Money and Banking Final Exam Graded A+

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. - ANSWER-B)open market operations; borrowed reserves; reserve requirements The Fed uses three policy tools to manipulate the money supply: open market operations, which affect the ________; changes in borrowed reserves, which affect the ________; and changes in reserve requirements, which affect the ________. - ANSWER-C) monetary base; monetary base; money multiplier The interest rate charged on overnight loans of reserves between banks is the - ANSWER-C) federal funds rate The primary indicator of the Fedʹs stance on monetary policy is - ANSWER-B) the federal funds rate. ________ are the most important monetary policy tool because they are the primary determinant of changes in the ________, the main source of fluctuations in the money supply. - ANSWER-A) Open market operations; monetary base Open market purchases raise the ________ thereby raising the ________. - ANSWER-C) monetary base; money supply Open market purchases ________ reserves and the monetary base thereby ________ the money supply - ANSWER-B) raise; raising Open market sales shrink ________ thereby lowering _______ - ANSWER-C) reserves and the monetary base; the money supply Discount policy affects the money supply by affecting the volume of ________ and the ________. - ANSWER-B) borrowed reserves; monetary base 2) The discount rate is - ANSWER-A) the interest rate the Fed charges on loans to banks The most common type of discount lending that the Fed extends to banks is called - ANSWER-C) primary credit. The most common type of discount lending, ________ credit loans, are intended to help healthy banks with short-term liquidity problems that often result from temporary deposit outflows. - ANSWER-B) primary An increase in ________ reduces the money supply since it causes the ________ to fall - ANSWER-B) reserve requirements; money multiplier A decrease in ________ increases the money supply since it causes the ________ to rise. - ANSWER-B) reserve requirements; money multiplier The Federal Reserve has had the authority to vary reserve requirements since the - ANSWER-B) 1930s Since 1980, ________ are subject to reserve requirements. - ANSWER-D) all depository institutions The European System of Central Banks signals the stance of its monetary policy by setting a target for the - ANSWER-B) overnight cash rate When the European System of Central Banks uses main refinancing operations, it is similar to the Federal Reserve using - ANSWER-B) defensive open market operations. When the European System of Central Banks uses long-term refinancing operations, it is similar to the Federal Reserve using - ANSWER-A) dynamic open market operations. The equivalent to the Federal Reserveʹs discount rate in the European System of Central Banks is the - ANSWER-B) marginal lending rate. Under monetary targeting, a central bank announces an annual growth rate target for ________. - ANSWER-A) a monetary aggregate During the years 1979 to 1982, the Federal Reserveʹs announced policy was monetary targeting. During this time period the Federal Reserve - ANSWER-B)did not hit any of their monetary targets because it is believed that controlling the money supply was not the intent of the Federal Reserve. The type of monetary policy that is used in Canada, New Zealand, and the United Kingdom is - ANSWER-B) inflation targeting.