Chapter 26 Preliminary Quiz
Central Banking and Monetary Policy

Multiple Choice Questions:

Enter your answer to each of the questions in the blank to the left of the question. Be sure to use lowercase letters only!

	1. Which of the following is not true about the Federal Reserve System? a. The Federal Reserve System consists of 12 regional Federal Reserve Banks. b. The Federal Reserve System is a department in the Executive Branch of the U.S. government and the Fed chairman reports directly to the President. c. The Federal Reserve conducts U.S. monetary policy, supervises and regulates banking in the United States, maintains stability in the U.S. financial system, and provides financial services to the government and public. d. none of the above.
	2. The Federal Open Market Committee: a. includes the seven Federal Reserve governors. b. includes all the presidents of the regional Federal Reserve banks, but only 5 presidents vote at any one time. c. both a and b. d. neither a nor b.
	3. Which of the following is not an objective of the Federal Reserve? a. economic growth b. low unemployment c. price stability d. high long-term interest rates
	4. Which of the following instruments of Fed monetary policy involves the buying or selling of U.S. government securities in the open market in order to influence the level of bank reserves? a. open-market operations b. discount-rate policy c. reserve-requirements policy d. none of the above
	5. Which of the following instruments of Fed monetary policy involves setting the interest rate at which commercial banks and other depository institutions can borrow reserves from one of the Federal Reserve banks? a. open-market operations b. discount-rate policy c. reserve-requirements policy d. none of the above
	6. The Fed primarily operates by setting a short-term target for the _______. a. federal funds rate b. required reserve ratio c. discount rate d. none of the above.
	7. The interest rate charged by the Federal Reserve when a bank borrows from one of the 12 regional banks is called the _______. a. federal funds rate b. required reserve ratio c. discount rate d. none of the above.
	8. Which of the following is the most unlikely change that the Fed will carry out as part of any monetary policy decision? a. change the discount rate. b. perform an open market operation. c. change the required reserve ratio. d. all of the above are equally likely.
	9. The route by which changes in the supply of money are translated into changes in output, employment, prices, and inflation is called: a. the money-supply multiplier. b. the required reserve ratio. c. the monetary transmission mechanism. d. none of the above.
	10. The supply and demand of money will determine: a. the inflation rate. b. the required reserve ratio. c. the monetary transmission mechanism. d. the interest rate.
	11. All other things held equal, an increase in the money supply will: a. decrease the interest rate. b. increase GDP. c. increase the price level. d. all of the above.
	12. The supply of money is determined by: a. the banking system. b. the Federal Reserve. c. both a and b. d. neither a nor b.
	13. The public's desire to hold money is represented by: a. the demand-for-money curve. b. the money supply curve. c. both a and b. d. neither a nor b.