Page | 1
FINA 3317 EXAM 1 2026
ACTUAL QUESTIONS WITH
VERIFIED ANSWERS.
Currently the Fed sets monetary policy by targeting
A) the Fed funds rate.
B) the prime rate.
C) the level of nonborrowed reserves.
D) the level of borrowed reserves.
E) the stock market. Topic: Monetary Policy Tools - correct
answer-A) the Fed funds rate.
From October 1983 to July 1993, the Federal Reserve targeted
A) the Fed funds rate.
B) borrowed reserves.
C) nonborrowed reserves.
D) M1.
E) M3. Topic: Monetary Policy Tools - correct answer-B)
borrowed reserves.
, Page | 2
Recently, oil prices have risen in the United States, generating
concerns that inflation may increase. If the Fed wishes to
ensure that inflation does not get out of hand, the Fed could
A) intervene in the currency markets to push the value of the
dollar down.
B) decrease the discount rate.
C) lower the target Fed funds rate.
D) lower the target money supply growth rate.
E) reduce reserve requirements at banks. Topic: The Federal
Reserve, the Money Supply, and Interest Rates - correct
answer-D) lower the target money supply growth rate.
The Fed changes reserve requirements from 10 percent to 14
percent, thereby eliminating $750 million in excess reserves.
The total change in deposits (with no drains) would be
(rounded)
Formula: (1/0.14) × $750 million
A) $7.917 billion.
B) $6.630 billion.
C) $5.357 billion.
D) $4.934 billion.
, Page | 3
E) None of these choices are correct. Topic: Monetary Policy
Tools - correct answer-C) $5.357 billion.
The Fed increases bank reserves in the system by $75 million.
If there are no drains, the expected change in bank deposits is
Formula: (1/0.10) × $75 million
A) $82.5 million.
B) $945 million.
C) $750 million.
D) $1,500 million.
E) $655 million. Topic: Monetary Policy Tools - correct answer-
$C) 750 million.
If the Fed is targeting interest rates and money demand
increases, an appropriate policy response would be to
A) increase reserve requirements.
B) increase the discount rate.
C) buy U.S. Treasury securities from government bond dealers.
D) increase government spending.
, Page | 4
E) None of these choices are correct. Topic: The Federal
Reserve, the Money Supply, and Interest Rates - correct
answer-C) buy U.S. Treasury securities from government bond
dealers.
The major monetary policy-making arm of the Federal Reserve
is the
A) Board of Governors.
B) Council of Federal Reserve Bank presidents.
C) Office of the Comptroller of the Currency.
D) Federal Reserve Bank of New York.
E) None of these choices are correct. Topic: Structure of the
Federal Reserve System - correct answer-E) None of these
choices are correct.
In the area of bank supervision, which of the following are
functions of the Federal Reserve Banks?
I. Examinations of state member banks
II. Approval of member bank and bank holding company
acquisitions
III. Deposit insurance
FINA 3317 EXAM 1 2026
ACTUAL QUESTIONS WITH
VERIFIED ANSWERS.
Currently the Fed sets monetary policy by targeting
A) the Fed funds rate.
B) the prime rate.
C) the level of nonborrowed reserves.
D) the level of borrowed reserves.
E) the stock market. Topic: Monetary Policy Tools - correct
answer-A) the Fed funds rate.
From October 1983 to July 1993, the Federal Reserve targeted
A) the Fed funds rate.
B) borrowed reserves.
C) nonborrowed reserves.
D) M1.
E) M3. Topic: Monetary Policy Tools - correct answer-B)
borrowed reserves.
, Page | 2
Recently, oil prices have risen in the United States, generating
concerns that inflation may increase. If the Fed wishes to
ensure that inflation does not get out of hand, the Fed could
A) intervene in the currency markets to push the value of the
dollar down.
B) decrease the discount rate.
C) lower the target Fed funds rate.
D) lower the target money supply growth rate.
E) reduce reserve requirements at banks. Topic: The Federal
Reserve, the Money Supply, and Interest Rates - correct
answer-D) lower the target money supply growth rate.
The Fed changes reserve requirements from 10 percent to 14
percent, thereby eliminating $750 million in excess reserves.
The total change in deposits (with no drains) would be
(rounded)
Formula: (1/0.14) × $750 million
A) $7.917 billion.
B) $6.630 billion.
C) $5.357 billion.
D) $4.934 billion.
, Page | 3
E) None of these choices are correct. Topic: Monetary Policy
Tools - correct answer-C) $5.357 billion.
The Fed increases bank reserves in the system by $75 million.
If there are no drains, the expected change in bank deposits is
Formula: (1/0.10) × $75 million
A) $82.5 million.
B) $945 million.
C) $750 million.
D) $1,500 million.
E) $655 million. Topic: Monetary Policy Tools - correct answer-
$C) 750 million.
If the Fed is targeting interest rates and money demand
increases, an appropriate policy response would be to
A) increase reserve requirements.
B) increase the discount rate.
C) buy U.S. Treasury securities from government bond dealers.
D) increase government spending.
, Page | 4
E) None of these choices are correct. Topic: The Federal
Reserve, the Money Supply, and Interest Rates - correct
answer-C) buy U.S. Treasury securities from government bond
dealers.
The major monetary policy-making arm of the Federal Reserve
is the
A) Board of Governors.
B) Council of Federal Reserve Bank presidents.
C) Office of the Comptroller of the Currency.
D) Federal Reserve Bank of New York.
E) None of these choices are correct. Topic: Structure of the
Federal Reserve System - correct answer-E) None of these
choices are correct.
In the area of bank supervision, which of the following are
functions of the Federal Reserve Banks?
I. Examinations of state member banks
II. Approval of member bank and bank holding company
acquisitions
III. Deposit insurance
