c. Decrease interest rates. D) there is no effect on bond yields. If the Fed conducts an open-market sale, bank reserves _ and the money supply is likely to _. Annual gross pay of $18,200. B. excess reserves at commercial banks will decrease. 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. It allows people to obtain more goods than they can using money. Increase the reserve requirement. B. influence the discount rate. D. The value o, If the nominal interest rate were to increase, then: a. money demand decreases and the price level increases. D) Required reserves decrease. Michael Haines 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. b. Saturday Quiz - August 14, 2010 - answers and discussion The Fed - Calculation of Reserve Balance Requirements C. increase by $290 million. The paper argues that the process of financialization has profoundly changed how capitalist economies operate. Which of the following is likely to occur if people reduce their spending because they are worried about an economic downturn, ceteris paribus? c) borrow reserves from other banks. It sells $20 billion in U.S. securities. are the minimum amount of reserves a bank is required to hold. 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 ______. 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. 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. In addition, the company had six partially completed units in its factory at year-end. D. $100,000 in checkable-deposit liabilities and $30,000 in reserves. Suppose the bond market and the money market both start out in equilibrium and then the Federal Reserve increases the money supply. Cost of finished goods manufactured. When the Fed raises the reserve requirement, it's executing contractionary policy. Use a balance sheet to show the impact on the bank's loans. Personal exemptions of$1,500. Makers, but perfectly competitive firms are price takers. Given an inflationary gap, the Federal Reserve will use monetary policy to do what to interest rates and to aggregate demand? Suppose the U.S. government paid off all its debt. When the Fed buys government bonds, the reserve of the banking system: a) increases, so the money supply increases. C. money supply. \text{Direct materials used} \ldots & \$ 750,000\\ b. the interest rate increases c. the Federal Reserve purchases bonds. \text{Income tax expense} \ldots & 100,000 \\ D. decrease, Assume that the Federal Reserve establishes a minimum reserve requirement of 12.5%. If the Fed decides to engage in an open market operation to increase the money supply, what will it do? The Burton Company manufactures chainsaws at its plant in Sandusky, Ohio. A change in government spending, a change in taxes, and monetary policy. The answer is b. rate of interest decreases. Fill in either rise/fall or increase/decrease. It transfers money from spenders to savers. \begin{array}{lcc} 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. What impact would this action have on the economy? All other trademarks and copyrights are the property of their respective owners. Which of the following is consistent with what Keynes believed? Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10. An open market operation is ____?A. b. increase the supply of bonds, thus driving down the interest rate. If $200,000 is deposited in the bank, then ceteris paribus: Excess reserves will increase by $170,000. A, Suppose that the Fed engages in an open-market purchase of $4,000 in securities from Bank A. To see how well you know the information, try the Quiz or Test activity. 23. As a result, the money supply will: a. increase by $1 billion. 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. The Fed - Closing the Monetary Policy Curriculum Gap - Federal Reserve Ceteris paribus, if the reserve requirement is decreased to 0.05, then excess reserves will . a. use open market operations to buy Treasury bills b. use open market operations to sell Treasury bills c. use discount policy to raise the disc. eachus, which of the following will occur if the Fed buys bonds through open-market operations? Patricia's nominal annual income in 2009 was $60,000. B. taxes. If the Fed sells $1 million of government bonds, what is the effect on the economy s reserves and money supply? ceteris paribus, if the fed raises the reserve requirement, then: Decrease by $100, Suppose the Federal Reserve buys 3 treasury bonds from the public. The Fed lowers the federal funds rate. The money supply decreases. It needs to balance economic growth. a. monetary base b. When the Federal Reserve makes an open market purchase, the Fed: If the federal reserve injects $3,000 into the banking system through open market operations, did the federal reserve buy or sell government bonds? How would this affect the money supply? Assume central bank money (H) is initially equal to $100 million. b. c. buy bonds, thus driving up the interest rate. The information provided should help you work out why you missed a question or three! 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. Assume the Federal Reserve decides to sell $25 billion worth of U.S. Treasury bonds i. Name the three tools of monetary policy that the Federal Reserve System can do to combat inflation. If they have it, does that mean it exists already ? 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. The four components of aggregate demand are: Consumption, investment, government spending, and net exports. c) decreases government spending and/or raises taxes. Ceteris paribus, what will occur if the Fed buys bonds through open-market operations? **Instructions** a. decrease b. increase c. not change, If the economy experiences an expansionary gap and the Fed sells US government securities in the open market, then ______. 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. The following is the past-due category information for outstanding receivable debt for 2019. 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 text describes the theoretical developments of the assignment rules regarding fiscal and monetary policies and the respective roles in macroeconomics stabilisation. c. real income increases. d. prices to remain constant. 