1. The central bank for the United States is
- the Federal Reserve System.
- First National Bank of New York.
- Chase Manhattan Bank.
- the Congressional Bank.
2. It is widely believed that the Federal Reserve's most important function is
- to set the legal, controlled consumer interest rates.
- to lend to risky customers.
- to provide loans to the federal government.
- to regulate the money supply.
3. Fractional reserve banking is a system in which
- depository institutions hold a fraction of total deposits in reserve.
- the money supply is a set fraction of the U.S. gold reserves.
- depository institutions pay a fraction of advertised interest rates.
- a fraction of banking services must be provided by depository institutions.
4. In order to reach the maximum money multiplier, it is assumed that
- there is insufficient loan demand.
- loans are diverted into circulating currency.
- commercial banks keep the amount of reserves equal to total bank deposits.
- all loans get redeposited in a checkable account.
5. By affecting the amount of reserves in the banking system, the Fed can
- increase government purchases.
- reduce government purchases.
- affect the size of the money supply.
- change the marginal tax rates.