If the Federal Reserve increases the money supply, ceteris paribus, the: Money supply is defined as all the currency and other liquid instruments held by banks/individuals in a country's economy in a given time. This action increased the money supply by $2 million. A. U.S.incometaxrateontheU.S.divisionsoperatingincomeFrenchincometaxrateontheFrenchdivisionsoperatingincomeFrenchimportdutyVariablemanufacturingcostperchainsawFullmanufacturingcostperchainsawSellingprice(netofmarketinganddistributioncosts)inFrance40%45%20%$100$175$300. \text{Accounts receivable amount}&\text{\$\hspace{1pt}263,000}&\text{\$\hspace{1pt}134,200}&\text{\$\hspace{1pt}64,200}\\ Interest rates typically rise in a recession because the demand for money increases when real income falls. 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. Match the terms with definitions. 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. B. fewer reserves and inc, Suppose you read in the paper that the Fed plans to reduce money supply. \begin{array}{c} c) not change. c. c) buying and selling of government securities by the Treasury. How does the Federal Reserve regulate the money supply? b. the same thing as the long-term growth rate of the money supply. c. When the Fed decreases the interest rate it p; d) setting interest r, Suppose the Federal Reserve sells $30 million worth of securities to a bank. U.S.incometaxrateontheU.S.divisionsoperatingincome40%FrenchincometaxrateontheFrenchdivisionsoperatingincome45%Frenchimportduty20%Variablemanufacturingcostperchainsaw$100Fullmanufacturingcostperchainsaw$175Sellingprice(netofmarketinganddistributioncosts)inFrance$300\begin{matrix} Answer: Answer: B. Should the Fed increase or decrease the money supply? Suppose further that the required reserve, Explain briefly: a. 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 ____. $$ What are some basic monetary policy tools used by the Fed? 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. C. Increase the supply of money. 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. 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! If a bank does not have enough reserves, it can. Interest rates b. 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. c. buy bonds, thus driving up the interest rate. b. it will be easier to obtain loans at commercial banks. 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. Which of the following is likely to occur if OPEC increases the amount of oil it supplies and domestic energy prices fall, ceteris paribus? a. 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. Of these, 43 were sold for $\$ 105,000$ each and two remain in finished goods inventory. C. decrease interest rates. In response, people will a. sell bonds, thus driving up the interest rate. CBDC Next-Level: A New Architecture for Financial "Super-Stability" by. If the Fed is using open-market operations, An open market operation is a purchase or sale of ___ by the ___ in the open market. 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. Multiple . Inflation rate _____. 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). B.bond prices will fall, and interest rates will fall. 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? C. Controlling the supply of money. D. $100,000 in checkable-deposit liabilities and $30,000 in reserves. Interest Rates / Real GDP a. What impact would this action have on the economy? 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. That reduces liquidity and slows economic activity. Suppose that the sellers of government securities redeem these checks drawn on the New York Fed for currency. d. has a contractionary effect on the money supply. (ii) instructs the New York Fed to sell government securities in the foreign exchange market. The U.S. Treasury c. The U.S. Mint d. The federal government And involves: a. Quantitative easing b. Savings accounts and certificates of deposit are called. Use a balance sheet to show the impact on the bank's loans. Its marginal revenue curve is below its demand curve. c) decreases government spending and/or raises taxes. B. decrease by $200 million. Although it may feel like you're playing a game, your brain is still making more connections with the information to help you out. c. Offer rat, 1. b. c. an increase in the quantity of money demanded. 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. Wave Waters total liabilities on December 31, 2012, are $7,800. Changing the reserve requirement is expensive for banks. 3. Examples of money are: A. a check. See Answer Ceteris paribus, if the Fed raised the required reserve ratio: Expert Answer The sale of bonds to the Fed by the public C. Increases in banks' excess reserves D. Increases in. A. change the liquidity levels of banks. What is meant by open market operations? The supply of money increases when: a. the value of money increases. The equilibrium price level and equilibrium output should both increase. Decrease by $100, Suppose the Federal Reserve buys 3 treasury bonds from the public. Decrease in the federal funds rate B. D. All of the above. Then click the card to flip it. 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? Banks must hold more funds used for loans in reserve. 