d. the demand for money. Which of the following is likely to occur if OPEC increases the amount of oil it supplies and domestic energy prices fall, ceteris paribus? What are some basic monetary policy tools used by the Fed? Which of the following functions does the Fed perform? b. A stock person who is laid off by a department store because retail sales across the country have decreased is _______ unemployed. &\textbf{0-60 days}&\textbf{61-120 days}&\textbf{Over 120 days}\\ An easing of monetary policy interest rates, which the demand for a currency and the fundamental value of the exchange rate. Toby Vail. Given an inflationary gap, the Federal Reserve will use monetary policy to do what to interest rates and to aggregate demand? c) an open market sale. The aggregate demand curve should shift rightward. International Financial Advisor. If the Federal Reserve wants to decrease the money supply, it should: a. What is the reserve-deposit ratio? Working Paper No. d. The Federal Reserve sells bonds on the open marke, If the Fed purchases government securities on the open market, the quantity of money and the nominal interest rate. If the price of computers falls during a period when the average price level remains constant, which of the following has occurred? The long-term real interest rate _____. D. The collectio. This is an example of which type of unemployment? The Federal Reserve expands the money supply by 5 percent. 3 . If the Federal Reserve increases the rate of money growth and maintains it at the new higher rate, eventually expected inflation will and the short-run Phillips curve will shift . a. decrease, downward b. decrease. B. the sellers of such securities buy new securities in the open market and t. Assume there is no leakage from the banking system and that all commercial banks are loaned up. (a) the money supply decreases, interest rates decline, GDP increases, and employment decreases (b) the money supply increases, interest rates increase, GDP decreases, 1) The Federal Reserve will lower short-run output by: a) Decreasing the money supply. Suppose the U.S. government paid off all its debt. B. expansionary monetary policy by selling Treasury securities. Find the taxable wages. Which of the following is NOT a basic monetary policy tool used by the Fed? An increase in the reserve ratio: a. increases the money multiplier. Monetary policy refers to the central bank's actions to the control of money supply in the economy. Suppose government spending increases. d. lower reserve requirements. c-A forecast of a permanent demand increase shifts the investment line . C.banks' reserves will be reduced. B ) bond yields will fall 2) A negative output gap indicates that A) nominal GDP is below real GDP. \text{Net Income (Loss)}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? Explain your reasoning. U.S. goods are less expensive for Americans so they buy fewer imports and more domestic goods. The Fed's decision amounted to a shift to a more cautious period of inflation fighting. If the Federal Reserve would like to increase the money supply, it can the reserve ratio, the discount rate, or government securities in open market operations. To decrease the money supply the Fed can: Raise the reserve requirement, raise the discount rate, or sell bonds. Make sure to remember your password. How would this affect the money supply? See Answer Ceteris paribus, if the Fed raised the required reserve ratio: Expert Answer the process of selling Fed-issued IOUs between banks. Accordingly, the Board is amending Regulation D to set the low reserve tranche for net transaction accounts for 2022 at $640.6 million, an increase of $457.7 million from 2021. According to macroeconomists, a goal for the economy is a: When the unemployment rate falls to the full-employment level: There is increased concern about inflation. Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page. D. change the level of reserves it holds for banks. A. Money supply to decrease b. A. c. state and local government agencies only. A combination of flexible rules and limited discretion. The result is that people _____. The money supply decreases. Its policymakers are welcoming the recent slowdown in price increases, and the disinflation trend gives . b. buys or sells foreign currency. The marginal revenue of the 11th item is: A monopolist sets price at a point on the _______ curve, corresponding to the rate of output determined by the intersection of ______. E.the Phillips curve will shift down. b. will cause banks to make more loans. Raise the reserve requirement, raise the discount rate or sell bonds Ceteris paribus, if the Fed reduces the discount rate, then: The incentive to borrow funds increases The use of money and credit controls to change macroeconomic activity is known as: Monetary policy To fight a recession, the Fed should conduct what kind of monetary policy to do what to interest rates and shift aggregate demand to the: A. contractionary; increase; left B. contractionary; decrease; Assume the demand for money curve is stationary and the Fed increases the money supply. **Instructions** Raise discount rate 2. Cause the money supply to decrease, b. Consider an expansionary open market operation. If the Fed wants to increase the money supply through an open market operation, it will a. purchase government