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Understanding the Federal Reserve System Chapter Exam

Exam Instructions:

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

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Question 1 1. Which was one of the most important reasons the Federal Reserve Act of 1913 was enacted by Congress?

Question 2 2. What's the role of the Federal Open Market Committee?

Question 3 3. How many regional Federal Reserve Banks are there in the Federal Reserve System?

Question 4 4. What are the Fed's two primary roles?

Question 5 5. What is the interest rate that the Federal Reserve charges on loans it makes to member banks called?

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Question 6 6. Which of the following statements is FALSE about the monetary tools of the Federal Reserve?

Question 7 7. What is the prime rate?

Question 8 8. What happens if the Federal Reserve sells a large amount of government securities in the open market?

Question 9 9. All of the following are ways that the Federal Reserve can affect the money supply except _____.

Question 10 10. How would the Federal Reserve implement an expansionary monetary policy?

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Question 11 11. The incentive that banks offer in return for use of a depositor's money is called _____.

Question 12 12. The Federal Reserve controls the growth rate of the money supply through _____.

Question 13 13. Which of the following statements regarding bonds is TRUE?

Question 14 14. What is the formula for finding a bond yield?

Question 15 15. Which of the following statements is TRUE of a normal yield curve?

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Question 16 16. If a bond has a coupon payment of $25 and currently sells for $1,500, then what is the bond yield?

Question 17 17. If all other factors remain equal, what would happen to interest rates when the amount of money circulating in the economy is increased?

Question 18 18. How would economists graphically illustrate a decrease in the money supply?

Question 19 19. The Fed's monetary policy has the greatest positive effect on real Gross Domestic Product under what set of conditions?

Question 20 20. If the Federal Reserve suddenly decreases the growth rate of the money supply from 6% to 4% per year, what is likely to happen to aggregate demand and real Gross Domestic Product in the short-run?

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Question 21 21. When someone deposits money into a savings account, this demand deposit becomes _____ to the bank?

Question 22 22. According to the T-account shown, if the required reserve ratio is 10%, what is the maximum amount of additional loans this bank can make?

Question 23 23. Under fractional banking, when a bank lends to a customer, which of the following happens?

Question 24 24. How do banks make money?

Question 25 25. What happens when money demand increases and all other things remain constant?

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Question 26 26. Because the central bank controls the money supply, it also controls what other economic driver?

Question 27 27. When economists illustrate the money market, the demand curve is _____ while the supply curve is _____.

Question 28 28. How does high economic output lead to higher nominal interest rates?

Question 29 29. Who runs the Fed?

Question 30 30. How would buying or selling government bonds affect the federal funds rate, if it was the government that initiated the sale?

Understanding the Federal Reserve System Chapter Exam Instructions

Choose your answers to the questions and click 'Next' to see the next set of questions. You can skip questions if you would like and come back to them later with the yellow "Go To First Skipped Question" button. When you have completed the practice exam, a green submit button will appear. Click it to see your results. Good luck!

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