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Which of the following could cause a recession? a. If the Federal Reserve increases the discount rate: a. the federal funds rate must decrease. 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). copyright 2003-2023 Homework.Study.com. Assume the required reserve ratio is 10 percent and the FOMC orders an open market sale of $50 million in government securities to banks. d. The Federal Reserve sells bonds on the open market. b. the same thing as the long-term growth rate of the money supply. a. increases, rises b. increases, falls c. decreases, falls d. decreases, does not change e. . The four components of aggregate demand are: Consumption, investment, government spending, and net exports. How will the lending capacity of the banking system be affected if the reserve requirement is 5 percent? a. decrease; decrease; decrease b. The Fed's decision amounted to a shift to a more cautious period of inflation fighting. d. velocity increases. Conduct open market sales of government bonds. b. the Federal Reserve buys bonds on the open market. 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. 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? a) 0.25 b) 0, Suppose the reserve requirement for checking deposits is 10 percent and banks do not hold any excess reserves. The Federal Reserve's monetary policy is one of the ways in which the U.S. government tries to regulate the nation's economy by controlling the money supply. \begin{array}{c} Officials indicated an aggressive path ahead, with rate rises coming at each of the . Multiple . B. influence the discount rate. 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. The Federal Open Market Committee is responsible for: a) reducing the Fed's reliance on open market operations. \begin{array}{lcc} All other trademarks and copyrights are the property of their respective owners. 16. Raise reserve requirements 3. 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. B. there is an excess demand for bonds, so those looking to borrow by selling bonds can do so at a lower interest rate. Ceteris paribus, if the Fed raises the reserve requirement, then Most studied answer the lending capacity of the banking system decreases. \text{Income tax expense} \ldots & 100,000 \\ The lender who forecloses will then end up with about $40,000. The nominal interest rates rises. Banks must hold more funds used for loans in reserve. B. decrease by $200 million. When you've placed seven or more cards in the Don't know box, click "retry" to try those cards again. b. the Open Market Desk at the Federal Reserve Board in Washington, D.C. c. the National Bureau of Economic, Suppose the Fed buys $10 billion of securities from the public and the public deposits the payment they receive from the Fed in their checking accounts at their commercial banks. When the Federal Reserve increases the money supply, ceteris paribus, the money supply curve will shift to the right, as illustrated in the graph, then the interest rate in equilibrium will decreases. Facility location decisions are significant for an organization because:? d) setting interest r, Suppose the Federal Reserve sells $30 million worth of securities to a bank. 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. Monetary Policy quiz Flashcards | Quizlet The Federal Reserve cut interest rates on March 3, 2020, in response to COVID-19. Price falls to the level of minimum average total cost. 1. Ceteris paribus, if the reserve requirement is decreased to 0.05, then excess reserves will . B) The lending capacity of the banking system decreases. 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. A perfectly competitive firm currently sells 30,000 cartons of eggs at $1.25 each. Answered: Question Now we introduce banks that | bartleby c. first purchase, then sell, government secur, If the Fed wants to decrease the money supply by $5,000, the Fed will use open market operations to _____ worth of U.S. government bonds. Annual gross pay of $18,200. If the Fed wants to increase the money supply through an open market operation, it will a. purchase government securities. Tax on amount over $3,000 :3 percent. The people who sold these bonds keep all their money in checking accounts. b) an increase in the money supply and a decrease in the interest rate. Also assume the Federal Reserve conducts an Open Market Operations purchase of U.S. Treasury securities in the amoun, Assume that the reserve requirement is 20 percent, banks do not hold excess reserves, and there is no cash held by the public. c. the Federal Reserve System. When the sellers deposit their checks in their bank accounts, their reserves will increase due to the deposits made. c. first purchase, then sell, government securities. What can be used to shift aggregate demand? d) decreases, so the money supply decreases. An increase in the money supply and a decrease in the interest rate. d. has a contractionary effect on the money supply. The Board of Governors has___ members, and they are appointed for ___year terms. b. Consider an expansionary open market operation. Suppose the Federal \textbf{Comparative Income Statements}\\ b. engage in open market purchases of government securities. If the Fed raises the reserve requirement, the money supply _____. Consider an open market purchase by the Fed of $16 billion of Treasury bonds. Assume that the currency-deposit ratio is 0.5. The nominal interest rates falls. c. the money supply and the price level would increase. c. Offer rat, 1. Raise discount rate 2. c. When the Fed decreases the interest rate it p; a. Cause the money supply to increase, c. Not affect the money supply, d. Decrease the money multiplier. This action increased the money supply by $2 million. If the Fed decides to engage in an open market operation to increase the money supply, what will it do? 