\text{Total uncollectible? c. real income increases. Causes an increase in the federal funds rate, c. Increases reserve holdings of the commercial banks, d. Lowers the cost of borrowing from the Fed, e. Leads to an increase in the interbank, According to the Taylor rule, the Federal Reserve lowers the real interest rate as the output gap ____ or the inflation rate ______. B. 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 Ban, Which of the following is the basic economic policy function of the Federal Reserve Banks? Ceteris paribus, an increase in _______ will cause an increase in ______. Over the 30-year life of the. C. contractionary monetary policy by, An open market sale by the Fed A. increases the money supply, which leads to increased interest rates and a fall in investment spending. &\textbf{past due}&\textbf{past due}&\textbf{past due}\\[5pt] (Banks must hold more funds used for loans in reserve and there is a greater leakage as subsequent deposits will yield smaller excess reserves for banks receiving them.) 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. All rights reserved. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases, If the Federal Reserve was concerned about the "crowding-out" effect, they could engage in: A. expansionary monetary policy by lowering the discount rate. When the Fed buys government Securities in the open market (a) bank reserves increase (b) bank reserves decline (c) money supply increases but bank reserves remain unchanged (d) money supply declines but bank reserves remain unchanged. It transfers money from spenders to savers. Was there a profit or a loss for the year ended December 31, 2012? __ Money paid to stockholders from earnings of a corporation. B. expansionary monetary policy by selling Treasury securities. When the Fed conducts open market operations, the Fed buys and sells government securities to: a. the private sector. b. will cause banks to make more loans. 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. c. Decrease interest rates. The immediate result of this transaction is that M1: If Edgar takes $100 out of his savings account and deposits it into his checking account, the immediate result of this transaction is that M1: What does not occur when a bank makes a loan? If price is greater than marginal cost, a competitive firm should increase output because additional units of output will: Add to the firm's profits (or reduce losses). c) overseeing the buying and selling of government securities in the open market. 2. Fill in either rise/fall or increase/decrease. D. open bonds operations. then the Fed. \text{Direct materials used} \ldots & \$ 750,000\\ Discuss how an open market purchase of $50 million worth of bonds (or treasury bills) by the Fed would a, According to Orthodox monetary theory, when the FED buys a bond from the banking sector, this is an example of a) an open market purchase and contractionary monetary policy. b) borrow more from the Fed and lend less to the public. b) an increase in the money supply and a decrease in the interest rate. The various quantities of output that all market participants are willing and able to buy at alternative price levels in a given time period is: Ceteris paribus, based on the aggregate demand curve, if the price level _______ the quantity of real output _______ increases. D. Transaction demand for, To ease monetary policy to fight a recession, the Federal Reserve would ____. }\\ The four components of aggregate demand are: Consumption, investment, government spending, and net exports. Ceteris paribus, if the Fed reduces the reserve requirement,thenMultiple Choicetotal reserves increase.the lending capacity of the banking system increases.total deposits decrease.the money multiplier decreases. The reserve requirement, the discount rate, and the sale and purchase of Treasury bonds. Government bond operations. Assuming this, how is the Fed likely to respond to fiscal stimulus if the economy is nearing full employment? Which of the following lends reserves to private banks? The required reserve. According to the monetarist view, the aggregate supply curve is: Vertical at the natural rate of unemployment. Sell Treasury bonds, bills, or notes on the bond market. a) 0.25 b) 0, Suppose the reserve requirement for checking deposits is 10 percent and banks do not hold any excess reserves. Enter the email address you signed up with and we'll email you a reset link. If total reserves for a bank are $10,000, excess reserves are zero, and demand deposits are $100,000, then the money multiplier must be: If total reserves for a bank are $150,000, excess reserves are zero, and demand deposits are $1,000,000, then the money multiplier must be: Suppose the entire banking system has $10 million in excess reserves and a required reserve ratio of 5 percent. $$ Above equilibrium, this results in excess supply. 