make open market sales, raise the reserve requirement ratio d. make open market sales, lower the reserve requirement ratio ANS: B PTS: 1 DIF: 2 REF: 29-3 TOP: Monetary tools MSC: Definitional 170. Which of the following lists two things that both decrease the money supply?
a. lower the discount rate, raise the reserve requirement ratio b. lower the discount rate, lower the reserve requirement ratio c. raise the discount rate, raise the reserve requirement ratio d. raise the discount rate, lower the reserve requirement ratio ANS: C PTS: 1 DIF: 2 REF: 29-3 TOP: Monetary tools MSC: Definitional 171. Which of the following lists two things that both decrease the money supply?
a. raise the discount rate, make open market purchases b. raise the discount rate, make open market sales
c. lower the discount rate, make open market purchases d. lower the discount rate, make open market sales ANS: B PTS: 1 DIF: 2 REF: 29-3 TOP: Monetary tools MSC: Definitional 172. Which of the following lists two things that both decrease the money supply?
a. make open market purchases, raise the reserve requirement ratio b. make open market purchases, lower the reserve requirement ratio c. make open market sales, raise the reserve requirement ratio d. make open market sales, lower the reserve requirement ratio ANS: C PTS: 1 DIF: 2 REF: 29-3 TOP: Monetary tools MSC: Definitional
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173. Which of the following actions would have the combined effect of raising the money supply and raising the
money multiplier?
a. The Fed sells bonds and raises the reserve requirement ratio. b. The Fed sells bonds and lowers the reserve requirement ratio. c. The Fed buys bonds and raises the reserve requirement ratio. d. The Fed buys bonds and lowers the reserve requirement ratio. ANS: D PTS: 1 DIF: 2 REF: 29-3 TOP: Monetary tools MSC: Analytical 174. The Fed increases the reserve requirement and makes open market purchases. Which of these by itself will
increase the money supply?
a. Neither the increase in the reserve requirement nor the open market purchases. b. Both the increase in the reserve requirement and the open market purchases. c. Only the increase in the reserve requirement. d. Only the open market purchases. ANS: D PTS: 1 DIF: 2 REF: 29-3
TOP: Reserve requirement | Open-market operations MSC: Applicative 175. When the Fed conducts open market purchases, bank reserves
a. increase and banks can increase lending. b. increase and banks must decrease lending. c. decrease and banks can increase lending. d. decrease and banks must decrease lending. ANS: A PTS: 1 DIF: 2 REF: 29-3 TOP: Monetary tools MSC: Interpretive 176. If the Fed sells government bonds to the public, bank reserves tend to
a. increase and the money supply increases. b. increase and the money supply decreases. c. decrease and the money supply increases. d. decrease and the money supply decreases. ANS: D PTS: 1 DIF: 2 REF: 29-3 TOP: Open-market operations MSC: Analytical 177. If the Fed makes open market purchases of bonds,
a. the money supply increases by more than the amount of bonds purchased. b. the money supply increases by less than the amount of bonds purchased. c. the money supply decreases by more than the amount of bonds purchased. d. the money supply decreases by less than the amount of bonds purchased. ANS: A PTS: 1 DIF: 2 REF: 29-3 TOP: Open-market operations MSC: Analytical 178. Reserve requirements are regulations concerning
a. the amount banks are allowed to borrow from the Fed. b. the amount of reserves banks must hold against deposits.
c. reserves banks must hold based on the number and type of loans they make. d. the interest rate at which banks can borrow from the Fed. ANS: B PTS: 1 DIF: 1 REF: 29-3 TOP: Reserve requirement MSC: Definitional 179. In a fractional reserve banking system, an increase in reserve requirements
a. increases both the money multiplier and the money supply. b. decreases both the money multiplier and the money supply. c. increases the money multiplier, but decreases the money supply. d. decreases the money multiplier, but increases the money supply. ANS: B PTS: 1 DIF: 2 REF: 29-3 TOP: Reserve requirement MSC: Interpretive
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180. In a fractional reserve banking system, a decrease in reserve requirements
a. increases both the money multiplier and the money supply. b. decreases both the money multiplier and the money supply. c. increases the money multiplier, but decreases the money supply. d. decreases the money multiplier, but increases the money supply. ANS: A PTS: 1 DIF: 2 REF: 29-3 TOP: Reserve requirement MSC: Interpretive
181. In 1991 the Federal Reserve lowered the reserve requirement ratio from 12 percent to 10 percent. Other things
the same this should have
a. increased both the money multiplier and the money supply. b. decreased both the money multiplier and the money supply.
c. increased the money multiplier and decreased the money supply. d. decreased the money multiplier and increased the money supply. ANS: A PTS: 1 DIF: 2 REF: 29-2 TOP: Reserve requirement MSC: Interpretive 182. Other things the same, if reserve requirements are increased, the reserve ratio
a. increases, the money multiplier increases, and the money supply increases. b. increases, the money multiplier decreases, and the money supply decreases. c. decreases, the money multiplier increases, and the money supply increases. d. decreases, the money multiplier decreases, and the money supply increases. ANS: B PTS: 1 DIF: 3 REF: 29-3 TOP: Reserve requirement MSC: Interpretive 183. Other things the same if reserve requirements are decreased, the reserve ratio
a. decreases, the money multiplier increases, and the money supply decreases. b. increases, the money multiplier increases, and the money supply increases. c. decreases, the money multiplier increases, and the money supply increases. d. increases, the money multiplier increases, and the money supply decreases. ANS: C PTS: 1 DIF: 3 REF: 29-3 TOP: Reserve requirement MSC: Interpretive
184. In a fractional reserve banking system with no excess reserves and no currency holdings, if the central bank
buys $100 million of bonds,
a. reserves and the money supply increase by less than $100 million.
b. reserves increase by $100 million and the money supply increases by $100 million.
c. reserves increase by $100 million and the money supply increases by more than $100 million. d. both reserves and the money supply increase by more than $100 million. ANS: C PTS: 1 DIF: 2 REF: 29-3 TOP: Open-market operations | Money multiplier MSC: Applicative 185. If the reserve ratio is 10 percent, banks do not hold excess reserves, and people do not hold currency, then when
the Fed purchases $20 million of government bonds, bank reserves
a. increase by $20 million and the money supply eventually increases by $200 million. b. decrease by $20 million and the money supply eventually increases by $200 million. c. increase by $20 million and the money supply eventually decreases by $200 million. d. decrease by $20 million and the money supply eventually decreases by $200 million. ANS: A PTS: 1 DIF: 3 REF: 29-3 TOP: Open-market operations | Money multiplier MSC: Applicative 186. If the reserve ratio is 20 percent, and banks do not hold excess reserves, and people hold only deposits and not
currency, then when the Fed sells $40 million of bonds to the public, bank reserves a. increase by $40 million and the money supply eventually increases by $200 million. b. increase by $40 million and the money supply eventually increases by $800 million. c. decrease by $40 million and the money supply eventually decreases by $200 million. d. decrease by $40 million and the money supply eventually decreases by $800 million. ANS: C PTS: 1 DIF: 3 REF: 29-3 TOP: Open-market operations | Money multiplier MSC: Applicative