17) Open-market operations change A) the size of the monetary multiplier but not

Question

17) Open-market operations change A) the size of the monetary multiplier but not commercial bank reserves. B) commercial bank reserves but not the size of the monetary multiplier C) neither commercial bank reserves nor the size of the monetary multiplier D) both commercial bank reserves and the size of the monetary multiplier. 18) An increase in the legal reserve ratio A) increases the money supply by increasing excess reserves and increasing the monetary multiplier B) decreases the money supply by decreasing excess reserves and decreasing the monetary multiplier. C) increases the money supply by decreasing excess reserves and decreasing the monetary multiplier es the money supply by increasing excess reserves and decreasing the monetary multiplier 19) The discount rate is the interest A) rate at which the central banks lend to the U.S. Treasury. B) rate at which the Federal Reserve Banks lend to commercial banks. C) yield on long-term government bonds. D) rate at which commercial banks lend to the public. 20) Interest paid on excess reserves held at the Fed A) is available to the general public, but not to commercial banks. B) incentivizes financial institutions to hold more reserves and reduce risky lending. C) is determined by the federal funds rate. D) totaled over $1 trillion in 2012. charge(s) B) the Fed; commercial banks D) banks; on federal student loans 21) The federal funds rate is the interest rate that A) banks; other banks C) banks; their best corporate customers 22) Generally, the prime interest rate A) moves in the opposite direction as the federal funds rate. B) remains constant over long periods of time. C) is highly inflexible downward. D) moves in the same direction as the federal funds rate. 23) After the financial crisis of 2007-2009, why did the Federal Reserve effectively lose its ability to A) Regulatory changes in response to the financial crisis significantly restricted the use of the increase the money supply by manipulating the federal funds rate target? federal funds rate target. B) The increase in excess reserves in the banking system virtually eliminated the need for banks C) Borrowing of excess reserves moved from traditional banks to the shadow banking industry D) The federal funds rate rose significantly and would not respond to Fed changes in the supply to borrow in the federal funds market. of reserves

Explanation / Answer

17) both the commercial bank reserves and the size of the monetary multiplier.

18)decreases the money supply by decreasing the excess reserveand decreasing monetary multiplier.

19) B

20) C

21) B

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