Question 1: If the required reserve ratio is 10%, banks keep 2% excess reserves, and the public keeps a 10% cash to deposit ratio, what is the money multiplier?
a) 10
b) 20
c) 5
d) 0.22
e) none of the above
Question 2: The increased use of credit/debit cards for transactions will cause the money multiplier to
a) increase
b) decrease
c) remain the same
d) credit/debit cards and the money multiplier are unrelated
e) none of the above
Question 3: The federal funds rate can never be ______ the discount rate.
a) higher than
b) lower than
c) equal to
d) the federal funds rate and the discount rate are unrelated
e) none of the above
Question 4: The interest rate that one commercial bank charges another for a loan to cover a deficiency in its reserves is called the
a) discount rate
b) federal funds rate
c) prime rate
d) required rate of return
e) none of the above
Question 5: Open market operations that maintain the reserves and monetary base at current levels are called
a) offensive
b) defensive
c) dynamic
d) compensatory
e) none of the above
Question 6: Sacrificing long-term gains for short-term gains is an example of
a) logical inconsistency
b) return inconsistency
c) time inconsistency
d) shortsightedness
e) none of the above
Question 7: Historically, the primary goal of US monetary policy has been
a) price stability
b) interest rate stability
c) stable GDP growth
d) low unemployment
e) none of the above