15) Which of the following is true? a) The money multiplier is easily calculated
ID: 1155433 • Letter: 1
Question
15) Which of the following is true?
a) The money multiplier is easily calculated by the Fed.
b) Monetary policy is usually not successful because the government cannot control its expenditures.
c) Monetary policy can no longer fix the economy because the Fed cannot precisely calculate the money multiplier.
d) None of the above.
17) Which of the following is true?
a) To tackle inflation, the Fed sells treasury bills, thereby decreases the money supply.
b) To tackle inflation the Fed purchases treasury bills, thereby decreases the money supply.
c) To tackle inflation the Fed sells treasury bills, thereby increases the Federal Funds Rate.
d) None of the above.
e) a and c.
19) Bank regulations
a) Are not necessary because the financial sector works more efficiently without government supervision.
b) Are designed partly to ensure the safety of depositors.
c) Are designed partly to minimize run on banks.
d) Are designed mainly to control the money supply.
e) b and c.
f) b,c,d.
20) Which of the following is true?
a) FDIC is an agent of the federal government.
b) The federal government cannot limit the type of assets in which banks can invest in.
c) Deposit insurance limits the money supply.
d) a and b.
e) all of the above.
f) None of the above.
Explanation / Answer
15 a) Money muliplier is the amount of money that banks generate with each dollar of reserves. It is the reciprocal of the reserve ratio. It can be easily calcultated.
17) a and c.
When the Fed sells treasury bills it reduces the money supply. The bank reserves will fall and the federal funds rate ( the overnight interest rate that banks from each other for maintaining reserves) will increase.
19) e Both b and c. Bank regulations are designed to protect the interest of the depositors and to proven disruption in the financial sector by preventing run on banks.
20) a) The Banking Act of 1935 has made the FDIC an agent of the government.
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