securities. The capital account surplus will increase. Calculate after-tax operating income earned by United States and French divisions from transferring 200,000 chainsaws (a) at full manufacturing cost per unit and (b) a market price of comparable imports. If the Fed decreases the money supply, GDP ________. are the minimum amount of reserves a bank is required to hold. C. The value of the dollar will decrease in foreign exchange markets. a. Sell government securities Ceteris paribus, if the Fed reduces the reserve requirement, then the lending capacity of the banking system increases Ceteris paribus, if the Fed reduces the discount rate, then the incentive to borrow funds increases Perform open market purchases of securities. Our experts can answer your tough homework and study questions. \text{General and Administrative Expense}&\text{\hspace{12pt}425,000}&\text{\hspace{12pt}425,000}\\ Previous question Next question Your email address is only used to allow you to reset your password. \text{Total per category}&\text{?}&\text{?}&\text{? It also raises the reserve ratio. The number of deposit dollars the banking system can create from $1 of excess reserves. C. purchases government bonds to increa, Within the Federal Reserve, the organizational body that is responsible for conducting open market operations (i.e., the buying and selling of government securities) is the: a) FOMC, b) Board of Governors, c) Board of Directors, d) Federal Reserve Bank o, Assume that the required reserve ratio is 10%; banks hold no excess reserves, and the public holds all money in the form of currency. B. D. all of the above. d. commercial bank, Assume all money is held in the form of currency. copyright 2003-2023 Homework.Study.com. c. has an expansionary effect on the money supply. If the Federal Reserve raises interest rates, it means the money supply starts to deplete. The Federal Reserve uses open market operations to control the money supply when it A. issues government bonds to finance the federal government's deficit. \text{French income tax rate on the French division's operating income} & \text{45\\\%}\\ Make sure you say increase or decrease/buy or sell. c) buying and selling of government securities by the Treasury. \text{Bad Debt Expense}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? The bank now sells $5,000 in securities to the Federal Reserve Bank in its, When the Federal Reserve purchases Treasury securities in the openmarket, A. the public starts buying houses and firms invest in anticipation of banks increasing their reserves. $$ Decrease the discount rate. Ceteris paribus, if the Fed raises the reserve requirement, then Most studied answer the lending capacity of the banking system decreases. d. equilibrium interest rate rises e. demand for money curve shifts leftward, If the Federal Reserve increases the rate of money growth and maintains it at the new higher rate, eventually expected inflation will [{Blank}] and the short-run Phillips curve will shift [{Blank}]. a. decrease, downward. A decrease in the reserve ratio will: a. d. buying and selling of government, 1) Open market operations are the: A) buying and selling of Federal Reserve Notes in the open market. a. b. Determine the December 31, 2012, balances in Wave Waters shareholders equity accounts and total shareholders equity on this date. Savings accounts and certificates of deposit are called. \text{Expenses:}\\ A. buy $25,000 B. sell $25,000 C. sell $5,000 D. buy $1,000 E. sell $1,000, In times of economic downturn, the Federal Reserve will engage in ___ monetary policy by ___ bonds. The answer is b. rate of interest decreases. This situation is an example of: After quitting one job, some people with marketable skills find that it takes several months to find a new job. Expansionary fiscal policy is when a. the government lowers spending and raises taxes. Increase the demand for money. Fill in either rise/fall or increase/decrease. Multiple Choice . We start by assuming that there is no reserve requirement or lending by the Central Bank. Cause a reduction in the dem. \text{Total uncollectible? Let's say the Fed had raised interest rates by 1% before the family got a loan, and the interest rate offered by banks for a $300,000 home mortgage loan rose to 4.5%. $$ D. In open market operations, the Fed exchanges cash (money) for non-cash (bonds). c. it borrows money, Consider how the following scenario would affect the money supply and, as a result, interest rates in the economy. \text{Full manufacturing cost per chainsaw} & \text{\$175}\\ Although it may feel like you're playing a game, your brain is still making more connections with the information to help you out. Holding the deposits or reserves of commercial banks. The Fed sells Treasury bills in the open market b. c. reduce the reserve requirement. (A) How will M1 be affected initially? It creates money, it creates a transactions-account balance for the borrower, and the money supply increases. C. a traveler's check. c. engage in open market sales of government securities. Would the effect on aggregate demand be larger if the Federal Reserve held the money supply constant in response or if the Fed were committed to maintaining a fixed interest rate? In the short run, if the Fed wants to raise the federal funds rate, it: (i) instructs the New York Fed to sell government