Finance Chapter 4 Practice Questions

The effect of an increase of required reserves by the Fed is? a decrease in loanable funds of depository institutions
The Fed discount rate is the interest rate that a bank must pay to borrow from its regional Federal Reserve Bank (T/F) True
Which of the following is the most likely outcome of the Federal Reserve lowering interest rates? Businesses could expand at a lower borrowing cost
____________________________ requires disclosure of the finance charge and the annual percentage rate of credit along with certain other costs and terms to permit consumers to compare the prices of credit. Truth in Lending Act
Quantitative Easing is a non-traditional monetary policy designed to stimulate economic activity when conventional monetary policy methods are ineffective. In executing quantitative easing, the Federal Reserve: Purchased financial assets from banks and other financial institutions
Since 2008, the Federal Funds Target Rate reflects the federal funds rate has been lower than the prime rate
Today the responsibilities of the Fed may be described as: those relating to monetary policy, to supervision and regulation, and to services provided for depository institutions and the government.
The Federal Reserve sets reserve requirements for member banks. The required reserve ratio is: The ratio of reserves to deposits required of banks by the Federal Reserve
The Federal Reserve can implement monetary policy by a implementing a discount policy. One of the discount rates is the Federal Funds Target Rate. Which of the following defines the Federal Funds Target Rate? Interest rate that banks and credit unions charge each other for overnight loans
A central bank is a Federal government agency that lends money to its member banks, hold its own reserves, and be responsible for creating money. True
All the following are ways the Federal Reserve can influence monetary policy EXCEPT: Managing the federal debt.
Which of the following statements would be false? The discount rate is A. an instrument of monetary policy B. frequently used as a tool of fiscal policy C. regarded as a fine-tuning mechanism D. all of the above are true frequently used as a tool of fiscal policy
The basic policy instruments that the Fed uses to execute monetary policy include all of the following EXCEPT conducting closed market operations
Three essential needs of a well-operating financial system include all of the following EXCEPT a bank insurance system
Quantitative Easing (QE) was a non-traditional monetary policy used by the Federal Reserve to stimulate economic growth after 2008. After spending $4.4 trillion over four years all the following are the effects of QE EXCEPT: Resulted in above-average economic growth in the US economy
Traditionally, the Federal Reserve will institute a monetary policy of increasing interest rates to: control increasing inflation
Which of the following best describes the Discount rate from the Federal Reserve? Interest rate that a bank must pay to borrow from its regional Federal Reserve Bank
The ability to change reserve requirements is a powerful tool the Fed uses frequently. False
The European Central Bank (ECB) conducts monetary policy for the twelve European countries that formed the European Monetary Union and adopted what common currency? Euro
Under the Federal Reserve Act of 1913, the number of Federal Reserve districtsestablished is: 12
The interest rate that a bank must pay to borrow from its regional Federal Reserve Bank is called: The Discount Rate
The prime rate is The rate of interest that banks charges for their most credit worthy customers
The Federal Reserve employed Quantitative Easing (QE) three times since 2009. QE by the Federal Reserve resulted in strong economic growth in the United States. (T/F) False
Which of the follwing is a method by which the Federal Reserve establishes monetary policy? A. setting reserve requirements B. altering the discount rate C. through Federal Open Market operations D. all of the above methods are used. D. all of the above methods are used.
The primary function of the Federal Reserve System is to: regulates the growth of the money supply

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