Chapter 14 Practice Quiz1. Both _____ and __________ are Federal Reserve assets.a. currency in circulation; reservesb. currency in circulation; government securitiesc. government securities; discount loansd. government securities; reserves2. The monetary base consists ofa. currency in circulation and Federal Reserve notes.b. currency in circulation and the U.S. Treasury’s monetary liabilities.c. currency in circulation and reserves.d. reserves and Federal Reserve Notes.3. When banks borrow money from the Federal Reserve, these funds are calleda. federal funds.b. discount loans.c. federal loans.d. Treasury funds.4. Purchases and sales of government securities by the Federal Reserve are calleda. discount loans.b. federal fund transfers.c. open market operations.d. swap transactions.5. When the Federal Reserve purchases a government bond from a bank, reserves in the banking system_________ and the monetary base _______, everything else held constant.a. increase; increasesb. increase; decreasesc. decrease; increasesd. decrease; decreases6. If the Fed decides to reduce bank reserves, it cana. purchase government bonds.b. extend discount loans to banks.c. sell government bonds.d. print more currency.7. If the required reserve ratio is 25%, the simple deposit multiplier isa. 5.0 b. 2.5c. 4.0 d. 10.08. Everything else held constant, an increase in currency holdings will causea. the money supply to rise.b. the money supply to remain constant.c. the money supply to fall.d. checkable deposits to rise.9. Everything else held constant, a decrease in holdings of excess reserves will meana. a decrease in the money supply.b. an increase in the money supply.c. a decrease in checkable deposits.d. an increase in discount loans.10. Everything else held constant, an increase in the required reserve ratio on checkable deposits will causea. the money supply to rise.b. the money supply to remain constant.c. the money supply to fall.d. checkable deposits to rise.Answers to practice quiz for chapter 14.1. C2. C3. B4. C5. A6. C7. C8. C9. B10.
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