1) Which of the following special lending facilities set up by the Federal Reserve is reserve neutral?
A) Term Auction Facility
B) Primary Dealer Credit Facility
C) Term Securities Lending Facility
D) Asset Backed Commercial Paper Money Market Mutual Fund Liquidity Facility
2) The Fed”s lender of last resort function
A) has proven to be ineffective.
B) cannot prevent runs by large depositors.
C) is no longer necessary due to FDIC insurance.
D) creates a moral hazard problem.
3) The most important advantage of discount policy is that the Fed can use it to
A) precisely control the monetary base.
B) perform its role as lender of last resort.
C) control the money supply.
D) punish banks that have deficient reserves.
Reserve Requirements
4) An increase in ________ reduces the money supply since it causes the ________ to fall.
A) reserve requirements; monetary base
B) reserve requirements; money multiplier
C) margin requirements; monetary base
D) margin requirements; money multiplier