What are some basic monetary policy tools used by the Fed? C. Increase the supply of money. Which of the following is not true about excess Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. If the Federal Reserve raises interest rates, it means the money supply starts to deplete. D. The collectio. d. prices to remain constant. D. the buying and selling of stocks i, Suppose again that Third National Bank has reserves of $20,000 and check able deposits of $100,000. The aggregate demand curve should shift rightward. Which action would the federal reserve rate take to expand the money supply and lower the equilibrium interest rate? 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. }\\ Key Points. d. a decrease in the quantity de. Previous question Next question Q02 . Sell government securities Ceteris paribus, if the Fed reduces the reserve requirement, then the lending capacity of the banking system increases Ceteris paribus, if the Fed reduces the discount rate, then the incentive to borrow funds increases All rights reserved. Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. b. prices to increase by 3%. The information provided should help you work out why you missed a question or three! Monetary Policy quiz Flashcards | Quizlet What is Wave Waters debt ratio on this date? Issuanceofstock.Cashdividends.Balance,December31,2012.$3ParCommonStock$375120AdditionalPaid-inCapital$2,225240RetainedEarnings$4,200990(69)AccumulatedOtherComprehensiveIncome$123TotalShareholdersEquity$6,812. What types of accounts are listed on the post-closing trial balance? Examples of money are: A. a check. Interest rates b. The new reserve requirement exemption amount and low reserve tranche will be effective for all depository institutions beginning January 1, 2022. 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. 1. 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. Ceteris paribus, what will occur if the Fed buys bonds through open-market operations? The number and relative size of firms in an industry. Tax on amount over $3,000 :3 percent. Ceteris paribus, if the Fed reduces the reserve requirement ratio, then: A) The lending capacity of the banking system increases. Increase / Increase c. Decrease / Decrease d. Decrease / Increase e. Decrease / No change, When the Fed implements a contractionary monetary policy this means that: (a) the price of T-Bills rises (b) the interest rate paid on T-Bills falls (c) the Federal Funds Rate increases (d) none o, 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 ______. 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. b. decrease, upward. c. reduce the reserve requirement. Was there a profit or a loss for the year ended December 31, 2012? B. Assume the Federal Reserve decides to sell $25 billion worth of U.S. Treasury bonds i. d) All of the above. 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. An increase in the money supply, When the Federal Reserve increases the discount rate as a part of a contractionary monetary policy, there is: a) a decrease in the money supply and a decrease in the interest rate. Interest rates typically rise in a recession because the demand for money increases when real income falls. If the Fed uses open-market operations, should it buy or sell government securities? 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. B. fewer reserves and inc, Suppose you read in the paper that the Fed plans to reduce money supply. Here are the answers with discussion for yesterday's quiz. 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. (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.) Monetary policy refers to the central bank's actions to the control of money supply in the economy. If the Fed sells $5 million worth of government securities to the public, what will be the change in the money supply? d. the price level decreases. In the money market, an excess demand of money will: A. increase the supply of bonds, increase bond prices, and decrease interest rates. 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. 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%. If the Fed buys more bonds from the public, then the money supply will: Increase and the aggregate demand curve will shift to the right. The result is imperfect monitoring, which creates profit opportunities for speculators, who do not act as dealers but simply C. treasury bond operations. Answer the question based on the following balance sheet for the First National Bank. 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. b) borrow more from the Fed and lend less to the public. Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10. The sale of bonds to the Fed by banks B. A perfectly competitive firm currently sells 30,000 cartons of eggs at $1.25 each. 3 . b. C. The nominal interest rate does not change. Total reserves increase.B. b. They will increase. If market interest rates rise, the selling price of existing bonds in the market will, ceteris paribus, . 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. ceteris paribus, if the fed raises the reserve requirement, then: Posted on . The supply of money increases when: a. the value of money increases. Financialization and Finance-Driven Capitalism View Answer. b) increases, so the money supply decreases. The Treasury buys bonds in the open market c. The Fed reduces reserve requirements d. The Treasury sells b. C. increase the supply of bonds, If the money supply increases, what happens in the money market (assuming money demand is downward sloping)? 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. decreases the bond price and decreases the interest rate. Money supply to decrease b. [Solved] Ceteris Paribus,if the Fed Raises the Reserve Requirement,then Suppose the bond market and the money market both start out in equilibrium and then the Federal Reserve increases the money supply. PDF Practice Short Answer Final Exam Questions - Simon Fraser University B. decrease by $2.9 million. The lending capacity of the banking system decreases. Answer: D. 15. Which of the following is NOT a basic monetary policy tool used by the Fed? When the Federal Reserve increases the discount-rate increases the discount rate as a part of a contractionary monetary policy, there is: A. 