Updated Chapter 13 Test Bank Economics

Updated Chapter 13 Test Bank Economics/ CH 13
Exam Questions & Verified Correct answers (100%
A+ Guarantee)
. The Board of Governors of the Federal Reserve serves on a larger policy-making
group called the House Banking Committee.
a. True
b. False - correct answer✔✔False

To expand the money supply the Fed could lower the required reserve ratio, lower the
discount rate, or purchase government securities.
a. True
b. False - correct answer✔✔True

The smaller the required reserve ratio, the larger the simple deposit multiplier.
a. True
b. False - correct answer✔✔True

Although the Fed can destroy money, it is impossible for the Fed to create money out of
thin air.
a. True
b. False - correct answer✔✔False

Members of the Board of Governors of the Federal Reserve are appointed by the
President and approved by the Senate to serve a 14-year term.
a. True
b. False - correct answer✔✔True

To decrease the money supply, the Fed may sell government securities or lower taxes.
a. True
b. False - correct answer✔✔False

The interest rate that the Fed charges when it lends reserves to banks is called the
federal funds rate.
a. True
b. False - correct answer✔✔False

To limit political influence on Fed policy, the terms of the Fed Board of Governors are
staggered so that one new appointment is made every four years to coincide with the
presidential elections.
a. True
b. False - correct answer✔✔False

,The Fed can change the federal funds rate by issuing an order, but it cannot change the
discount rate this way.
a. True
b. False - correct answer✔✔False

. The Fed is one of the largest departments within the U.S. Treasury.
a. True
b. False - correct answer✔✔False

Controlling the nation's money supply is the most important duty of the Federal
Reserve.
a. True
b. False - correct answer✔✔True

The president of the Federal Reserve District Bank of New York holds a permanent seat
on the Federal Open Market Committee.
a. True
b. False - correct answer✔✔True

There is an inverse relationship between the required reserve ratio and the money
supply.
a. True
b. False - correct answer✔✔True

The discount rate is sometimes also known as the primary credit rate.
a. True
b. False - correct answer✔✔True

. In 2007, the Fed began using an additional monetary policy tool called the term
auction facility program.
a. True
b. False - correct answer✔✔True

When the Federal Reserve system was being created, some people thought that there
should be as few district banks as possible to enhance efficiency and for ease of
operation.
a. True
b. False - correct answer✔✔True

The boundaries of the Federal Reserve districts were determined based on trade
patterns between cities.
a. True
b. False - correct answer✔✔True

, The Federal Open Market Committee (FOMC) meets on the first Tuesday of each
month.
a. True
b. False - correct answer✔✔False

When the Federal Open Market Committee (FOMC) votes on policy, it does so in the
following order: the chair votes first, the vice chair votes second, and the remaining
FOMC members vote based on their seniority at the Fed.
a. True
b. False - correct answer✔✔False

The Federal Reserve Bank of Minneapolis once chartered a small airplane to deliver
money to a commercial bank that was experiencing a "mad run" on the bank.
a. True
b. False - correct answer✔✔True

When the Fed was created, its governing body was called the Federal Reserve Board,
but it was later officially renamed the Board of Governors of the Federal Reserve
System.
a. True
b. False - correct answer✔✔True

. Lowering the required reserve ratio raises the simple deposit multiplier.
a. True
b. False - correct answer✔✔True

The interest rate that the Fed pays on reserves acts as a ceiling on the federal funds
rate.
a. True
b. False - correct answer✔✔False

A discount loan is a loan the Federal Reserve makes to a commercial bank.
a. True
b. False - correct answer✔✔True

To deal with the financial crisis of 2007-2009, the Fed extended its lender of last resort
function to include institutions other than banks.
a. True
b. False - correct answer✔✔True

Under free banking, banks are regulated by the Federal Reserve.
a. True
b. False - correct answer✔✔False