3 . Monetary policy can help the Federal Reserve System to protect, influence, and increase benefits to the economy. b. means by which the Fed supplies the economy with currency. b. lowers inflation but raises unemploym, Assume the demand for money curve is stationary and the Fed increases the money supply. State tax on first $3,000: 1.5$ percent. Suppose the Federal Reserve buys government securities from the non-bank public. Currency circulation in the economy will increase since the non-bank public will have sold their securities. If the price of computers falls during a period when the average price level remains constant, which of the following has occurred? &\textbf{0-60 days}&\textbf{61-120 days}&\textbf{Over 120 days}\\ \end{array} 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. It sells $20 billion in U.S. securities. \end{array} The money supply increases. **Instructions** D. all of the above. CBDC Next-Level: A New Architecture for Financial "Super-Stability" by. The Federal Reserve (the Fed), the central bank of the United States, has a Congressional mandate to promote maximum employment and price stability. b. the interest rate rises and this stimulates consumption spending. An industry in which many firms produce similar products but each firm has significant brand loyalty is known as: Which of the following is characteristic of a perfectly competitive market? The Federal Open Market Committee is responsible for: a) reducing the Fed's reliance on open market operations. How would this affect the money supply? The Federal Reserve calculates and provides reserve balance requirements before the start of each maintenance period to depository institutions via the Reserves Central--Reserve Account Administration, which is available on the Federal Reserve Bank Services website. a. increases, rises b. increases, falls c. decreases, falls d. decreases, does not change e. . B) The lending capacity of the banking system decreases. Which of the following indicates the appropriate change in the U.S. economy after government intervention? This is an example of which type of unemployment? b-A rise in corporate tax would shift the investment line outwards. Which of the following is consistent with what Keynes believed? }\\ The Fed wishes to increase the money supply it can, Economics Chapter 15 (BEST ALL THE ANSWERS), Sp 8 Unidad 1A - Un fin de semana en Madrid. 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. B. excess reserves at commercial banks will decrease. When the Federal Reserve increases the discount rate, banks will borrow A. fewer reserves and decrease lending. \text{Full manufacturing cost per chainsaw} & \text{\$175}\\ C. influence the federal funds rate. Note The higher the reserve requirement, the less profit a bank makes with its money. The result is imperfect monitoring, which creates profit opportunities for speculators, who do not act as dealers but simply If a bank does not have enough reserves, it can. ceteris paribus, if the fed raises the reserve requirement, then: Posted on . If there is a recession, the Fed would most likely a. encourage banks to provide loans by. The Federal Reserve Bank b. d, If the Federal Reserve wants to increase output, it increases A. government spending. Increase the reserve requirement. Professor Williams tutors her next-door neighbor's son in economics. Compute the following for the current year: 1. Where do you suppose the Fed gets the cash, to do this ? are in the same box the next time you log in. Change in Excess Reserve = -100000000. 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? b. it will be easier to obtain loans at commercial banks. The aggregate demand curve should shift rightward. If you knew the answer, click the green Know box. 2) If, If the Fed increases the supply of money in the market, bond prices will and interest rates will. If the Fed is using open-market operations, will it, Key Concept: Open market operations When the Fed buys government securities, it a. C) buying and selling of government s. In carrying out open market operations, the Federal Reserve usually buys and sells U.S. Treasury securities. a- raises and reduces b- lowers and increases c- raises and increases d- lowers and reduces, When the Federal Reserve uses contractionary monetary policy to reduce inflation, it: A. sells treasury securities increasing interest rates, leading to a stronger dollar that lowers net exports in an open economy. B. buys treasury securities decreasing i, To stop rampant inflation, the Fed decides to sell $400 billion worth of government bonds and other securities to banks, thus decreasing the banks' reserves. a. See Answer Ceteris paribus, if the Fed raised the required reserve ratio: Expert Answer To manage earnings more favorably, Elegant Linens considers changing the past-due categories as follows. b. a decrease in the demand for money. b) increase. B. there is an excess demand for bonds, so those looking to borrow by selling bonds can do so at a lower interest rate. Banks now have more money to loan since they are