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. the price level in the economy will rise, thus i. The Federal Reserve cut interest rates on March 3, 2020, in response to COVID-19. 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. Multiple . Chapter 14 Quiz Flashcards | Quizlet b. c. it borrows money, Consider how the following scenario would affect the money supply and, as a result, interest rates in the economy. If the Federal Reserve increases the nominal supply of money, all else equal: a. the demand for money increases. View Answer. The Federal Reserve conducts open market operations when it wants to [{Blank}]? The Fed - Closing the Monetary Policy Curriculum Gap - Federal Reserve to send you a reset link. c. real income increases. Suppose the Federal Reserve buys government securities from the nonbank public. Excess reserves increase. Then required reserves are: If excess reserves are $50,000, demand deposits are $1,000,000, and the minimum reserve requirement is 5 percent, then total reserves are: Suppose a bank has $1,500,000 in deposits, a minimum reserve requirement of 20 percent, and total reserves of $350,000. It forces them to modify their procedures. The U.S. Treasury c. The U.S. Mint d. The federal government And involves: a. Quantitative easing b. b. the Federal Reserve buys bonds on the open market. Explain. 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 %. If the required reserve ratio is 9%, what is the resulting change in checkable deposits (or the money supply), assuming that there are no cash leakages, Suppose that the reserve requirement for checking deposits is 10 percent and that banks do not hold any excess reserves. 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. Given an inflationary gap, the Federal Reserve will use monetary policy to do what to interest rates and to aggregate demand? Suppose the Federal Reserve undertakes an open market purchase of government bonds. Perform open market purchases of securities. b. rate of interest decreases. The marginal revenue of the 11th item is: A monopolist sets price at a point on the _______ curve, corresponding to the rate of output determined by the intersection of ______. Inflation rate _____. If the Open-Market Committee of the Federal Reserve sells securities, this action tends to: a. decrease the money supply. Lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public. The following is the past-due category information for outstanding receivable debt for 2019. 1. raise the discount rate. Consider an expansionary open market operation. Currency circulation in the economy will increase since the non-bank public will have sold their securities. Explain your reasoning. It needs to balance economic growth. Consider an open market purchase by the Fed of $16 billion of Treasury bonds. Make sure you say increase or decrease/buy or sell. Suppose the Federal Reserve purchases mortgage-backed securities (MBS). 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. Suppose the Fed conducts $10 million open market purchase from Bank A. \text{General and administrative expenses} \ldots & 500,000 \\ $$ a. \text{French income tax rate on the French division's operating income} & \text{45\\\%}\\ Martin takes $150 out of his checking account and hides it in his house as cash. \text{Direct materials used} \ldots & \$ 750,000\\ d. buying and selling of government, 1) Open market operations are the: A) buying and selling of Federal Reserve Notes in the open market. Price charged is always less than marginal revenue. B) Total reserves increase D) The money multiplier decreases. 1) Ceteris paribus, if bond prices rise, then A) the Federal reserve must be pursuing contractionary monetary policy. \begin{array}{lcc} Assume a fixed demand for money curve and the Fed decreases the money supply. $$ If the Federal Reserve wants to decrease the money supply, it should: a. The Fed sells Treasury bills in the open market b. Ceteris paribus, based on the real balances effect, if the price level falls: According to the foreign trade effect, when the U.S. price level decreases, U.S. consumers are likely to buy: Which of the following is an example of the foreign trade effect, assuming the U.S. price level decreases? 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. \text{Direct labor} \ldots & 800,000\\ \text{Expenses:}\\ c-A forecast of a permanent demand increase shifts the investment line . }\\ \text{Cost of Goods Sold}&\underline{\text{\hspace{19pt}85,250}}&\underline{\text{\hspace{19pt}85,250}}\\ 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. 2. }\\ When the sellers deposit their checks in their bank accounts, their reserves will increase due to the deposits made. C. a traveler's check. $$. 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. b. decrease the money supply and decrease aggregate demand. If the Fed sells $1 million of government bonds, what is the effect on the economy's reserves and money supply? 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? c. 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. E.the Phillips curve will shift down. \text{Accounts receivable amount}&\text{\$\hspace{1pt}263,000}&\text{\$\hspace{1pt}134,200}&\text{\$\hspace{1pt}64,200}\\ The buying and selling of government bonds by the Fed to control bank reserves and the money supply are operations known as a. Makers, but perfectly competitive firms are price takers. 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. Solved I.The use of money and credit controls to change - Chegg The nominal interest rates falls. The Board of Governors has___ members, and they are appointed for ___year terms. Total costs for the year (summarized alphabetically) were as follows: b. Expansionary fiscal policy is when a. the government lowers spending and raises taxes. Which of the following lends reserves to private banks? During the last recession (2008-09. b) Lowering the nominal interest rate. 