“Lender of last resort” means that the central bank a. has to lend money to failing banks. b. should lend money to individuals if their bankruptcy would threaten the banking system. c. should lend money to banks that are suffering short-term liquidity shortages. d. should lend money to pay for government deficits. e. None of […]
Interstate Commerce Commission (ICC) Act of 1887 gave the federal government rate-setting powers. Indicate whether the statement is true or false ANSWER FALSE
The U.S. experience with the rise and fall of its railroad industry illustrates that central planners are less likely than private investors to allocate investment funds into wealth-creating projects. Indicate whether the statement is true or false ANSWER TRUE
The Board of Governors of the Federal Reserve System is responsible for a. approving changes in the discount rate. b. controlling monetary policy. c. administering discount lending. d. Both a and b e. All of the above ANSWER A
Assuming the Federal Reserve makes an open-market purchase of a government security worth $10,000 . By writing a check to pay for this security, the Federal Reserve a. reduces the balance of its assets by $10,000. b. reduces the balance of its liabilities by $10,000. c. neither reduces the balance of its assets nor the […]
Fears that the Munn v Illinois (1877) doctrine would result in excessive government control over businesses were not realized, for it actually had the effect of retarding government regulation. Indicate whether the statement is true or false ANSWER FALSE
If many banks fail, this is likely to cause a/an a. increase in the currency-to-deposit ratio. b. increase in the reserves-to-deposit ratio. c. a fall in the currency-to-deposit and reserves-to-deposit ratios. d. both a and b. e. none of the above. ANSWER D
Roads during the 1800s proved to be a preferred transportation alternative to railroads and thus competed successfully for profits. Indicate whether the statement is true or false ANSWER FALSE
Railroads attracted funds from foreign investors. Indicate whether the statement is true or false ANSWER TRUE
Assume that the Federal Reserve has purchased a $1,000 security from an individual, the required reserve ratio is 20 percent, and that individual deposits the proceeds in his bank. What is the increase in excess reserves for this bank? a. $200 b. $1,000 c. $1,200 d. $800 e. $2,000 ANSWER D
