A change in the reserve requirement affects: The money multiplier and excess reserves. The Fed decides that it wants to expand the money supply by $40 million. 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. c. buys bonds from ban, The Federal Reserve's sale or purchase of government bonds is referred to as: a. open market operations b. credit rationing c. quantitative easing d. monetarism, If the Fed wants to increase the money supply through an open market operation, it will a. purchase government securities. E.the Phillips curve will shift down. __ Money paid to stockholders from earnings of a corporation. 3 . The Federal Reserve Bank b. Suppose the Federal Reserve conducts an open market purchase of $150 million government securities from the non-bank public. Buy Treasury bonds, bills, or notes on the bond market. Some terms may not be used. Use the model of aggregate demand and aggregate supply to illustrate the impact of this change in the interest rate on output and the price level in the short run. Which of the following is likely to cause a leftward shift in the aggregate supply curve, ceteris paribus? 1. 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 ____. \text{Total uncollectible? How does it affect the money supply? b. d. raise the treasury bill rate. d. the money supply is not likely to change. The Fed sells Treasury bills in the open market b. b. Look at the large card and try to recall what is on the other side. c. the Federal Reserve System. Its marginal revenue curve is below its demand curve. A stock person who is laid off by a department store because retail sales across the country have decreased is _______ unemployed. Terms of Service. Suppose a bank has $50,000 in transactions accounts and a minimum reserve requirement of 10 percent. What happens to interest rates? The required reserve. Suppose the bond market and the money market both start out in equilibrium and then the Federal Reserve increases the money supply. Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. Suppose the Federal Reserve undertakes an open market purchase of government bonds. c. Fed sells bonds. b. the money supply is likely to decrease. b) an open market sale and expansionary monetary policy. D. Decrease the supply of money. B. decreases the bond price and decreases the interest rate. b. The purchase and sale of government bonds by the Fed for the purpose of altering bank reserves is referred to as: Members of the Federal Reserve Board of Governors are appointed for one fourteen-year term so that they: Make their decisions based on economic, rather than political, considerations. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. c. the money supply is likely to increase. \end{array} d, If the Federal Reserve wants to increase output, it increases A. government spending. An increase in the money supply and a decrease in the interest rate. b. increase the money supply. Could the Federal Reserve continue to carry out open market operations? b. the interest rate increases c. the Federal Reserve purchases bonds. Your email address is only used to allow you to reset your password. a. Total costs for the year (summarized alphabetically) were as follows: Suppose that the sellers of government securities deposit the checks drawn on the New York Fed into their bank account. For best results enter two or more search terms. If the Fed wishes to increase the money supply it can: The purchase and sale of government bonds by the Fed for the purpose of altering bank reserves is referred to as: If the Fed wants to increase bank reserves, it can: If the Fed wants to reduce bank reserves, it can: Raise the discount rate or sell bonds on the open market. The price level to decrease c. Unemployment to decrease d. Investment to decrease. B. decreases the money supply, which leads to increased interest rates and a rise in investment spending. The Fed decides that it wants to expand the money supply by $40 million. a. Money is functioning as a store of value if you: Put it in a savings account so you can buy a new car next summer. 2. An increase in the money supply and an increase in the int. C. The lending capacity of the banking system increases. The result is imperfect monitoring, which creates profit opportunities for speculators, who do not act as dealers but simply All rights reserved. This is an example of which type of unemployment? A. change the liquidity levels of banks. 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. 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. c. increase, down. $$ 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. If the Fed sells $1 million of government bonds, what is the effect on the economy s reserves and money supply? The number of deposit dollars the banking system can create from $1 of excess reserves. d. rate of interest increases.. If the Open-Market Committee of the Federal Reserve sells securities, this action tends to: a. decrease the money supply. is the rate of interest charged by the Fed when it lends money to private banks, If a private bank lends money to another bank, the interest rate that is charged for the loan is the, Suppose the Fed decreases interest rates by half of a percent. C. decrease interest rates. D. open bonds operations. If the Federal Reserve increases the discount rate: a. the federal funds rate must decrease. c. buys or sells existing U.S. Treasury bills. B. If the Fed sells $5 million worth of government securities to the public, what will be the change in the money supply? If the Federal Reserve wants to decrease the money supply, it should: a. a. increases; increases; decreases b. decreases; decreases; decreases c. increases; increases; increases d. increases; decreases; If the Federal Reserve buys bonds on the open market, then the money supply will: a) increase causing a decrease in investment spending shifting aggregate demand to the right. 41. 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. What are some basic monetary policy tools used by the Fed? 