1. | Banks can borrow money from what sources?
I. other banks
II. the Fed's discount window
II. ATM machines | | A. | I only | B. | II only | C. | III only | D. | I and II only | |
Correct
| Points Earned: | 1/1 | Your Response: | D | 2. | For a given money multiplier, a decrease in the banking system's reserves will cause the money supply to: | | A. | increase. | B. | decrease. | C. | remain constant. | D. | become difficult to predict. | |
Incorrect
| Points Earned: | 0/1 | Your Response: | A | 3. | When the Fed wants to increase interest rates, it: | | A. | instructs banks across the nation that they must raise their rates. | B. | sells bonds in the open market. | C. | buys bonds in the open market. | D. | adjusts the fractional reserve ratio. | |
Correct
| Points Earned: | 1/1 | Your Response: | B | 4. | Which of the following are the least liquid assets? | | A. | currencies | B. | checkable deposits | C. | small-time deposits | D. | savings deposits | |
Incorrect
| Points Earned: | 0/1 | Your Response: | B | 5. | If the Fed buys bonds in the open market:
I. investment spending will increase.
II. short-term interest rates will increase.
III. inflation will increase. | | A. | I and II only | B. | II and III only | C. | I and III only | D. | I, II, and III | |
Incorrect
| Points Earned: | 0/1 | Your Response: | B | 6. | A bank will become illiquid if: | | A. | it has short-term liabilities that exceed its short-term assets. | B. | it is insolvent. | C. | it is solvent and liquid. | D. | there is a financial crisis like the one of 2008. | |
Incorrect
| Points Earned: | 0/1 | Your Response: | B | 7. | The main difference between M1 and M2 is that: | | A. | M1 includes some less liquid assets in addition to the