Monetarists believe that a. the Open Market Committee should only sell government bonds, never buy them. b. the Fed should alter the target growth rate of money periodically to counteract adverse economic activity. c. the Fed should be constantly changing the growth of the money supply to counteract economic fluctuations. d. the Fed should allow the money supply to grow at a constant rate to accommodate the natural rate of economic growth.
Monetarists believe that a. the Open Market Committee should only sell government bonds, never buy them. b. the Fed should alter the target growth rate of money periodically to counteract adverse economic activity. c. the Fed should be constantly changing the growth of the money supply to counteract economic fluctuations. d. the Fed should allow the money supply to grow at a constant rate to accommodate the natural rate of economic growth.
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QUESTION 31
The Board of Governors of the Federal Reserve System is
| composed of seven members who are appointed by the President and approved by the Senate. | ||
| composed of 12 members of the Senate and the U.S. House of Representatives. | ||
| elected by the general public. | ||
| composed of representatives from the country's 12 largest commercial banks. |
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QUESTION 32
The Fed is said to be the "lender of last resort" in that
| it charges a higher interest rate to borrowers than does any other bank. | ||
| it functions as the government's bank only when commercial banks fail to do so. | ||
| it makes loans to individuals whom commercial banks do not believe are credit-worthy. | ||
| it stands ready to lend to any depository institution that it has decided should not fail. |
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QUESTION 33
The Federal Reserve System acts as the government's fiscal agent by
| providing checking account services for the government. | ||
| preparing the budget the President presents to Congress every year. | ||
| determining how to finance a deficit. | ||
| auditing taxpayers. |
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QUESTION 34
The Federal Reserve System was established in which year?
| 1913. | ||
| 1929. | ||
| 1865. | ||
| 1941. |
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QUESTION 35
By serving as the lender of last resort,
| the Fed provides check clearing services. | ||
| the Fed aids in the sale of government securities. | ||
| the Fed supervises depository institutions. | ||
| the Fed can prevent bank failures. |
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QUESTION 36
Depository institutions must
| use and pay for the services of the Federal Reserve System. | ||
| set their interest rates according to schedules established by the Federal Reserve System. | ||
| keep a certain percentage of their deposits as reserves. | ||
| turn over a percentage of their profits to the Federal Reserve System as payment for services provided by the Fed. |
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QUESTION 37
The Federal Reserve System has
| 50 district banks. | ||
| 24 district banks. | ||
| 12 district banks. | ||
| 7 district banks. |
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QUESTION 38
The part of the Federal Reserve System (the Fed) that holds the reserve balances of depository institutions is
| the Board of Governors. | ||
| the Federal Advisory Committee. | ||
| the Federal Open Market Committee. | ||
| the Federal Reserve district banks. |
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QUESTION 39
The potential for a financial breakdown at one financial institution to spread throughout the financial system is known as a
| systemic risk. | ||
| liquidity risk. | ||
| lending risk. | ||
| moral hazard. |
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QUESTION 40
A system in which depository institutions hold reserves that are less than the amount of total deposits is called
| fiat money banking. | ||
| required reserve banking. | ||
| fractional reserve banking. | ||
| central banking system. |
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QUESTION 41
Total reserves of private banks are
| all customer deposits. | ||
| the minimum amount banks need to hold against time deposits. | ||
| federal reserve notes. | ||
| deposits held at the Fed and vault cash. |
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QUESTION 42
A statement of assets and liabilities of any business entity is called
| a cash flow statement. | ||
| an income statement. | ||
| a balance sheet. | ||
| a statement of net worth. |
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QUESTION 43
Which of the following actions has no effect on the total money supply?
| The Federal Open Market Committee buys government securities. | ||
| There is a transfer of deposits from one bank to another bank. | ||
| There is change in the money multiplier. | ||
| The Federal Open Market Committee sells government securities. |
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QUESTION 44
Given a required reserve ratio of 20 percent, a commercial bank that has received a new deposit of $100 can make additional loans of
| $80. | ||
| $0. | ||
| $400. | ||
| $20. |
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QUESTION 45
The Federal Open Market Committee has responsibility for
| appointing members to the Board of Governors of the Federal Reserve system. | ||
| issuing orders to buy or sell government securities for the Fed. | ||
| advising the Treasury Department on monetary policy. | ||
| printing money. |