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. If the Fed raises the reserve requirement, the money supply _____. Currency, transactions accounts, and traveler's checks. c. the money supply and the price level would increase. D.bond prices will rise, and interest rates will fall. 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. 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. a. mortgages; Bank of America b. government securities; New York Fed c. government securities; Federal Reserve Bank of Florida d. Mortgages; Federal Reserve. . Ceteris paribus, if the Fed raises the reserve requirement, then: e The lending capacity of the banking system decreases. A, Suppose that the Fed engages in an open-market purchase of $4,000 in securities from Bank A. Also assume that banks do not hold excess reserves and there is no cash held by the public. \textbf{ELEGANT LINENS}\\ \text{Selling expenses} \ldots & 500,000 That reduces liquidity and slows economic activity. How will the lending capacity of the banking system be affected if the reserve requirement is 5 percent? \text{Full manufacturing cost per chainsaw} & \text{\$175}\\ Assuming this, how is the Fed likely to respond to fiscal stimulus if the economy is nearing full employment? 41. 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). Note The higher the reserve requirement, the less profit a bank makes with its money. Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. Biagio Bossone. eachus, which of the following will occur if the Fed buys bonds through open-market operations? If you've accidentally put the card in the wrong box, just click on the card to take it out of the box. Bob, a college student looking for summer work. c. When the Fed decreases the interest rate it p, Which of the following options is correct? If Bank A and all the other banks use reserves to purchase only securities, what will happen to deposits in the banking system and how much does it expand? 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. (Income taxes are not included in the computation of the cost-based transfer prices.) $$ C. the Fed is seeking, All else equal, if the Federal Reserve decreases the money supply, interest rates will _ and the dollar will _ against other currencies. a. 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. d. rate of interest increases.. If they have it, does that mean it exists already ? 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. 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). \text{Net Income (Loss)}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? In order to increase sales by one item per month, the monopolist must lower the price of its software by $1 to $49. D. The money multiplier decreases. D. change the level of reserves it holds for banks. &\textbf{0-30 days}&\textbf{31-90 days}&\textbf{Over 90 days}\\ c. state and local government agencies only. b. an increase in the demand for money balances. Then the bank has excess reserves of: Suppose a bank has $1,000,000 in deposits, a minimum reserve requirement of 15 percent, and bank reserves of $170,000. How does it affect the money supply? If the Fed conducts an open-market sale, bank reserves _ and the money supply is likely to _. . A decrease in the reserve ratio will: a. What fiscal policy tools are used to shift the aggregate demand curve? Personal exemptions of$1,500. These actions can be classified as expansionary or contractionary, depending on the prevailing market conditions. c. an increase in the demand for bonds and a rise in bond prices. Ceteris paribus, if the Fed raises the reserve requirement, then: The money multiplier increases. In terms of pricing, which of the following is not true for a monopolist? a. A change in government spending, a change in taxes, and monetary policy. b. \text{Total uncollectible? Money is functioning as a standard of value if you: Compare the prices of running shoes online to those in a sporting goods store. Over the 30-year life of the. The Dutch East India Company (also known by the abbreviation "VOC" in Dutch) was the first publicly listed company ever to pay regular dividends. This is an example of which type of unemployment? At what price per share did Wave Water issue common stock during 2012? The creation of a Federal Reserve System was recommended by. Use these flashcards to help memorize information. c. the government increases spending and lowers taxes. Suppose the economy is initially experiencing an inflationary gap. 16) a) encourage banks to provide loans by lowering the discount rate Explanations: During a slow economy, the Fed encourages growth in the economy and the money supply by reducing reserve requirements and lowering the discount rate. The Federal Reserve expands the money supply by 5 percent. 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%. Solved 3. Open market operations versus discount loans | Chegg.com How does the Federal Reserve regulate the money supply? c) increases government spending and/or cuts taxes. Corporate finance - Wikipedia \begin{array}{lcc} 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. c. commercial bank reserves will be unaffected. 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. c. When the Fed decreases the interest rate it p; The aggregate supply curve is positively sloped because as the price level increases: Profit margins increase in the short run. b. sell government securities. Which of the following is likely to occur if people reduce their spending because they are worried about an economic downturn, ceteris paribus? b. the price level increases. D. interest rates will increase. What can be used to shift aggregate demand? Reserve Requirements of Depository Institutions - Federal Register c) buying and selling of government securities by the Treasury. How can you tell? a. Conduct open market sales of government bonds. In addition, the company had six partially completed units in its factory at year-end.