Unit 4 - Financial Sector MC Practice Test #2

The liquid assets banks keep in their vaults are known as bank

• deposits

• savings

• reserves

• money

• returns

The required reserve ratio is

• the most cash that banks are allowed to hold in their vault

• set by the Federal Reserve

• responsible for most bank runs

• equal to 5% of bank deposits

• the fraction of bank loans held as reserves

If rr is the reserve requirement, the money multiplier is equal to

Which of the following is part of the money supply but not part of the monetary base?

• checkable bank deposits

• bank reserves

• currency in circulation

• deposits at the Fed

• savings accounts

The Federal Reserve is a(n)

• single central bank located in New York

• government agency overseen by the Secretary of the Treasury

• system of 10 regional banks

• institution that oversees the banking system

• depository institution that lends to large corporations

The Federal Reserve is chaged with doing all of the following EXCEPT

• providing financial services to commercial banks

• supervising and regulating banks

• maintaining the stability of the financial system

• conducting monetary policy

• insuring bank deposits

Which of the following will increase the demand for money?

• a fall in the aggregate price level

• an increase in real GDP

• technological advances

• open-market operations by the Fed

• a decrease in the interest rate

The money supply curve is

• upward sloping

• vertical

• horizontal

• downward sloping

• U-shaped

When banking regulations were changed so that banks could pay interest on checking accounts, what was the effect on interest rates and the equilibrium quantity of money

• Interest Rates will increase and the Quantity of Money will decrease

• Interest Rates will decrease and the Quantity of Money will increase

• Interest Rates will increase and the Quantity of Money will increase

• Interest Rates will decrease and the Quantity of Money will decrease

• Interest Rates will increase and the Quantity of Money will not change

Which of the following will shift the supply curve for loanable funds to the right?

• an increase in the rate of return on investment spending

• an increase in the government budget deficit

• a decrease in the national saving rate

• an increase in expected inflation

• capital inflows from abroad