securities in the open market. The difference in potential money creation when the Bank of Canada buys government securities from the chartered banks rather than from the public is due to the fact that a. excess reserves are larger when the Bank of Canada buys government securities from the chartered banks. Now suppose the Fed lowers. With everything else held constant, how will each of the following change as the result of the Fed's policy action (increase, decrease, or no change)? D. the buying and selling of stocks i, Suppose again that Third National Bank has reserves of $20,000 and check able deposits of $100,000. Then, ceteris paribus, bank reserves _____ (increase, decrease, or do not change), currency in circulation _____ (increases, decreases, or does not change), and thus the monetary base will _____ (decrease or increase). C. Controlling the supply of money. Conduct open market purchases. c. Purchase government bonds on the open market. a. use open market operations to buy Treasury bills b. use open market operations to sell Treasury bills c. use discount policy to raise the disc. What types of accounts are listed on the post-closing trial balance? Banks now have more money to loan since they are required to hold less in reserve. Which of the following is likely to occur if people reduce their spending because they are worried about an economic downturn, ceteris paribus? Why does an open market sale of Treasury securities by the federal Reser, Suppose the Federal Reserve wanted to increase the money supply: it could a. \begin{array}{lcc} Increase the reserve requirement. If the Federal Reserve System buys government securities from commercial banks and the public: a. the money supply will contract. c. buys or sells existing U.S. Treasury bills. C. sell bonds lowering the, If The Fed decides to buy bonds & securities in the open market, it will likely: a. increase the money supply and decrease aggregate demand. Bank A with total deposits of $100 million isfully loaned up. If the Fed decides to engage in an open market operation to increase the money supply, what will it do? d) All of the above. The required reserve ratio is 16%. The French import duty is charged on the price at which the product is transferred into France. The U.S. Treasury c. The U.S. Mint d. The federal government And involves: a. Quantitative easing b. In the money market, an excess demand of money will: A. increase the supply of bonds, increase bond prices, and decrease interest rates. D. Transaction demand for, To ease monetary policy to fight a recession, the Federal Reserve would ____. 2) If, If the Fed increases the supply of money in the market, bond prices will and interest rates will. \text{Total Expenses}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? copyright 2003-2023 Homework.Study.com. Suppose the economy is initially experiencing an inflationary gap. The deposit-creation potential of the banking system is: A reduction in the money supply should shift the aggregate: Monetary policy involves the use of money and credit controls to: What not a basic monetary policy tool used by the Fed? Some terms may not be used. A. a. contractionary; buying b. expansionary; buying c. expansionary; selling d. contractionary; selling, Suppose the Federal Reserve conducts an open market purchase of $10 million worth of securities from a bank. If there is a recession, the Fed would most likely a. encourage banks to provide loans by. Corporate finance for the pre-industrial world began to emerge in the Italian city-states and the low countries of Europe from the 15th century.. b. Multiple Choice . receivables. Aggregate demand will decrease or shift to the left. C. increase by $50 million. d) increases the money supply and lowers interest rates. Suppose during the same period average prices in the economy rose by 150 percent.The paintings owner, relative to those who do not own paintings, experienced a: Lower real wealth as a result of the wealth effect. 16. a) Given the required reserve ratio, RR/D=0.10, the excess reserves to deposits ratio, ER/D=0.06, the currency to deposits ratio, Assume that any money lent by a bank is always deposited back in the banking system as a checkable deposit and that the required reserve ratio is 15%. The fixed monthly cost is $21,000, and the variable cost. \text{Direct labor} \ldots & 800,000\\ b) increase causing an increase in investment spending shifting aggregate deman, An expansionary monetary policy ____ the money supply, causing the real interest rate to ____ and planned investment to ____. d. the average number of times per year a dollar is spent. If the firm wants to sell one more carton of eggs, the firm: A flat or horizontal demand curve for a firm indicates that: If a perfectly competitive firm wanted to maximize its total revenues, it would produce: As much output as it is capable of producing. State tax on first $3,000: 1.5$ percent. An open market operation is ____?A. b. the price level increases. b. sell government securities. Was there a profit or a loss for the year ended December 31, 2012? B. decreases the bond price and decreases the interest rate. If the economy is currently in monetary equilibrium, an increase in the money supply will a. The Board of Governors has ___ members,and they are appointed for ___ year terms. If the Fed sells $1 million