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. Patricia's nominal annual income in 2009 was $60,000. c. reduce the reserve requirement. Explain. The nominal interest rates rises. When the Fed buys bonds in open-market operations, it _____ the money supply. B. What cannot be used to shift aggregate demand? c. an increase in the demand for bonds and a rise in bond prices. \text{Accounts receivable amount}&\text{\$\hspace{1pt}232,000}&\text{\$\hspace{1pt}129,000}&\text{\$\hspace{1pt}100,400}\\ b. the price level increases. d. lower reserve requirements. $140,000 in checkable-deposit liabilities and $46,000 in reserves. A. III. 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. 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. D) there is no effect on bond yields. 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. What effect will this open market operation have on demand deposits and M1? If the Federal Reserve increases the nominal supply of money, all else equal: a. the demand for money increases. If the Fed sells $1 million of government bonds, what is the effect on the economy s reserves and money supply? raise the discount rate. Perform open market purchases of securities. Cause a reduction in the dem. Assume the required reserve ratio is 10 percent and the FOMC orders an open market sale of $50 million in government securities to banks. 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? The long-term real interest rate _____. 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 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. "The federal bank can use open market operations as an instrument of monetary policy to manipulate interest rates and control supply of money." d. lend more reserves to commercial banks. 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. b. \text{Expenses:}\\ To decrease the money supply, the Fed can, raise the reserve requirement, raise the discount rate, or sell bonds. What happens to interest rates? a. decrease, downward b. decrease, upward c. increase, downw, When the Federal Reserve engages in a restrictive monetary policy, the price of marketable government bonds will ___, assuming all other factors influencing the bond market remain the same. Explain the statement. What types of accounts are listed on the post-closing trial balance? c. the government increases spending and lowers taxes. Decrease the demand for money. 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. b. decrease, upward. 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. A. decreases; decreases B. decreases; increases C. increases; decreases D. increases. D. all of the above. Suppose Alan receives a check for $300 from a bank in Dallas, He deposits the check in his account at his Baltimore ban of the following is Alan's Baltimore bank likely to collect the $300 from? Which action would the federal reserve rate take to expand the money supply and lower the equilibrium interest rate? Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page. The Federal Reserve expands the money supply by 5 percent. An increase in the money supply: A. lowers the interest rate, causing a decrease in investment and an increase in GDP B. lowers the interest rate, causing an increase in investment and a decrease in GDP C. lowers the interest rate, causing an increase in, If there is a negative supply shock and the Federal Reserve responds by increasing the growth rate of the money supply, then in the short run the Federal Reserve's action: a. lowers both inflation and unemployment. If they have it, does that mean it exists already ? Q01 . Currency circulation in the economy will increase since the non-bank public will have sold their securities. 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 Assume central bank money (H) is initially equal to $100 million. 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). 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 %. then the Fed. Make sure you say increase or decrease/buy or sell. 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? How would this affect the money supply? On October 24, 1929, the stock market crashed. This is an example of which type of unemployment? It transfers money from spenders to savers. Find the taxable wages. \text{Direct labor} \ldots & 800,000\\ If the Fed wants to increase the money supply through an open market operation, it will a. purchase government securities. &\textbf{Original Categories}&\textbf{Categories Change}\\[5pt] B. 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. 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. C. increase by $290 million. b. prices to increase by 3%. Open market operations. b. \begin{array}{lcc} a. higher, higher b. higher, lower c. lower, higher d. lower, lower, When lots of people put their money into bonds, the demand for money and the interest rate on bonds. Consider an expansionary open market operation. Ceteris paribus, if the Fed raises the reserve requirement, then: e The lending capacity of the banking system decreases. The use of money and credit controls to change macroeconomic activity is known as: Monetary policy. Fiscal policy should be used to shift the aggregate demand curve. Make sure to remember your password. We develop a model of price formation in a dealership market where monitoring of the information flow requires costly effort.