Who Is Elias Uncle On Queen Of The South, Articles C

All rights reserved. d. rate of interest increases.. \text{Selling price (net of marketing and distribution costs) in France} & \text{\$300}\\ Savings accounts and certificates of deposit are called. Here are the answers with discussion for yesterday's quiz. 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 ______. b. money demand increases and the price level decreases. b) increases, so the money supply decreases. The Great Depression was caused by a steep decline in the money supply when the stock market crashed in 1929. B. A sale of treasury bills by the federal reserve _____ interest rates and _____ the money supply. c) an open market sale. In terms of pricing, which of the following is not true for a monopolist? Accordingly, the Board is amending Regulation D to set the low reserve tranche for net transaction accounts for 2022 at $640.6 million, an increase of $457.7 million from 2021. Total reserves increase.B. 1. c. the money supply divided by nominal GDP. For best results enter two or more search terms. \begin{array}{l r} If the fed increases the money supply, what will happen to each of the following (other things being equal)? Total deposits decrease. If $200,000 is deposited in the bank, then ceteris paribus: Excess reserves will increase by $170,000. B. there is an excess demand for bonds, so those looking to borrow by selling bonds can do so at a lower interest rate. Using the oversimplified money multiplier, the money suppl, Assume the reserve requirement is 10%. If they have it, does that mean it exists already ? C. influence the federal funds rate. In order to decrease the money supply, the Fed can. 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. 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. b. means by which the Fed supplies the economy with currency. Then, ceteris paribus, bank reserves , currency in circulation and thus the monetary base will decreases etary base by increasing bank reserves only. If the Fed conducts an open-market sale, bank reserves _ and the money supply is likely to _. 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. Given an inflationary gap, the Federal Reserve will use monetary policy to do what to interest rates and to aggregate demand? 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). What happens to interest rates? b. engage in open market purchases of government securities. C. a traveler's check. The monetary base in the economy will increase. $$ \begin{array}{lcc} Ceteris paribus, an increase in _______ will cause an increase in ______. d. velocity increases. a. decrease; decrease; decrease b. Answer: Answer: B. The Federal Reserve Bank b. Instead of paying her for this service,the neighbor washes the professor's car. The Treasury buys bonds in the open market c. The Fed reduces reserve requirements d. The Treasury sells b. If you knew the answer, click the green Know box. How will the lending capacity of the banking system be affected if the reserve requirement is 5 percent? Consider an expansionary open market operation. If the Federal Reserve commits to money supply growth of 2% per year and then the economy enters a recession, it would be time consistent to raise the growth rate to 5%. If the Federal Reserve increases the nominal supply of money, all else equal: a. the demand for money increases. Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10. copyright 2003-2023 Homework.Study.com. In order to maintain price stability, the Federal Reserve has decided to engage in monetary restraint. d. has a contractionary effect on the money supply. The key decision maker for general Federal Reserve policy is the: Free . Ceteris paribus, if the Fed reduces the reserve requirement ratio, then: A) The lending capacity of the banking system increases. \text{Income tax expense} \ldots & 100,000 \\ b) borrow more from the Fed and lend less to the public. It creates money, it creates a transactions-account balance for the borrower, and the money supply increases. 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). 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? d. prices to remain constant. (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.) 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. B) means by which the Fed acts as the government's banker. c. the government increases spending and lowers taxes. Conduct open market purchases. Assume that the Fed increases the monetary base by $1 billion when the reserve requirement is 1/7. 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). What can be used to shift aggregate demand? 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%. (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. Currency circulation in the economy will increase since the non-bank public will have sold their securities. 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? The Dutch East India Company (also known by the abbreviation "VOC" in Dutch) was the first publicly listed company ever to pay regular dividends. If the Fed is using open-market operations, will it, Key Concept: Open market operations When the Fed buys government securities, it a. Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. Each bond is worth $1000 (so the Fed has bought $3000 worth of bonds). b. prices to increase by 3%. Changing the reserve requirement is expensive for banks. a- raises and reduces b- lowers and increases c- raises and increases d- lowers and reduces, When the Federal Reserve uses contractionary monetary policy to reduce inflation, it: A. sells treasury securities increasing interest rates, leading to a stronger dollar that lowers net exports in an open economy. 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. Suppose the U.S. government paid off all its debt. Patricia's nominal annual income in 2009 was $60,000. Its policymakers are welcoming the recent slowdown in price increases, and the disinflation trend gives . Suppose the Federal Reserve buys government securities from the non-bank public. Cause an excess demand for money and a decrease in the rate of interest. 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. Suppose the Federal Reserve conducts an open market purchase of $150 million government securities from the non-bank public. Ceteris paribus, if the Fed raises the reserve requirement, then: The money multiplier increases. Suppose the Federal Reserve purchases mortgage-backed securities (MBS). The aggregate supply curve is positively sloped because as the price level increases: Profit margins increase in the short run. Which of the following is NOT a possible source of last-minute reserves for a private bank? the process of selling Fed-issued IOUs between banks. 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. Raise reserve requirements 3. What effect will this open market operation have on demand deposits and M1? B. expansionary monetary policy by selling Treasury securities. 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. C. contractionary monetary policy by, An open market sale by the Fed A. increases the money supply, which leads to increased interest rates and a fall in investment spending. The required reserve. If you've accidentally put the card in the wrong box, just click on the card to take it out of the box. C) buying and selling of government s. In carrying out open market operations, the Federal Reserve usually buys and sells U.S. Treasury securities. Suppose the banks in the Federal Reserve System have $100 million in transactions accounts and the reserve requirement is 0.10. - By buying and selling bonds through open-market operations - By buying and selling stocks - By setting the interes, Suppose the Fed decided to purchase $100 billion worth of government securities in the open market, directly deposited into the banking system. Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. Officials indicated an aggressive path ahead, with rate rises coming at each of the . D. all of the above. Why does an open market purchase of Treasury securities by the Federal Reserve increase bank reserves? The financial sector has grown relative to the real economy and become more fragile. Decrease the price it asks for the bonds. d. Conduct open market sales. \end{array} Its marginal revenue curve is below its demand curve. Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. To fight a recession, the Fed should conduct what kind of monetary policy to do what to interest rates and shift aggregate demand to the: A. contractionary; increase; left B. contractionary; decrease; Assume the demand for money curve is stationary and the Fed increases the money supply. 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. B. decreases the bond price and decreases the interest rate. Cause the money supply to increase, c. Not affect the money supply, d. Decrease the money multiplier. a-Ceteris paribus, an increase in the interest rate would lead to a fall in investment due to an inward shift of the investment line. Ceteris paribus, what will occur if the Fed buys bonds through open-market operations? If the Fed uses open-market operations, should it buy or sell government securities? To see how well you know the information, try the Quiz or Test activity. b. the Federal Reserve buys bonds on the open market. 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. The Federal Open Market Committee is responsible for: a) reducing the Fed's reliance on open market operations. A perfectly competitive firm is a price taker because: It has no control over the market price of its product. 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. When you need a break, try one of the other activities listed below the flashcards like Matching, Snowman, or Hungry Bug. The Fed decides that it wants to expand the money supply by $40 million. This causes excess reserves to, the money supply to, and the money multiplier to. It also raises the reserve ratio. The shape of the curve determines the impact of an aggregate demand shift on prices and output. Which of the following indicates the appropriate change in the U.S. economy? Answer: D. 15. Aggregate demand will decrease or shift to the left. Fill in either rise/fall or increase/decrease. C. Increase the supply of money. 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. c) borrow reserves from other banks. The buying and selling of government securities by the Fed is known as: A. open market operations. $$ If there is a recession, the Fed would most likely a. encourage banks to provide loans by. d) increases the money supply and lowers interest rates. 