c. the money supply divided by nominal GDP. c. state and local government agencies only. Reserve Requirements of Depository Institutions - Federal Register \text{Accounts receivable amount}&\text{\$\hspace{1pt}232,000}&\text{\$\hspace{1pt}129,000}&\text{\$\hspace{1pt}100,400}\\ The difference between price and average total cost multiplied by the quantity sold. d. raise the treasury bill rate. C. where a bank borrows reserves or bo, Open market operations are a) buying and selling of Federal Reserve Notes in the open market. \text{Total uncollectible? d) decreases, so the money supply decreases. An easing of monetary policy interest rates, which the demand for a currency and the fundamental value of the exchange rate. D. Decrease the supply of money. Q01 . Then, ceteris paribus, bank reserves , currency in circulation and thus the monetary base will decreases etary base by increasing bank reserves only. The Fed sells Treasury bills in the open market b. The nominal interest rates rises. Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. 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%. 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. Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page. Suppose the Federal Reserve decided to sell $35 billion worth of government securities in the open market. Previous question Next question The money supply increases. b) decreases the money supply and raises interest rates. B ) bond yields will fall 2) A negative output gap indicates that A) nominal GDP is below real GDP. In terms of pricing, which of the following is not true for a monopolist? 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. \begin{array}{lcc} Now suppose the Fed conducts an open market purchase of government bonds equal to $1, Fiscal policy is conducted by: a. The capital account surplus will increase. Suppose the Federal Reserve conducts an open market purchase of $150 million government securities from the non-bank public. If the Fed sells $29 million worth of government securities in an open market operation, then the money supply can: A. increase by $2.9 million. the process of selling Fed-issued IOUs between banks. Which of the following is NOT a basic monetary policy tool used by the Fed? What effect will this open market operation have on demand deposits and M1? A combination of flexible rules and limited discretion. c) increases government spending and/or cuts taxes. What is Wave Waters debt ratio on this date? Wave Waters total liabilities on December 31, 2012, are $7,800. Total deposits decrease. 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. 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! Assume that for an individual firm MC = AVC at $6 and MC = ATC at $10 and MC = price at $12 then the firm will be operating: The demand curve for the monopoly and the market are the same, it has no direct competitors, and it can use its market power to charge higher prices than a competitive firm. C. increase by $50 million. \text{Cost of Goods Sold}&\underline{\text{\hspace{19pt}85,250}}&\underline{\text{\hspace{19pt}85,250}}\\ Buying securities in open market operations is a tool used by the Federal Reserve to increase the money supply in the economy, thus encouraging economic growth. Suppose the Federal Reserve Bank buys Treasury securities. A. change the liquidity levels of banks. 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. \text{French income tax rate on the French division's operating income} & \text{45\\\%}\\ B.bond prices will fall, and interest rates will fall. a) decrease, downward b) decrease, upward c) inc. All other trademarks and copyrights are the property of their respective owners. Suppose the economy is initially experiencing an inflationary gap. A. 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? \text{Direct materials used} \ldots & \$ 750,000\\ b. a) Describe what initially happens to the reserves of bank B. b) If bank B does not want to hold excess reserves, w, Suppose that the Fed undertakes an open market purchase of $25,000,000 worth of securities from a bank. Ceteris paribus, if the Fed reduces the reserve requirement, then: A. If there is a recession, the Fed would most likely a. encourage banks to provide loans by. The information provided should help you work out why you missed a question or three! Biagio Bossone. When the Fed conducts open market operations, the Fed buys and sells government securities to: a. the private sector. 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. When the economy overheats, the government sometimes cools it down with higher taxes, spending reductions, and less money. c). $$ Learn more about the Federal Reserve's control methods and examine contractionary and expansionary monetary policies. D. interest rates will increase. Instead of paying her for this service,the neighbor washes the professor's car. 