The monetary base in the economy will increase. 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. Currency, transactions accounts, and traveler's checks. c) buying and selling of government securities by the Treasury. If the Fed decides to engage in an open market operation to increase the money supply, what will it do? c) Increasing the money supply. e. raise the reserve requirement. 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. 2) If, If the Fed increases the supply of money in the market, bond prices will and interest rates will. The total change in deposits (with no drains) would be$12,857 million = (1/0.07) $900 million If the Fed wishes to stimulate the economy, it could I. buy U.S. government securities.II. b) an increase in the money supply and a decrease in the interest rate. The required reserve. Savings accounts and certificates of deposit are called. The central bank uses various monetary tools such as open market operations, the Fed's fund rate, and reserve requirements to achieve its goals. \text{Total per category}&\text{?}&\text{?}&\text{? C. decrease interest rates. c. Increase the interest rate paid on ban, Which of the following describes what the Federal Reserve would do to pursue an expansionary monetary policy? b. the money supply is likely to decrease. 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. 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. The nominal interest rates rises. Expansionary fiscal policy: a) decreases the money supply and raises interest rates. A stock person who is laid off by a department store because retail sales across the country have decreased is _______ unemployed. 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. d) setting interest r, Suppose the Federal Reserve sells $30 million worth of securities to a bank. See our 1. The Board of Governors has ___ members,and they are appointed for ___ year terms. Ceteris paribus, if the Fed raises the reserve requirement, then: e The lending capacity of the banking system decreases. FROM THE STUDY SET b. will cause banks to make more loans. Perform open market purchases of securities. Assume that the reserve requirement is 20%. Use a balance sheet to show the impact on the bank's loans. Suppose the Federal Reserve decided to sell $35 billion worth of government securities in the open market. The lender who forecloses will then end up with about $40,000. The people who sold these bonds keep all their money in checking accounts. The Federal Reserve carries out open-market operations, purchasing $1 million worth of bonds from banks. In terms of pricing, which of the following is not true for a monopolist? b) increase. $$ a. B. decrease by $2.9 million. The Fed lowers the federal funds rate. \text{Direct materials used} \ldots & \$ 750,000\\ Use these flashcards to help memorize information. The fixed monthly cost is $21,000, and the variable cost. 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. c. it borrows money, Consider how the following scenario would affect the money supply and, as a result, interest rates in the economy. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. b. increase the supply of bonds, thus driving down the interest rate. Learn more about the Federal Reserve's control methods and examine contractionary and expansionary monetary policies. The Fed lowers the federal funds rate. They will increase. 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. When the Fed conducts open market operations, the Fed buys and sells government securities to: a. the private sector. View Answer. They will remain unchanged. B. If the Fed conducts an open-market sale, bank reserves _ and the money supply is likely to _. copyright 2003-2023 Homework.Study.com. Suppose a bank has $50,000 in transactions accounts and a minimum reserve requirement of 10 percent. Answer: Answer: B. You would need to create a new account. b. prices to increase by 3%. 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. The following is the past-due category information for outstanding receivable debt for 2019. c. the money supply is likely to increase. b. the interest rate increases c. the Federal Reserve purchases bonds. B. On October 24, 1929, the stock market crashed. D. decrease, Assume that the Federal Reserve establishes a minimum reserve requirement of 12.5%. The money multiplier is equal to ______ and the reserve ratio is equal to _____%. \text{French income tax rate on the French division's operating income} & \text{45\\\%}\\ When aggregate demand exceeds the full-employment level of output, the result is: LEFT ARROW - move card to the Don't know pile. Assume the Federal Reserve decides to sell $25 billion worth of U.S. Treasury bonds i. }\\ Ceteris paribus, if the reserve requirement is decreased to 0.05, then excess reserves will . \end{array} Suppose the Federal Reserve undertakes an open market purchase of government bonds. Suppose the Federal Reserve buys government Open market operations versus discount loans Consider an expansionary open market operation. 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. d. the money supply and the pric, When the Fed increases the quantity of money, the: a. equilibrium interest rate falls b. demand for money curve shifts right c. supply of money curve shifts leftward. 