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. Assume that banks use all funds except required, 13. }\\ then the Fed. d) decreases, so the money supply decreases. Decrease in the federal funds rate B. U.S. goods are less expensive for Americans so they buy fewer imports and more domestic goods. b) decreases the money supply and raises interest rates. All other trademarks and copyrights are the property of their respective owners. As a result, the money supply will: a. increase by $1 billion. The number of deposit dollars the banking system can create from $1 of excess reserves. The immediate result of this transaction is that M1: If Edgar takes $100 out of his savings account and deposits it into his checking account, the immediate result of this transaction is that M1: What does not occur when a bank makes a loan? 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. Increase the interest rate paid on ban, Which of the following describes what the Federal Reserve would do to pursue an expansionary monetary policy? Your email address is only used to allow you to reset your password. Required reserves decrease. \text{Gross Margin}&\text{\hspace{5pt}1,369,250}&\text{\hspace{5pt}1,369,250}\\ b) Lowering the nominal interest rate. In addition, the company had six partially completed units in its factory at year-end. Over the 30-year life of the. The Federal Reserve conducts open market operations when it wants to [{Blank}]? What fiscal policy tools are used to shift the aggregate demand curve? }\\ If the Federal Reserve increases the nominal money supply by 5 % and real income increases by 2%, then we would expect: a. prices to increase by 5%. a. increases, rises b. increases, falls c. decreases, falls d. decreases, does not change e. . Previous question Next question Your email address is only used to allow you to reset your password. Transcribed Image Text: Question Now we introduce banks that will act as liquidity providers in the economy. 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. B. buy bonds lowering the price of bonds and driving up the interest rates. Interest rates b. The capital account surplus will increase. __ Money paid to stockholders from earnings of a corporation. a. &\textbf{0-30 days}&\textbf{31-90 days}&\textbf{Over 90 days}\\ e. increase inflation. Suppose the bond market and the money market both start out in equilibrium and then the Federal Reserve increases the money supply. increase; decrease decrease; decrease increase; increase decrease; increas. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. \text{Cost of Goods Sold}&\underline{\text{\hspace{19pt}85,250}}&\underline{\text{\hspace{19pt}85,250}}\\ 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. b. buys bonds from banks, which increases bank reserves. Which of the following is NOT a basic monetary policy tool used by the Fed? C. The nominal interest rate does not change. 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. c. engage in open market sales of government securities. Explain. 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. Suppose the Federal Reserve Bank buys Treasury securities. The Fed funds market is the market where banks a) buy and sell bonds to the Federal Reserve. C. excess reserves at commercial banks will increase. If the market price was below the ATC and at the current firm's rate of production the MC was less than the market price an increase in output would: increase profit but economic profits would still be negative. . c. Decrease interest rates. B) The lending capacity of the banking system decreases. 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. \text{Manufacturing overhead} \ldots & 1,200,000 \\ c. When the Fed decreases the interest rate it p, Which of the following options is correct? The nominal interest rates falls. Determine whether each of the following, Open market operations are the a. buying and selling of Federal Reserve Notes in the open market. Assume that the currency-deposit ratio is 0.5. c. the money supply and the price level would increase. A lower amount of money in the economy makes it more expensive to borrow for banks and consumers.. All other trademarks and copyrights are the property of their respective owners. Is this an example of fiscal policy or monetary policy? Our experts can answer your tough homework and study questions. 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? are in the same box the next time you log in. c) overseeing the buying and selling of government securities in the open market. See our The lender who forecloses will then end up with about $40,000. What cannot be used to shift aggregate demand? Some terms may not be used. Was there a profit or a loss for the year ended December 31, 2012? 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. 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. An easing of monetary policy interest rates, which the demand for a currency and the fundamental value of the exchange rate. Which of the following functions does the Fed perform? Increase; appreciate b. Cause the money supply to decrease, b. B) bond yields will fall C) bond yields will increase as well. FROM THE STUDY SET $$ Raise discount rate 2. In the money market, an excess demand of money will: A. increase the supply of bonds, increase bond prices, and decrease interest rates. Although it may feel like you're playing a game, your brain is still making more connections with the information to help you out. \text{Total per category}&\text{?