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. How would this affect the money supply? Martin takes $150 out of his checking account and hides it in his house as cash. a. The aggregate demand curve should shift rightward. See our 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. C. treasury bond operations. Should the Fed increase or decrease the money supply? The Federal Reserve conducts open market operations when it wants to [{Blank}]? The Fed decides that it wants to expand the money supply by $40 million. D. The collectio. The paper argues that the process of financialization has profoundly changed how capitalist economies operate. Cause a reduction in the dem. Which of the following indicates the appropriate change in the U.S. economy? Which of the following indicates the appropriate change in the U.S. economy after government intervention? The Economic Impacts of COVID-19 and City Lockdown: Early Evidence from Open market operations. Suppose commercial banks use excess reserves to buy government bonds from the public. C. money supply. The key decision maker for general Federal Reserve policy is the: Free . b. The Federal Reserve expands the money supply by 5 percent. If the Fed sells government bonds, this will: A. Name the three tools of monetary policy that the Federal Reserve System can do to combat unemployment/recession. \begin{array}{lcc} a) decreases, decreases b) decreases, increases c) increases, decr, An increase in the interest rate will cause: an increase in the demand for money an increase in the supply of money a decrease in the demand for money a decrease in the quantity demanded of money, When the Federal Reserve increases the money supply and expands aggregate demand, it moves the economy along the Phillips curve to a point with (blank) inflation and (blank) unemployment. By the end of the year, over $40 billion of wealth had vanished. 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. The Federal Reserve cut interest rates on March 3, 2020, in response to COVID-19. Ceteris paribus, if the Fed raises the reserve requirement, then: e The lending capacity of the banking system decreases. C) Excess reserves increase. When the Federal Reserve increases the discount-rate increases the discount rate as a part of a contractionary monetary policy, there is: A. The money supply decreases. (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 Federal Reserve System buys government securities from commercial banks and the public: a. the money supply will contract. $$ The financial sector has grown relative to the real economy and become more fragile. $$ B. If the Fed purchases $10 million in government securities, then wh. If the Federal Reserve increases the money supply, ceteris paribus, the: a. rate of interest is unaffected. b. c. real income increases. It is considered to be less efficient for an economy than the use of money. Decrease by $100, Suppose the Federal Reserve buys 3 treasury bonds from the public. International Financial Advisor. $$ 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). The use of money and credit controls to change macroeconomic activity is known as: Monetary policy. Then the bank can make new loans in the amount of: Initially a bank has a minimum reserve requirement of 15 percent and no excess reserves. It improves aggregate demand, thus increasing the country's GDP. In the short run, the quantity of money demanded [{Blank}] and the nominal interest rate [{Blank}]. Multiple Choice . b) increase. copyright 2003-2023 Homework.Study.com. Decrease in the federal funds rate B. b. d) All of the above. b. money demand increases and the price level decreases. The Board of Governors has ___ members,and they are appointed for ___ year terms. Solved Ceteris paribus, if the Fed raised the required | Chegg.com 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. The long-term real interest rate _____. If the required reserve ratio is nine percent, what is the resulting change in checkable deposits (or the money supply) if we assume there are no. 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 b. increase the supply of bonds, thus driving down the interest rate. B. a dollar bill. U.S.incometaxrateontheU.S.divisionsoperatingincome40%FrenchincometaxrateontheFrenchdivisionsoperatingincome45%Frenchimportduty20%Variablemanufacturingcostperchainsaw$100Fullmanufacturingcostperchainsaw$175Sellingprice(netofmarketinganddistributioncosts)inFrance$300\begin{matrix} Holding the deposits or reserves of commercial banks. 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 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. increase, down. Suppose a market is dominated by three firms. b. (a) increases because the resulting increase in the interest rate leads to a decrease in investment (b) increases because the resulting decrease in the interest rate leads to an increase in investment (, The Fed decreases the quantity of money. PDF Practice Short Answer Final Exam Questions - Simon Fraser University 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. 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. 1. It transfers money from spenders to savers. 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 ____. 23. The Federal Reserve (the Fed), the central bank of the United States, has a Congressional mandate to promote maximum employment and price stability. B. d) Lowering the real interest rate. D. open bonds operations. 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.