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. The use of money and credit controls to change macroeconomic activity is known as: Free . Which of the following is NOT a possible source of last-minute reserves for a private bank? The change in total revenue that results from a one-unit increase in quantity sold is: For a monopolist, after the first unit of output, marginal revenue is always: Suppose a monopoly firm produces software and can sell 10 items per month at a price of $50 each. This problem has been solved! ceteris paribus, if the fed raises the reserve requirement, then: Posted on . If the Fed raises the reserve requirement, the money supply _____. $$ Ceteris paribus, if the Fed reduces the reserve requirement, then: A. Issuanceofstock. Cashdividends. U.S.incometaxrateontheU.S.divisionsoperatingincome, FrenchincometaxrateontheFrenchdivisionsoperatingincome, Sellingprice(netofmarketinganddistributioncosts)inFrance, Alexander Holmes, Barbara Illowsky, Susan Dean, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Fundamentals of Engineering Economic Analysis, David Besanko, Mark Shanley, Scott Schaefer, Don Herrmann, J. David Spiceland, Wayne Thomas. \text{Total uncollectible? b) decreases the money supply and raises interest rates. It sells $20 billion in U.S. securities. If you knew the answer, click the green Know box. Interest rates b. b) the federal reserve must raise interest rates and lower the required reserve ratio, If the Federal Reserve ("Fed") engages in the contractionary monetary policy then: A. the Fed is seeking to decrease the money supply and lower interest rates to lower inflation. b) increases the money supply and lowers interest rates. All other trademarks and copyrights are the property of their respective owners. Multiple Choice . a. 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. Could the Federal Reserve continue to carry out open market operations? 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. 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. In order to decrease the money supply, the Fed can. Answer: Answer: B. It also raises the reserve ratio. b. increase causing an increase in investment spending shifting aggregate demand, When the Federal Reserve increases the money supply, it aggregate demand and moves the economy along the Phillips curve to a point with inflation and unemployment. B. increase the supply of bonds, decrease bond prices, and increase interest rates. \text{Manufacturing overhead} \ldots & 1,200,000 \\ If they have it, does that mean it exists already ? For the federal deficit to be lowered, a) the federal gov't must decrease its spending and increase net exports. b. rate of interest decreases. The Fed has most likely reduced the, If the Fed wishes to increase the money supply it can, If the Fed wishes to decrease the money supply it can, The rate of interest banks charge each other for lending reserves is the, 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, consists of seven members appointed by the President of the United States, who together act as the key decision-making entity for monetary policy, Bank reserves in excess of required reserves, Ceteris paribus, if the Fed raises the discount rate, then, the incentive to borrow reserves decreases. A, Suppose that the Fed engages in an open-market purchase of $4,000 in securities from Bank A. 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. Should the Fed increase or decrease the money supply? 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. The result is that people a. increase the supply of bonds, thus driving up the interest rate. It creates money, it creates a transactions-account balance for the borrower, and the money supply increases. to send you a reset link. b. 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). then the Fed. Is this part of expansionary or contractionary fiscal or monetary policy? d. prices to remain constant. \text{Total Expenses}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? c. the money supply and the price level would increase. b. Buy Treasury bonds, bills, or notes on the bond market. The Treasury buys bonds in the open market c. The Fed reduces reserve requirements d. The Treasury sells b. a. a. increase the supply of bonds, thus driving up the interest rate. Makers, but perfectly competitive firms are price takers. The key decision maker for general Federal Reserve policy is the: Free . What types of accounts are listed on the post-closing trial balance? Which of the following functions does the Fed perform? b) an open market sale and expansionary monetary policy. Michael Haines \text{Percent uncollectible}&\text{8\\\%}&\text{17\\\%}&\text{31\\\%}\\ 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? Multiple Choice . D. Transaction demand for, To ease monetary policy to fight a recession, the Federal Reserve would ____. b) Lowering the nominal interest rate. B.bond prices will fall, and interest rates will fall. A. $$ Change in Excess Reserve = -100000000. c-A forecast of a permanent demand increase shifts the investment line . Raise discount rate 2. Determine the December 31, 2012, balances in Wave Waters shareholders equity accounts and total shareholders equity on this date. Interest Rates / Real GDP a. How does it affect the money supply? &\textbf{past due}&\textbf{past due}&\textbf{past due}\\[5pt] Facility location decisions are significant for an organization because:? }\\ d. velocity increases. Patricia's nominal annual income in 2009 was $60,000. What cannot be used to shift aggregate demand? c. Increase the required reserve, Suppose the Federal Reserve s trading desk buys $500,000 in T-bills from a securities dealer who then deposits the Fed's check-in Best National Bank. c. They wil, 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. Conduct open market sales of government bonds. Working Paper No. 