16) One of the largest items on the liability side of the Federal Reserve\'s bal
ID: 1210751 • Letter: 1
Question
16) One of the largest items on the liability side of the Federal Reserve's balance sheet is
A) commercial bank deposits. B) U.S. government securities.
C) cash items in the process of collection. D) U.S. Treasury deposits.
17) When the Fed receives an inflow of Federal Reserve notes from commercial banks, its
A) assets rise. B) liabilities decline.
C) liabilities increase. D) assets decline.
18) If the reserve requirement on checkable deposits is .25, the ratio of currency held by the public to demand
deposits is .15, the ratio of time deposits to demand deposits is 3, the reserve requirement on time deposits is 0,
and the ratio of excess reserves to demand deposits is 0, then the demand deposit multiplier is
A) 5. B) 4. C) 3.33. D) 2.5.
19) __________ the required reserve ratio will __________ the potential for multiple expansion.
A) Raising; increase B) Lowering; decrease
C) Raising; decrease D) None of the above.
20) A major limitation of the discount rate as a policy tool is that the initiative for its use rests with
A) commercial banks. B) Congress.
C) the U.S. Treasury. D) The Federal Reserve FOMC.
21) Which of the following situations is likely to lead to dynamic open market operations?
A) A recession B) An increase in discount lending
C) An increase in the checkable deposits D) An increase in currency holdings by the public
Explanation / Answer
16.
A) commercial bank deposits
liability to the Federal Reserve Banks because these funds are cash belonging to commercial banks, but they are a claim the commercial banks have against the Federal Reserve Bank
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