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. Increase the supply of money. Expansionary fiscal policy is when a. the government lowers spending and raises taxes. The nominal interest rates falls. The key decision maker for general Federal Reserve policy is the: Free . A change in the reserve requirement affects: The money multiplier and excess reserves. It improves aggregate demand, thus increasing the country's GDP. d. lend more reserves to commercial banks. When the Federal Reserve makes an open market purchase, the Fed: buys securities from banks and the public, which will decrease tha. 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. b. increase the supply of bonds, thus driving down the interest ra, If the Fed begins to buy treasury bills to counter a recession, we would expect to see an increase in the a. demand for money. On October 24, 1929, the stock market crashed. If the Fed sells bonds: A.aggregate demand will increase. c) borrow less from the Fed and, If Federal Reserve decides to decrease the money supply in the United States, what will happen to: 1) the interest rate 2) the level of investment spending in America 3) the level of GDP 4) the level of money demand 3) the U.S interest rate 4) the level o. 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 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. &\textbf{Original Categories}&\textbf{Categories Change}\\[5pt] Should the Fed increase or decrease the money supply? \begin{array}{l r} \end{matrix} 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. True or false? If the Fed increases the money supply, then ceteris Now suppose the. 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. A. The Federal Reserve expands the money supply by 5 percent. The Federal Reserve cut interest rates on March 3, 2020, in response to COVID-19. C. where a bank borrows reserves or bo, Open market operations are a) buying and selling of Federal Reserve Notes in the open market. Suppose that the sellers of government securities redeem these checks drawn on the New York Fed for currency. 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. b) borrow reserves from the public. d) decreases, so the money supply decreases. decreases, rises, If the Federal Reserve reduces interest rates, it wants: a. PDF AP Macroeconomics Unit 4 Practice Quiz #2 KEY The number and relative size of firms in an industry. Which of the following is NOT a possible source of last-minute reserves for a private bank? The Fed lowers the federal funds rate. Ceteris paribus, an increase in _______ will cause an increase in ______. Decrease the demand for money. Holding the deposits or reserves of commercial banks. If the Fed is using open-market operations, An open market operation is a purchase or sale of ___ by the ___ in the open market. c) decreases, so the money supply increases. A. expands, higher, higher B. expands, higher, lower C. expands, lower, higher D. contracts, In the market for money, when the demand for funds increases, the interest rate _______ and the amount of money borrowed _______ . 3 . Road Warrior Corporation began operations early in the current year, building luxury motor homes. Any import duty paid to the French authorities is a deductible expense for calculating French income taxes. Now suppose the Fed conducts an open market purchase of government bonds equal to $1, Fiscal policy is conducted by: a. 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). 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. 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? A. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10. a. 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. c. engage in open market sales of government securities. It also raises the reserve ratio. Some terms may not be used. c. an increase in the demand for bonds and a rise in bond prices. C. The lending capacity of the banking system increases. Suppose the Federal Reserve buys 100 mortgage-backed securities in the open market. The Fed sells Treasury bills in the open market b. 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? C) Total deposits decrease. d. the money supply and the pric, When the Fed increases the quantity of money, the: a. equilibrium interest rate falls b. demand for money curve shifts right c. supply of money curve shifts leftward. \textbf{ELEGANT LINENS}\\ d. The money supply should increase when _ a. The Economic Impacts of COVID-19 and City Lockdown: Early Evidence from c. the Federal Reserve System. b. A combination of flexible rules and limited discretion. a. mortgages; Bank of America b. government securities; New York Fed c. government securities; Federal Reserve Bank of Florida d. Mortgages; Federal Reserve. The reserve ratio is 20%. In the money market, an excess demand of money will: A. increase the supply of bonds, increase bond prices, and decrease interest rates. What types of accounts are listed on the post-closing trial balance? Changing the reserve requirement is expensive for banks. B. a. decrease, downward. 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. b. will cause banks to make more loans. b. the money supply is likely to decrease. When the Federal Reserve increases the discount rate, banks will borrow A. fewer reserves and decrease lending. 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. The bank now sells $5,000 in securities to the Federal Reserve Bank in its, When the Federal Reserve purchases Treasury securities in the openmarket, A. the public starts buying houses and firms invest in anticipation of banks increasing their reserves. If the Fed sells $5 million worth of government securities to the public, what will be the change in the money supply? 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%. d) setting interest r, Suppose the Federal Reserve sells $30 million worth of securities to a bank. 16. b) increases the money supply and lowers interest rates. b. A Burton marketing division in Lille, France, imports 200,000 chainsaws annually from the United States. (Income taxes are not included in the computation of the cost-based transfer prices.) b. a decrease in the demand for money. 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%. Assume a fixed demand for money curve and the Fed decreases the money supply. Consider an open market purchase by the Fed of $16 billion of Treasury bonds. \end{array} 1. The sale of bonds to the Fed by the public C. Increases in banks' excess reserves D. Increases in. d. equilibrium interest rate rises e. demand for money curve shifts leftward, 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}]. Buy Treasury bonds, bills, or notes on the bond market.