Fin 321 Final Exa1

FIN 321 FINAL EXAM


Toou____________outheoueconomy,outheouFedou_____________ouTreasuryousecuritiesou
andoutoou____________outheoueconomy,outheouFedou_____________ouTreasuryousecurit
iesouinoutheouopenoumarket.

a)ouexpand;oubuys;oucontract;oualsooubuys
b)ouexpand;ousells;oucontract;oualsoousells
c)ouexpand;ousells;oucontract;oubuys
d)ouexpand;oubuys;oucontract;ousellsou-ouans--d)ouexpand;oubuys;oucontract;ousells

TrueouorouFalse:ouTheouFedoucanoutargetoubothoumoneyousupplyouandouinterestouratesousi
multaneously.ou-ouans--False:

TrueouorouFalse:ouTheouthreeoumonetaryoupolicyoutoolsou(i.e.,ouopenoumarketouoperations,
oudiscountourate,ouandoureserveourequirements)ouareounotoumutuallyouexclusive;outheouFe
doucanouuseoumoreouthanouoneoutoolouatouaoutime.ou-ouans--

Whatouareoutheou3oumonetaryoupolicyoutools?ou-ouans--1.ouopenoumarketouoperations
2.oudiscountoupolicy
3.oureserveourequirements

Primaryoucreditourateou-ouans--
interestourateouusedouinoupracticeoutooureflectoutheoudiscountourateouchargedoubyouReserv
eouBanksouforouloansoutooudepositoryouinstitutions.

WhyoudoesoutheouFEDoupreferoufinancialouinstitutionsoutoouborrowoudirectlyoufromouanothe
rouratherouthanoutheouFED?ou-ouans--
FinancialouInstitutionsoucanouwatchouandoukeepoueachouotheroumoreouaccountable.

TrueouorouFalse:ouAllouofoutheouFed'soudecisionsouneedoutooubeouratifiedoubyoutheouPreside
ntouandouCongress.ou-ouans--False

TrueouorouFalse:ouThereouisouaoutradeoffoubetweenoueconomicougrowthouandoufullouemplo
yment.ou-ouans--False

Theoufederaloufundsourateouisouofouparticularouimportanceoubecauseouitouisouusedoubyouthe
ouFederalouReserveouas...ou-ouans--TargetouRateouforoumonetaryoupolicy.


WhatouPrincipalouissuerouissuesouT-Bills?ou-ouans--U.SouTreasury

, IfoutheouFedouisoutargetingouinterestourateouforoumonetaryoupoliciesouandoutheoudemandouf
oroumoneyoudecreases,outheouFedouwouldoulikely

a)ouKeepoutheoumoneyousupplyoutheousame
b)ouIncreaseoutheoumoneyousupply
c)ouKeepoutheoumoneyousupplyoutheousameouandoutheouinterestourateoutheousame
d)oudecreaseoutheoumoneyousupplyou-ouans--d)ouDecreaseoutheoumoneyousupply

Whatouareoutheou3oumainoumonetaryoupolicyoutoolsouthatoutheouFEDouuses?ou-ouans--
1.ouOpenoumarketouoperations,ou
2.ouReserveourequirement,ou
3.ouDiscountourate

Whatoukindouofoufinancialouinstrumentsoudooucommercialoubanksouissue?ou-ouans--
FederalouFunds,ouRepurchaseouagreements,oucommercialoupaper,ouNeogotiableouCDs,ou
andouBanker'souAcceptances.

WhatouareoucommercialouBanks?ou-ouans--
Aoucommercialoubankouisouaouretailoubankouthatouprovidesoufinancialouservicesoutoouitsoucu
stomers,ousuchouasouacceptingousavingsoudepositsouandouapprovingoubankouloans.ou

ouCommercialoubanks'outransactionsouareousociallyouandoulegallyougovernedoubyoutheouce
ntraloubank.

Whatouareoutheou2oukindsouofoureservesouinouaoucommercialoubank?ou-ouans--
ReserveouRequirementouandouExcessoureserve.

ReserveouRequirementsouareouminimalouamountsouofoucashouaoubankoumustoukeepouonou
hand.ou

Excessoureservesouareoutheouadditionaloucashouthatouaoubankoukeepsouonouhandouandoud
eclinesoutoouloanouout.ouEARNSouINTEREST

SellingouTreasuryousecuritiesouinoutheouopenoumarket,ouincreasingourequiredoureservesoua
ndouincreasingoutheoudiscountourateouallouhaveoutheoueffectouofou________ouinterestourate
souinoutheoueconomy.

a)oustabilizing
b)ouIncreasing
c)oudecreasing
d)ounooueffectou-ouans--b)ouincreasing

Whatouareoutheoueffectsouon

-MoneyouSupply
-CreditouAvailability