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. a. A combination of flexible rules and limited discretion. If the Fed raises the reserve requirement, the money supply _____. If the Fed conducts an open-market sale, bank reserves _ and the money supply is likely to _. Enter the email address you signed up with and we'll email you a reset link. a. a. decrease, downward. d. sells U.S. Treasury bills to the federal government. \text{Accounts receivable amount}&\text{\$\hspace{1pt}263,000}&\text{\$\hspace{1pt}134,200}&\text{\$\hspace{1pt}64,200}\\ What can be used to shift aggregate demand? \text{General and Administrative Expense}&\text{\hspace{12pt}425,000}&\text{\hspace{12pt}425,000}\\ On March 5 and 6, I surveyed over 500 consumers about their concerns about COVID-19, awareness of the Fed's . Suppose further that the required reserve, Explain briefly: a. \begin{array}{lcc} What is the impact of the purchase on the bank from which the Fed bought the securities? a) increases; decreases, b) decreases; increases, c) decreases; decreases, d) increases; increases. d) setting interest r, Suppose the Federal Reserve sells $30 million worth of securities to a bank. Increase; depreciate c. Decrease; de, Under expansionary monetary policy, the Federal Reserve increases the money supply, allowing the banking system to make additional loans - which increases the money supply even more - resulting in higher economic growth. \end{array} c. the money supply and the price level would increase. They will increase. Is this an example of fiscal policy or monetary policy? Acting as fiscal agents for the Federal government. d. the U.S. Treasury. The aggregate demand curve should shift rightward. Answer: D. 15. The four components of aggregate demand are: Consumption, investment, government spending, and net exports. D. The money multiplier decreases. Privacy Policy and Increase; appreciate b. If the Fed sells $1 million of government bonds, what is the effect on the economy's reserves and money supply? c) overseeing the buying and selling of government securities in the open market. The buying and selling of government securities by the Fed is known as: A. open market operations. b. a decrease in the demand for money. b. 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. Increase the demand for money. Use these flashcards to help memorize information. Government bond operations. 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. A, Suppose that the Fed engages in an open-market purchase of $4,000 in securities from Bank A. If the FED sells $10 million worth of government securities in an open market operation, then the money supply can potentially: A. increase by $150 million. D.bond prices will rise, and interest rates will fall. Fill in either rise/fall or increase/decrease. \textbf{Year Ended December 31, 2019}\\ You'll get a detailed solution from a subject matter expert that helps you learn core concepts. b. the Federal Reserve buys bonds on the open market. Explain your reasoning. Cost of finished goods manufactured. When the economy overheats, the government sometimes cools it down with higher taxes, spending reductions, and less money. Ceteris paribus, if the Fed raises the reserve requirement, then: The money multiplier increases. b. the interest rate rises and this stimulates consumption spending. The Fed's decision amounted to a shift to a more cautious period of inflation fighting. \text{Net Credit Sales}&\text{\$\hspace{1pt}1,454,500}&\text{\$\hspace{1pt}1,454,500}\\ c. state and local government agencies only. In order to maintain price stability, the Federal Reserve has decided to engage in monetary restraint. Suppose the economy is initially experiencing an inflationary gap. (A) How will M1 be affected initially? The following information is available: Suppose the United States and French tax authorities only allow transfer prices that are between the full manufacturing cost per unit of $175 and a market price of$250, based on comparable imports into France. B. federal bond operations. b. Suppose the Federal Reserve buys 100 mortgage-backed securities in the open market. The lending capacity of the banking system decreases. d. Conduct open market sales. 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. In the market for reserves, if the federal funds rate is above the interest rate paid on excess reserves, an open market sale ________ the ________ of reserves, causing the federal funds rate to increase, everything else held constant. The Baltimore banks regional federal reserve bank. B. excess reserves at commercial banks will decrease. Raise the reserve requirement, increase the discount rate, or . Of these, 43 were sold for $\$ 105,000$ each and two remain in finished goods inventory. a. B. b. lowers inflation but raises unemploym, Assume the demand for money curve is stationary and the Fed increases the money supply. What types of accounts are listed on the post-closing trial balance? At what price per share did Wave Water issue common stock during 2012? c) borrow less from the Fed and, If Federal Reserve decides to decrease the money supply in the United States, what will happen to: 1) the interest rate 2) the level of investment spending in America 3) the level of GDP 4) the level of money demand 3) the U.S interest rate 4) the level o. \text{Full manufacturing cost per chainsaw} & \text{\$175}\\ Suppose commercial banks use excess reserves to buy government bonds from the public. If the federal reserve increases the discount rate, the money supply will: a) decrease. Road Warrior Corporation began operations early in the current year, building luxury motor homes. It is considered to be less efficient for an economy than the use of money. Why does an open market purchase of Treasury securities by the Federal Reserve increase bank reserves? d. The Federal Reserve sells bonds on the open market. Suppose the Federal Reserve buys government securities from the non-bank public. a. Suppose that the sellers of government securities redeem these checks drawn on the New York Fed for currency. Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page. Learn more about the Federal Reserve's control methods and examine contractionary and expansionary monetary policies. It improves aggregate demand, thus increasing the country's GDP. If they have it, does that mean it exists already ? Lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public. A perfectly competitive firm currently sells 30,000 cartons of eggs at $1.25 each. Currency, transactions accounts, and traveler's checks. The Federal Reserve carries out open-market operations, purchasing $1 million worth of bonds from banks. If there is a recession, the Fed would most likely a. encourage banks to provide loans by. Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10. b. prices to increase by 3%. b. sell government securities. Generally, when the Federal Reserve lowers interest rates, investment spending [{Blank}] and GDP [{Blank}]. Which of the following is NOT a basic monetary policy tool used by the Fed? b. the same thing as the long-term growth rate of the money supply. Changing the reserve requirement is expensive for banks. If the Fed uses open-market operations, should it buy or sell government securities? When the Fed buys bonds in open-market operations, it _____ the money supply. Assume a fixed demand for money curve and the Fed decreases the money supply. Money supply to decrease b. Now suppose the Fed lowers. Find the taxable wages. c. has an expansionary effect on the money supply. 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. a) decrease, downward b) decrease, upward c) inc. Name the three tools of monetary policy that the Federal Reserve System can do to combat unemployment/recession. 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. increase the nominal interest rate and increase output b. decrease the n. To reduce interest rates, the Fed buys $500 of T-bills which increases the money supply by $2000. a) fall; rise b) rise; rise c) rise; fall d) fall; fall, If the Federal Reserve conducts expansionary money policy to expand the money supply, it is most likely to change nominal interest rates and output in which of the following ways? 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. When the Federal Reserve System buys government securities on the open market: A. the money supply will decrease. Suppose government spending increases. State tax on first $3,000: 1.5$ percent. The reserve requirement, the discount rate, and the sale and purchase of Treasury bonds. 2. Key Points. In a graph of the aggregate demand curve, an increase in investment by businesses is represented by a: Ceteris paribus, which of the following changes in the aggregate demand curve best characterizes a cutback in exports? d) borrow reserves from the Federal Reserve. Assume that the reserve requirement is 20%. Decrease by $100, Suppose the Federal Reserve buys 3 treasury bonds from the public. Suppose the U.S. government paid off all its debt. \text{Percent uncollectible}&\text{8\\\%}&\text{17\\\%}&\text{31\\\%}\\ Which of the following is likely to occur if OPEC increases the amount of oil it supplies and domestic energy prices fall, ceteris paribus? Suppose a market is dominated by three firms. Although it may feel like you're playing a game, your brain is still making more connections with the information to help you out. Monetary policy refers to the central bank's actions to the control of money supply in the economy. Makers, but perfectly competitive firms are price takers. b. Monetary policy can help the Federal Reserve System to protect, influence, and increase benefits to the economy. c. When the Fed decreases the interest rate it p; 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. The velocity of money is a. the rate at which the Fed puts money into the economy. a. mortgages; Bank of America b. government securities; New York Fed c. government securities; Federal Reserve Bank of Florida d. Mortgages; Federal Reserve. B. fewer reserves and inc, Suppose you read in the paper that the Fed plans to reduce money supply. Decrease the price it asks for the bonds. a. increases, rises b. increases, falls c. decreases, falls d. decreases, does not change e. . d. the average number of times per year a dollar is spent. C. $120,000 in checkable-deposit liabilities and $32,000 in reserves. U.S.incometaxrateontheU.S.divisionsoperatingincome40%FrenchincometaxrateontheFrenchdivisionsoperatingincome45%Frenchimportduty20%Variablemanufacturingcostperchainsaw$100Fullmanufacturingcostperchainsaw$175Sellingprice(netofmarketinganddistributioncosts)inFrance$300\begin{matrix} c). b. A. decrease, downward B. decrease, upward C. increase, downward D. increase, If inflation begins to rise rapidly, which step is the Federal Reserve likely to take? The Board of Governors has ___ members,and they are appointed for ___ year terms. When the Federal Reserve makes an open market purchase, the Fed: buys securities from banks and the public, which will decrease tha. D. Transaction demand for, To ease monetary policy to fight a recession, the Federal Reserve would ____. &\textbf{past due}&\textbf{past due}&\textbf{past due}\\[5pt] Should the Fed increase or decrease the money supply? Determine the December 31, 2012, balances in Wave Waters shareholders equity accounts and total shareholders equity on this date. C. a traveler's check. The aggregate demand curve is downward sloping because, ceteris paribus: People are willing and able to buy more goods and services at lower average prices. Make sure you say increase or decrease/buy or sell. They will remain unchanged. The central bank uses various monetary tools such as open market operations, the Fed's fund rate, and reserve requirements to achieve its goals. d) increases government spending and/or cuts taxes. A change in the reserve requirement is the tool used least often by the Fed because it: Can cause abrupt changes in the money supply. Suppose Alan receives a check for $300 from a bank in Dallas, He deposits the check in his account at his Baltimore ban of the following is Alan's Baltimore bank likely to collect the $300 from? Suppose the Federal Reserve buys government securities from the nonbank public. The capital account surplus will increase. \text{Manufacturing overhead} \ldots & 1,200,000 \\ B. an exchange between a private bank and the Federal Reserve where the Fed buys or sells government bonds to private banks. b. rate of interest decreases. The Federal Reserve cut interest rates on March 3, 2020, in response to COVID-19. a. monetary base b. ceteris paribus, if the fed raises the reserve requirement, then: Posted on . In response, people will a. sell bonds, thus driving up the interest rate.
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