}&\text{?}&\text{? The current account deficit will increase. D) there is no effect on bond yields. What is the reserve-deposit ratio? 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. What impact would this action have on the economy? Also assume that banks do not hold excess reserves and there is no cash held by the public. The answer is b. rate of interest decreases. The change is negative it means that excess reserve falls by -100000000 or 100 million. If the Fed purchases $10 million in government securities, then wh. d. buying and selling of government, 1) Open market operations are the: A) buying and selling of Federal Reserve Notes in the open market. c. the money supply is likely to increase. Aggregate supply will increase or shift to the right. To manage earnings more favorably, Elegant Linens considers changing the past-due categories as follows. Government bond operations. C. increase by $50 million. Suppose the Federal Reserve engages in open-market operations. Issuanceofstock.Cashdividends.Balance,December31,2012.$3ParCommonStock$375120AdditionalPaid-inCapital$2,225240RetainedEarnings$4,200990(69)AccumulatedOtherComprehensiveIncome$123TotalShareholdersEquity$6,812. Which of the following indicates the appropriate change in the U.S. economy after government intervention? Is this part of expansionary or contractionary fiscal or monetary policy? 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. The Burton Company manufactures chainsaws at its plant in Sandusky, Ohio. Suppose the economy is initially experiencing an inflationary gap. Get access to this video and our entire Q&A library, How the Federal Reserve Changes the Money Supply and Affects Interest Rates. A. 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? [Solved] Ceteris paribus,if the Fed raises the reserve requirement,then: A) The money multiplier increases. Interest Rates / Real GDP a. 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. The Board of Governors has___ members, and they are appointed for ___year terms. 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. The number and relative size of firms in an industry. B. purchases government bonds to decrease the money supply. The velocity of money is a. the rate at which the Fed puts money into the economy. a. The equilibrium price level and equilibrium output should both increase. Note The higher the reserve requirement, the less profit a bank makes with its money. B. decrease by $2.9 million. Name the three tools of monetary policy that the Federal Reserve System can do to combat unemployment/recession. If market interest rates rise, the selling price of existing bonds in the market will, ceteris paribus, . \text{French import duty} & \text{20\\\%}\\ Increase / Decrease b. c) not change. 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. C. money supply. Money demand c. Investment spending d. Aggregate demand e. The equilibrium level of national income, When the expected inflation rate falls, the real cost of borrowing ______ and bond supply ______, everything else held constant. \text{Net Credit Sales}&\text{\$\hspace{1pt}1,454,500}&\text{\$\hspace{1pt}1,454,500}\\ Facility location decisions are significant for an organization because:? c) decreases, so the money supply increases. A) increases; supply. d. a decrease in the quantity de. You would need to create a new account. A change in the reserve requirement affects: The money multiplier and excess reserves. Enter the email address you signed up with and we'll email you a reset link. \text{Total Expenses}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? Which action would the federal reserve rate take to expand the money supply and lower the equilibrium interest rate? See Answer &\textbf{Original Categories}&\textbf{Categories Change}\\[5pt] 26. 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. d) setting interest r, Suppose the Federal Reserve sells $30 million worth of securities to a bank. (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. Total costs for the year (summarized alphabetically) were as follows: Fill in either rise/fall or increase/decrease. 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. d) Lowering the real interest rate. Demand; marginal revenue and marginal cost. Look at the large card and try to recall what is on the other side. If the Fed is using open-market operations, An open market operation is a purchase or sale of ___ by the ___ in the open market. $$. Raises the cost of borrowing from the Fed, discouraging banks from ma, If the Federal Reserve System buys government securities from commercial banks and the public: A. commercial bank reserves will decline B. commercial bank reserves will be unaffected C. it will be easier to obtain loans at commercial banks D. the money su, Suppose that the Fed purchases from bank A some bonds in the open market and that, before the sale of bonds, bank A had no excess reserves. Any import duty paid to the French authorities is a deductible expense for calculating French income taxes. 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.