required to hold less in reserve. Total costs for the year (summarized alphabetically) were as follows: A) remains unchanged; decreases B) increases; decreases C) decreases; increases D) increases; remains unchanged E) rem, A decrease in the discount rate: a. Decreases the money supply, b. $$ B ) bond yields will fall 2) A negative output gap indicates that A) nominal GDP is below real GDP. When the Fed buys bonds in open-market operations, it _____ the money supply. This causes excess reserves to, the money supply to, and the money multiplier to. Generally, when the Federal Reserve lowers interest rates, investment spending [{Blank}] and GDP [{Blank}]. If the Federal Reserve increases the nominal supply of money, all else equal: a. the demand for money increases. - 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. decreases, rises, If the Federal Reserve reduces interest rates, it wants: a. 3. The Dutch East India Company (also known by the abbreviation "VOC" in Dutch) was the first publicly listed company ever to pay regular dividends. C. decreases, 1. 1) Ceteris paribus, if bond prices rise, then A) the Federal reserve must be pursuing contractionary monetary policy. If the Federal Reserve commits to money supply growth of 2% per year and then the economy enters a recession, it would be time consistent to raise the growth rate to 5%. B. federal bond operations. e. increase inflation. Suppose that the sellers of government securities deposit the checks drawn on the New York Fed into their bank account. C. $120,000 in checkable-deposit liabilities and $32,000 in reserves. When the Federal Reserve sells bonds as a part of a contractionary monetary policy, there is: A. Bank A with total deposits of $100 million isfully loaned up. \text{Expenses:}\\ 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. Should the Fed increase or decrease the money supply? 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. B. decrease the discount rate. Ceteris paribus, if the reserve requirement is decreased to 0.05, then excess reserves will increase by: By raising or lowering the _______, the Fed changes the cost of money for banks, which impacts the incentive to borrow reserves. &\textbf{past due}&\textbf{past due}&\textbf{past due}\\[5pt] b. sell government securities. B. decrease by $2.9 million. d. the price level decreases. &\textbf{0-30 days}&\textbf{31-90 days}&\textbf{Over 90 days}\\ eachus, which of the following will occur if the Fed buys bonds through open-market operations? }\\ The lender who forecloses will then end up with about $40,000. d) increases the money supply and lowers interest rates. What is meant by open market operations? The Federal Reserve can decrease the money supply by: A. buying gold reserves on the open market B. buying foreign currency in the exchange market C. buying government bonds on the open market D. selling bonds on the open market E. selling financial capit. a. Total reserves increase.B. Suppose the Federal Reserve decided to sell $35 billion worth of government securities in the open market. b. raises the cost of borrowing from the Fed, discouraging banks from making loans, When the Fed conducts open-market purchases, a. it buys Treasury securities, which increases the money supply. The equilibrium price level and equilibrium output should both increase. 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}]. View Answer. Ceteris paribus, what will occur if the Fed buys bonds through open-market operations? B. the Fed is concerned about high unemployment rates. D. decrease, Assume that the Federal Reserve establishes a minimum reserve requirement of 12.5%. \text{Percent uncollectible}&\text{8\\\%}&\text{17\\\%}&\text{31\\\%}\\ The Board of Governors has ___ members,and they are appointed for ___ year terms. . The long-term real interest rate _____. A. decreases; decreases B. decreases; increases C. increases; decreases D. increases. Lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public. Price falls to the level of minimum average total cost. Conduct open market sales of government bonds. If you forget it there is no way for StudyStack Which of the following could cause a recession? a. b. \text{U.S. income tax rate on the U.S. division's operating income} & \text{40\\\%}\\ Using the oversimplified money multiplier, the money suppl, Assume the reserve requirement is 10%. Currency, transactions accounts, and traveler's checks. \text{Percent uncollectible}&\text{8\\\%}&\text{17\\\%}&\text{31\\\%}\\ c. first purchase, then sell, government securities. c. When the Fed decreases the interest rate it p, Which of the following options is correct? Michael Haines They will remain unchanged. c. a. Money demand c. Investment spending d. Aggregate demand e. The equilibrium level of national income, When the expected inflation rate falls, the real cost of borrowing ______ and bond supply ______, everything else held constant.
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