of government bonds, what is the effect on the economy s reserves and money supply? The money supply increases. a) Describe what initially happens to the reserves of bank A, Open market operations refer to A. the buying and selling of government bonds by the Fed. If a bank does not have enough reserves, it can. C. Increase the supply of money. The Federal Reserve has a few main goals with respect to the economy: to promote maximum employment, keep prices stable and ensure moderate long-term interest rates. C. treasury bond operations. Which of the following is likely to cause a leftward shift in the aggregate supply curve, ceteris paribus? The nominal interest rates rises. These actions can be classified as expansionary or contractionary, depending on the prevailing market conditions. The text describes the theoretical developments of the assignment rules regarding fiscal and monetary policies and the respective roles in macroeconomics stabilisation. B. there is an excess demand for bonds, so those looking to borrow by selling bonds can do so at a lower interest rate. Increase the reserve requirement C. Buy government securities D. Decrease the discount rate, When the Fed successfully decreases the money supply, GDP options: a. increases because the resulting increase in the interest rate leads to a decrease in investment b. increases because the resul, If the Fed wants to raise the interest rate, in the short run in the money market, the Fed: a) decreases the quantity of money b) increases the quantity of money c) shifts the demand for money curve leftward d) shifts the demand for money curve rightward, The Federal Reserve is becoming more cautious about rising inflationary pressure. Ceteris paribus, if the Fed raised the required reserve ratio: Question: Ceteris paribus, if the Fed raised the required reserve ratio: This problem has been solved! Aggregate supply will increase or shift to the right. The monetary base in the economy will increase. The lending capacity of the banking system decreases. Generally, the central bank. c. the interest rate rises and this. Currency circulation in the economy will increase since the non-bank public will have sold their securities. If the Federal Reserve decreases money supply, then a) The money supply curve will shift up and interest rates will increase b) The money supply curve will shift up and interest rates will decrease. (a) money supply increases, investment increases, aggregate demand increases (b) money supply increases, the interest rate increases, If the Fed increases the money supply to bring down the federal funds rate: A. The people who sold these bonds keep all their money in checking accounts. The reserve ratio is 20%. Open market operations c. Printing mo. When the Federal Reserve sells bonds as a part of a contractionary monetary policy, there is: A. C) Total deposits decrease. Then, ceteris paribus, bank reserves _____ (increase, decrease, or do not change), currency in circulation _____ (increases, decreases, or does not change), and thus the monetary base will _____ (decrease or increase). Enter the email address you signed up with and we'll email you a reset link. Get access to this video and our entire Q&A library, How the Federal Reserve Changes the Money Supply and Affects Interest Rates. Price falls to the level of minimum average total cost. A. expands, higher, higher B. expands, higher, lower C. expands, lower, higher D. contracts, In the market for money, when the demand for funds increases, the interest rate _______ and the amount of money borrowed _______ . C. $120,000 in checkable-deposit liabilities and $32,000 in reserves. d) borrow reserves from the Federal Reserve. Make sure you say increase or decrease/buy or sell. If the banking system has a required reserve ratio of 20 percent, then the money multiplier is: It is more likely to occur if people lose faith in a nation's currency. b. rate of interest decreases. D. open bonds operations. When the Federal Reserve System buys government securities on the open market: A. the money supply will decrease. Over the 30-year life of the. The velocity of money is a. the rate at which the Fed puts money into the economy. In order to maintain price stability, the Federal Reserve has decided to engage in monetary restraint. Increase / Decrease b. A. decreases; decreases B. decreases; increases C. increases; decreases D. increases. __ Money paid to stockholders from earnings of a corporation. If Bank A and all the other banks use reserves to purchase only securities, what will happen to deposits in the banking system and how much does it expand? Suppose that the Fed purchases from bank B some bonds in the open market and that, before the sale of bonds, bank B had no excess reserves. b. increase the supply of bonds, thus driving down the interest ra, If the Fed begins to buy treasury bills to counter a recession, we would expect to see an increase in the a. demand for money. - By buying and selling bonds through open-market operations - By buying and selling stocks - By setting the interes, Suppose the Fed decided to purchase $100 billion worth of government securities in the open market, directly deposited into the banking system. $$ c. commercial bank reserves will be unaffected. If the required reserve ratio is 10 percent, what is the resulting change in checkable deposits (or the money supply) if we assume no cash leakages and banks hold zero excess res. Increase government spending. 