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. When the Federal Reserve increases the discount rate, banks will borrow A. fewer reserves and decrease lending. \text{Gross Margin}&\text{\hspace{5pt}1,369,250}&\text{\hspace{5pt}1,369,250}\\ Martin takes $150 out of his checking account and hides it in his house as cash. b. decrease, upward. When the Fed buys bonds in open-market operations, it _____ the money supply. Multiple Choice . Could the Federal Reserve continue to carry out open market operations? 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. 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. The new reserve requirement exemption amount and low reserve tranche will be effective for all depository institutions beginning January 1, 2022. The lending capacity of the banking system decreases. e. raise the reserve requirement. It is considered to be less efficient for an economy than the use of money. Interest rates typically rise in a recession because the demand for money increases when real income falls. Then click the card to flip it. Make sure you say increase or decrease/buy or sell. Excess reserves increase. Demand; marginal revenue and marginal cost. d) means by which the Fed supplies the, Suppose the Fed wishes to use monetary policy to close an expansionary gap. The money supply decreases. The Fed is most likely to do this by: A. purchasing government bonds from the public B. selling government bonds to the public C. selling government bonds to the treasury D. purchasi, Which of the following tends to reduce the effect of the expansionary open market operation on the money supply? b) increases the money supply and lowers interest rates. Econ Final Flashcards - Cram.com }\\ d) increases government spending and/or cuts taxes. 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 %. &\textbf{past due}&\textbf{past due}&\textbf{past due}\\[5pt] 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. B. a dollar bill. 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. The Fed - Closing the Monetary Policy Curriculum Gap - Federal Reserve True or false? If the Fed increases the money supply, then ceteris See our Suppose the Federal Reserve buys government securities from the nonbank public. b-A rise in corporate tax would shift the investment line outwards. It creates money, it creates a transactions-account balance for the borrower, and the money supply increases. Ceteris paribus, if the Fed reduces the reserve requirement ratio, then: A) The lending capacity of the banking system increases. 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 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. If there is a recession, the Fed would most likely a. encourage banks to provide loans by. C. increase the supply of bonds, If the money supply increases, what happens in the money market (assuming money demand is downward sloping)? Generally, the central bank. 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. Price charged is always less than marginal revenue. Patricia's nominal annual income in 2009 was $60,000. 26. d. an increase in the supply of bonds and a fal, When there is an excess supply of money: A. the Fed will decrease the money supply. a. increase the supply of bonds, thus driving up the interest rate. Hence C is the correct option. c. buy bonds, thus driving up the interest rate. \text{Net Credit Sales}&\text{\$\hspace{1pt}1,454,500}&\text{\$\hspace{1pt}1,454,500}\\ 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. Assume the Federal Reserve decides to sell $25 billion worth of U.S. Treasury bonds i. 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. $$ c) buying and selling of government securities by the Treasury. 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. If market interest rates rise, the selling price of existing bonds in the market will, ceteris paribus, . To decrease the money supply, the Fed can, raise the reserve requirement, raise the discount rate, or sell bonds. 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 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. If a market basket of goods cost $100 in the base year and $110 in a later year, then average prices have increased by: Keynes and classical economists disagree about whether: Government intervention should be used to correct business cycles. How can you tell? While those goals were articulated in 1977, 2 the approach and tools used to implement those objectives have changed over time. 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. This type of market is called: As the economy falls from the peak to the trough of the business cycle: Cyclical unemployment should increase and real GDP should decline. Assume that the reserve requirement is 20%. \end{array} When the Fed engages in open-market operations, the transactions are conducted by: a. the Open Market Desk at the Federal Reserve Bank of New York. U.S. goods are less expensive for Americans so they buy fewer imports and more domestic goods. When the Federal Reserve System buys government securities on the open market: A. the money supply will decrease. The result is imperfect monitoring, which creates profit opportunities for speculators, who do not act as dealers but simply If the Fed sells $5 million worth of government securities to the public, what will be the change in the money supply? Decrease the price it asks for the bonds. a. D. all of the above. B. decrease by $2.9 million. c. When the Fed decreases the interest rate it p, Which of the following options is correct? Decrease the demand for money. \text{General and Administrative Expense}&\text{\hspace{12pt}425,000}&\text{\hspace{12pt}425,000}\\ Bob, a college student looking for summer work. Solved I.The use of money and credit controls to change - Chegg Which of the following indicates the appropriate change in the U.S. economy after government intervention? 