Federal Funds / Discount Rate
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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
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
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
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
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
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
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
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