1
ECON 2305 FINAL EXAM REVIEW UTA
Questions with Correct Answers | Updated
(100% Correct Answers)
How many districts are in the Federal Reserve System? Which
district is most relevant to UTA students? Answer: There are 12
districts. UTA students are in the 11th District (Dallas Fed).
How many branch banks are located in the 11th District? Which
cities have them? Answer: The 11th District has three branch banks
in El Paso, Houston, and San Antonio.
Which states are represented in the 11th District? Which state has
two Federal Reserve District banks? Answer: The 11th District
includes Texas, northern Louisiana, and southern New Mexico.
Missouri has two district banks (St. Louis and Kansas City).
What are the 4 C's of banking? Answer: Character, Capacity, Capital,
Collateral.
What are the 4 tools of the Federal Reserve? Which is most
powerful? Which is best & why? Answer: Tools: Open market
operations (OMOs)(Most useful), Reserve requirement(most
powerful), Discount rate, Moral Suasian. Most powerful: Open
market operations. Best: Open market operations, because they
allow precise, frequent, quick adjustments.
© 2025 All rights reserved
, 2
Who advocated a 100% reserve requirement? What would happen
to the money multiplier if RR = 100%? Answer: Advocated by
Milton Friedman. If RR = 100%, the money multiplier = 1, meaning
deposits cannot expand the money supply.
What is the formula for the money multiplier? Answer: mm = 1 /
reserve requirement ratio (RR).
How does the reserve requirement affect the money supply?
Answer: Higher RR → smaller money supply. Lower RR → larger
money supply.
How does the discount rate affect the money supply? Answer:
Higher discount rate → banks borrow less → money supply
decreases. Lower discount rate → banks borrow more → money
supply increases.
How does a change in the money supply affect the inflation rate?
Answer: Increasing money supply → higher inflation. Decreasing
money supply → lower inflation.
How does the discount rate differ from the federal funds rate?
Answer: Discount rate = rate the Fed charges banks. Federal funds
rate = rate banks charge each other.
How does selling Treasury securities affect the money supply?
Answer: Selling → money leaves banks → money supply decreases.
© 2025 All rights reserved
ECON 2305 FINAL EXAM REVIEW UTA
Questions with Correct Answers | Updated
(100% Correct Answers)
How many districts are in the Federal Reserve System? Which
district is most relevant to UTA students? Answer: There are 12
districts. UTA students are in the 11th District (Dallas Fed).
How many branch banks are located in the 11th District? Which
cities have them? Answer: The 11th District has three branch banks
in El Paso, Houston, and San Antonio.
Which states are represented in the 11th District? Which state has
two Federal Reserve District banks? Answer: The 11th District
includes Texas, northern Louisiana, and southern New Mexico.
Missouri has two district banks (St. Louis and Kansas City).
What are the 4 C's of banking? Answer: Character, Capacity, Capital,
Collateral.
What are the 4 tools of the Federal Reserve? Which is most
powerful? Which is best & why? Answer: Tools: Open market
operations (OMOs)(Most useful), Reserve requirement(most
powerful), Discount rate, Moral Suasian. Most powerful: Open
market operations. Best: Open market operations, because they
allow precise, frequent, quick adjustments.
© 2025 All rights reserved
, 2
Who advocated a 100% reserve requirement? What would happen
to the money multiplier if RR = 100%? Answer: Advocated by
Milton Friedman. If RR = 100%, the money multiplier = 1, meaning
deposits cannot expand the money supply.
What is the formula for the money multiplier? Answer: mm = 1 /
reserve requirement ratio (RR).
How does the reserve requirement affect the money supply?
Answer: Higher RR → smaller money supply. Lower RR → larger
money supply.
How does the discount rate affect the money supply? Answer:
Higher discount rate → banks borrow less → money supply
decreases. Lower discount rate → banks borrow more → money
supply increases.
How does a change in the money supply affect the inflation rate?
Answer: Increasing money supply → higher inflation. Decreasing
money supply → lower inflation.
How does the discount rate differ from the federal funds rate?
Answer: Discount rate = rate the Fed charges banks. Federal funds
rate = rate banks charge each other.
How does selling Treasury securities affect the money supply?
Answer: Selling → money leaves banks → money supply decreases.
© 2025 All rights reserved
