Chapter 16 Section 3 Quiz

The interest rate the Federal Reserve charges on loans to financial institutions.

• Open market Operations
• Money Multiplier
• Discount Rate
• Money Creation

What is the required reserve ratio?

• the deposits that commercial companies make in banks
• the amount of money a bank has to loan out
• the portion of a deposit that a bank must keep on hand
• the ratio of commercial to personal loans that a bank makes

The process by which money enters into circulation.

• Bond Sales
• Money Creation
• Prime Rate
• Excess Reserves

What is the policy used most by the Fed to change the money supply?

• changes in the money creation policy
• changes in the discount rate
• changes in the reserve requirement
• open market operations

Rate of interest banks charge on short-term loans to their best customers.

• Discount Rate
• Prime rate
• Money Multiplier Formula
• Bona-fide Rate

How does a bond sale made by the Fed affect the money supply?

• The sale increases the money supply
• The sale decreases the money supply
• The sale increases the money supply but not in the proportion that the multiplier effect would suggest
• It does not affect the money supply

The buying and selling of government securities (T-Bills, T-Bonds, etc.) to change the supply of money

• Open Market Operations
• Discount Rate
• Prime Rate
• Money Multiplier

How does the Fed encourage banks to loan more money?

• by reducing the discount rate
• by increasing the interest rate allowed
• by borrowing from their own member banks
• by increasing the reserves required of banks