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. Suppose the U.S. government paid off all its debt. Currency circulation in the economy will increase since the non-bank public will have sold their securities. a) 0.25 b) 0, Suppose the reserve requirement for checking deposits is 10 percent and banks do not hold any excess reserves. &\textbf{Original Categories}&\textbf{Categories Change}\\[5pt] 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? c) an open market sale. It transfers money from spenders to savers. If the Fed sells $1 million of government bonds, what is the effect on the economy s reserves and money supply? Also assume the Federal Reserve conducts an Open Market Operations purchase of U.S. Treasury securities in the amoun, Assume that the Federal Reserve establishes a minimum reserve requirement of 12 %. c. real income 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. }\\ Here are the answers with discussion for yesterday's quiz. An open market operation is ____?A. Also assume that banks do not hold excess reserves and there is no cash held by the public. Fiscal policy should be used to shift the aggregate demand curve. Name the three tools of monetary policy that the Federal Reserve System can do to combat inflation. d. sells U.S. Treasury bills to the federal government. If you've accidentally put the card in the wrong box, just click on the card to take it out of the box. b. D. conduct open market sales. 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). Required reserves decrease. \text{Accounts receivable amount}&\text{\$\hspace{1pt}232,000}&\text{\$\hspace{1pt}129,000}&\text{\$\hspace{1pt}100,400}\\ (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.) b. means by which the Fed supplies the economy with currency. 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. The price level to decrease c. Unemployment to decrease d. Investment to decrease. receivables. Although it may feel like you're playing a game, your brain is still making more connections with the information to help you out. On March 5 and 6, I surveyed over 500 consumers about their concerns about COVID-19, awareness of the Fed's . c). C. increase by $290 million. If the Fed wants to raise short-term interest rates, it should a. act to increase the money supply. A change in government spending, a change in taxes, and monetary policy. An office worker who loses her job because she does not have the necessary computer skills is, ceteris paribus: Which of the following is likely to reduce the level of structural unemployment? b. decrease, upward. C) Total deposits decrease. 23. All rights reserved. c. has an expansionary effect on the money supply. a. 2. Assume central bank money (H) is initially equal to $100 million. Enter the email address you signed up with and we'll email you a reset link. D. The collectio. Suppose the economy is initially experiencing an inflationary gap. d. the average number of times per year a dollar is spent. a. decrease b. increase c. not change, If the economy experiences an expansionary gap and the Fed sells US government securities in the open market, then ______. Q01 . b. Assume a fixed demand for money curve and the Fed decreases the money supply. D. Describe the categories change effect on net income and accounts receivable. D. open bonds operations. The Fed sells Treasury bills in the open market b. A) increases; supply. Holding the deposits or reserves of commercial banks. In order to maintain price stability, the Federal Reserve has decided to engage in monetary restraint. a. B. decrease the discount rate. Increase / Decrease b. d. commercial bank, Assume all money is held in the form of currency. When the Federal Reserve increases the discount-rate increases the discount rate as a part of a contractionary monetary policy, there is: A. The Federal Reserve conducts open market operations when it wants to [{Blank}]? a. increases, rises b. increases, falls c. decreases, falls d. decreases, does not change e. . 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? Consider an expansionary open market operation. }\\ b. If market interest rates rise, the selling price of existing bonds in the market will, ceteris paribus, . \end{array} b. the Federal Reserve buys bonds on the open market. Keynes viewed the economy as inherently unstable and suggested that during a recession policy makers should: Cut taxes and/or increase government spending. **Instructions** Decrease the demand for money. D. all of the above. Determine whether each of the following, Open market operations are the a. buying and selling of Federal Reserve Notes in the open market. D) Required reserves decrease. (ii) instructs the New York Fed to sell government securities in the foreign exchange market. d) decreases, so the money supply decreases. Increase the demand for money. The difference between price and average total cost multiplied by the quantity sold. 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. An easing of monetary policy interest rates, which the demand for a currency and the fundamental value of the exchange rate. C. increases the bond price and decreases the interes, When the Fed increases the money supply, a. people spend less because they have more money. B) bond yields will fall C) bond yields will increase as well. If the fed increases the money supply, what will happen to each of the following (other things being equal)? 26. . c. means by which the Fed acts as the government's banker. The discount rate is the interest rate charged by, the Federal Reserve when it lends money to private banks, Ceteris paribus, if the Fed raises the reserve requirement, then, the lending capacity of the banking system decreases, If the economy is inflationary, the Fed would most likely, encourage banks to provide loans by buying government securities, if the economy is recessionary, the Fed would most likely, encourage banks to provide loans by selling government securities, Alexander Holmes, Barbara Illowsky, Susan Dean, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Statistical Techniques in Business and Economics, Douglas A. Lind, Samuel A. Wathen, William G. Marchal, David R. Anderson, Dennis J. Sweeney, James J Cochran, Jeffrey D. Camm, Thomas A. Williams, Elegant Linens uses the balance sheet aging method to account for uncollectible debt on
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