If the Federal Reserve lowers the reserve requirement, what is the most immediate effect on the banking system?

AP Macroeconomics – Unit 4 Quiz: The Financial Sector

Quiz
•
Financial Education
•
10th Grade
•
Medium
Kishan Virdy
Used 3+ times
FREE Resource
10 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
A) Banks will be required to hold more reserves, reducing the money supply.
B) Banks will have more excess reserves, increasing their ability to lend.
C) The money multiplier will decrease, slowing economic growth.
D) Demand deposits will automatically decrease as banks adjust reserves.
2.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Suppose the Federal Reserve wants to combat inflation. Which of the following policy actions would be most effective?
Buying government securities to lower interest rates
Decreasing the discount rate to encourage borrowing
Selling government securities to contract the money supply
Reducing the reserve requirement to expand bank lending
3.
MULTIPLE SELECT QUESTION
30 sec • 1 pt
If the Federal Reserve purchases $200 million worth of government securities from banks and the reserve requirement is 10%, what is the maximum potential increase in the money supply?
$200 million
$2 billion
$20 billion
$10 billion
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
An increase in the real interest rate is most likely to result in which of the following changes in the loanable funds market?
A) A decrease in the supply of loanable funds as savers choose to spend more
B) An increase in the demand for loanable funds as borrowing becomes more attractive
C) A decrease in the demand for loanable funds as borrowing becomes more expensive
D) No significant change, as interest rates do not affect investment behavior
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
If the money supply increases while real GDP remains constant, what is the most likely long-run effect?
A) A decrease in nominal interest rates and deflation
B) A decrease in real wages and an increase in the price level
C) An increase in unemployment and a decrease in aggregate demand
D) A decrease in the velocity of money and a lower price level
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Which of the following is true about the federal funds rate?
It is the interest rate the Fed directly sets for all commercial banks.
It is influenced by open market operations conducted by the Federal Reserve.
It is always lower than the discount rate.
It is the interest rate banks charge consumers for long-term loans.
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
If the Federal Reserve wants to decrease the federal funds rate, what open market operation should it conduct?
Buy government securities, increasing bank reserves
Sell government securities, reducing the money supply
Increase the discount rate, discouraging bank borrowing
Raise the required reserve ratio, reducing excess reserves
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