1. Fiscal policy should be used to shift the aggregate demand curve. C. The nominal interest rate does not change. Open market operations When the Fed sells government securities, it: a. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public. c) not change. If the Fed is using open-market operations, will it, Key Concept: Open market operations When the Fed buys government securities, it a. Now suppose the Fed conducts an open market purchase of government bonds equal to $1, Fiscal policy is conducted by: a. Suppose the Federal Reserve buys 100 mortgage-backed securities in the open market. If the Fed sells $1 million of government bonds, what is the effect on the economy's reserves and money supply? It improves aggregate demand, thus increasing the country's GDP. Suppose the Federal Reserve conducts an open market purchase of $150 million government securities from the non-bank public. Price charged is always less than marginal revenue. a. decreases; falls b. decreases; rises c. does not change; falls d. increases; rises e. increases; falls, At 3% unemployment which is likely to happen, the Federal Reserve should: A. sell bonds increasing the price of bonds and driving up the interest rates. FROM THE STUDY SET a)increases; increases b)increases; decreases c)decreases; increase, If the Federal Reserve increases the rate of money growth and maintains it at the new higher rate, eventually expected inflation will (blank) and the short-run Phillips curve will shift (blank). This is an example of: Money is functioning as a medium of exchange when you: Buy lunch at a fast food restaurant for yourself and your friend. a. mortgages; Bank of America b. government securities; New York Fed c. government securities; Federal Reserve Bank of Florida d. Mortgages; Federal Reserve. Suppose the Federal Reserve buys government securities from the nonbank public. CBDC Next-Level: A New Architecture for Financial "Super-Stability" by. B.bond prices will fall, and interest rates will fall. B. decrease by $2.9 million. What impact would this action have on the economy? Consider the money multiplier and assume the, Suppose that the reserve requirement ratio is 4% and that the Fed uses open market operations (OMO) by BUYING $200 million worth of Treasury securities. b. C. influence the federal funds rate. The Fed decides that it wants to expand the money supply by $40 million. According to the monetarist view, the aggregate supply curve is: Vertical at the natural rate of unemployment. c. Decrease interest rates. Suppose the Federal Reserve wishes to use monetary policy to close an expansionary gap. The use of money and credit controls to change macroeconomic activity is known as: Free . It transfers money from spenders to savers. B. increase the supply of bonds, decrease bond prices, and increase interest rates. \end{array} How does the Federal Reserve regulate the money supply? \text{Total per category}&\text{?}&\text{?}&\text{? The Fed approved a 0.25 percentage point rate hike, the first increase since December 2018. If $200,000 is deposited in the bank, then ceteris paribus: Excess reserves will increase by $170,000. Assume the Federal Reserve decides to sell $25 billion worth of U.S. Treasury bonds i. B. Suppose the Federal Reserve decided to sell $35 billion worth of government securities in the open market. c) decreases government spending and/or raises taxes. B. decrease by $200 million. Suppose further that the required reserve, Explain briefly: a. When the Federal Reserve increases the discount-rate increases the discount rate as a part of a contractionary monetary policy, there is: A. Which of the following is consistent with what Keynes believed? \text{Direct materials used} \ldots & \$ 750,000\\ b. Suppose the Federal Reserve engages in open-market operations. Lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public. c. first purchase, then sell, government securities. D. Describe the categories change effect on net income and accounts receivable. Suppose a bank has $50,000 in transactions accounts and a minimum reserve requirement of 10 percent. d. The Federal Reserve sells bonds on the open market. How will the lending capacity of the banking system be affected if the reserve requirement is 5 percent? The VOC was also the first recorded joint-stock company to get a fixed capital stock. raise the discount rate. Also assume that banks do not hold excess reserves and there is no cash held by the public. If you've accidentally put the card in the wrong box, just click on the card to take it out of the box. The deposit-creation potential of the banking system is: Suppose the entire banking system has $10,000 in excess reserves and a required reserve ratio of 20 percent. b. D. Decrease the supply of money. If the population of a country is 1,000,000 people, its labor force consists of 600,000, and 60,000 people are unemployed, the unemployment rate is: If the population of a country is 220 million people, its labor force consists of 115 million, and 99 million people are employed, the unemployment rate is: When construction workers seek work because the ground is covered in snow and ice, the unemployment rate goes up.
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