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. a. increase the supply of money by buying bonds b. increase the supply of money by selling bonds c. increase the demand for money by buying bonds d. increase the demand for mo, An increase in the money supply will cause interest rates to: a. rise b. fall c. remain unchanged. If the Open-Market Committee of the Federal Reserve sells securities, this action tends to: a. decrease the money supply. to send you a reset link. Each bond is worth $1000 (so the Fed has bought $3000 worth of bonds). Which of the following is NOT a possible source of last-minute reserves for a private bank? 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? b. 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. C. influence the federal funds rate. Ceteris paribus, if the Fed raises the reserve requirement, then: The money multiplier increases. The Fed decides that it wants to expand the money supply by $40 million. What are some basic monetary policy tools used by the Fed? Should the Fed increase or decrease the money supply? Suppose the Federal Reserve buys government securities from the non-bank public. Privacy Policy and Acting as fiscal agents for the Federal government. the process of selling Fed-issued IOUs between banks. Michael Haines Cause an excess demand for money and a decrease in the rate of interest. In order to decrease the money supply, the Fed can. Ceteris paribus if the fed was targeting the quantity - Course Hero PDF Practice Short Answer Final Exam Questions - Simon Fraser University The Federal Reserve expands the money supply by 5 percent. Total reserves increase.B. You would need to create a new account. (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. B. federal bond operations. 23. b. buys or sells foreign currency. c. means by which the Fed acts as the government's banker. As a result, the money supply will: a. increase by $1 billion. b. a decrease in the demand for money. D. The money multiplier decreases. In the money market, an excess demand of money will: A. increase the supply of bonds, increase bond prices, and decrease interest rates. If the Fed is using open-market operations, An open market operation is a purchase or sale of ___ by the ___ in the open market. An increase in the reserve ratio: a. increases the money multiplier. copyright 2003-2023 Homework.Study.com. b. Changing the reserve requirement is expensive for banks. Suppose the Federal Reserve buys 100 mortgage-backed securities in the open market. Financialization and Finance-Driven Capitalism Instead of paying her for this service,the neighbor washes the professor's car. 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? C.banks' reserves will be reduced. 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. If the Fed sells $1 million of government bonds, what is the effect on the economy s reserves and money supply? The financial sector has grown relative to the real economy and become more fragile. 2. Solved 3. Open market operations versus discount loans | Chegg.com The French import duty is charged on the price at which the product is transferred into France. d. lend more reserves to commercial banks. d. the U.S. Treasury. The velocity of money is a. the rate at which the Fed puts money into the economy. If the Fed purchases $10 million in government securities, then wh. D. Describe the categories change effect on net income and accounts receivable. d) borrow reserves from the Federal Reserve. a. increase, increase, sell b. increase, increase, buy c. decrease, decrease, buy d. decrease, If the Fed is following policies to reduce inflation, it is most likely to be: a. lowering interest rates b. raising the money supply c. lowering the money supply d. both lowering interest rates and, When the interest rate falls in the money market, the quantity of money demanded ______ and the quantity of money supplied _______. If the Federal Reserve System buys government securities from commercial banks and the public: a. the money supply will contract. B. excess reserves at commercial banks will decrease. 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 per category}&\text{?}&\text{?}&\text{? a. increases, increase, increase b. increases, increase, decrease c. decreases, increase, decrease d. increases, decrease, increa, If the Federal Reserve increases the discount rate, how are interest rates and real GDP affected? If the Fed sells government bonds, this will: A. In terms of pricing, which of the following is not true for a monopolist? Assume that the Fed increases the monetary base by $1 billion when the reserve requirement is 1/7. Cost of finished goods manufactured. \text{U.S. income tax rate on the U.S. division's operating income} & \text{40\\\%}\\ 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? c. the money supply is likely to increase. 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. B. buy bonds lowering the price of bonds and driving up the interest rates. A) Increase money supply to decrease interest rates, increase i. Expansionary monetary policy: a) decreases government spending and/or raises taxes. 2. The result will be a in the money market and a in the bond market, which will push bond prices and interest rates will unti, Starting from a monetary equilibrium condition, an increase in the money supply A. increases the bond price and increases the interest rate. State tax on first $3,000: 1.5$ percent. Currency circulation in the economy will increase since the non-bank public will have sold their securities. increase; decrease decrease; decrease increase; increase decrease; increas. The required reserve. D. Decrease the supply of money. Generally, when the Federal Reserve lowers interest rates, investment spending [{Blank}] and GDP [{Blank}]. A. }\\ The Return of Fiscal Policy and the Euro Area Fiscal Rule [Solved] Ceteris paribus,if the Fed raises the reserve requirement,then: A) The money multiplier increases. 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.