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The creation of a Federal Reserve System was recommended by. The required reserve ratio is 16%. __ Money paid to stockholders from earnings of a corporation. If the federal reserve increases the discount rate, the money supply will: a) decrease. \end{array} Eco 120 chapter 14 Flashcards | Quizlet d) decreases, so the money supply decreases. C. Increase the supply of money. D. All of the above. B. If the price of computers falls during a period when the average price level remains constant, which of the following has occurred? c. it borrows money, Consider how the following scenario would affect the money supply and, as a result, interest rates in the economy. The buying and selling of government securities by the Fed is known as: A. open market operations. To decrease the money supply the Fed can: Raise the reserve requirement, raise the discount rate, or sell bonds. Decrease the price it asks for the bonds. The money multiplier is equal to ______ and the reserve ratio is equal to _____%. If you knew the answer, click the green Know box. Use a balance sheet to show the impact on the bank's loans. 16. c. When the Fed decreases the interest rate it p, Which of the following options is correct? b. a decrease in the demand for money. Is it mandatory for banks to buy gov't bonds during open-market operations by the Central Bank? The paper argues that the process of financialization has profoundly changed how capitalist economies operate. 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. 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. If the Fed sells bonds: A.aggregate demand will increase. Conduct open market sales of government bonds. Keynes viewed the economy as inherently unstable and suggested that during a recession policy makers should: Cut taxes and/or increase government spending. Of these, 43 were sold for $\$ 105,000$ each and two remain in finished goods inventory. D. change the level of reserves it holds for banks. 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. b. the interest rate rises and this stimulates consumption spending. D.bond prices will rise, and interest rates will fall. Make sure you say increase or decrease/buy or sell. A. Question 47 Ceteris Paribus, If The Fed Raises The Discount Rate, Then 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. decrease; decrease; decrease b. 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. B. excess reserves at commercial banks will decrease. then the Fed. 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. The sale of bonds to the Fed by the public C. Increases in banks' excess reserves D. Increases in. c. buy bonds, thus driving up the interest rate. B. purchases government bonds to decrease the money supply. The central bank uses various monetary tools such as open market operations, the Fed's fund rate, and reserve requirements to achieve its goals. This is an example of which type of unemployment? In addition, the company had six partially completed units in its factory at year-end. The Fed decides that it wants to expand the money supply by $40 million. C.banks' reserves will be reduced. d. sells U.S. Treasury bills to the federal government. We start by assuming that there is no reserve requirement or lending by the Central Bank. B. decrease the discount rate. - 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. c). How can you tell? 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 aggregate supply curve is positively sloped because as the price level increases: Profit margins increase in the short run. 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%. If the Federal Reserve increases the money supply, ceteris paribus, the The Fed funds market is the market where banks a) buy and sell bonds to the Federal Reserve. Suppose the banks in the Federal Reserve System have $100 million in transactions accounts and the reserve requirement is 0.10. If the Fed raises the reserve requirement, the money supply _____. Solved 3. Open market operations versus discount loans | Chegg.com What Happens When The Fed Raises Rates? - Forbes Advisor B ) bond yields will fall 2) A negative output gap indicates that A) nominal GDP is below real GDP. When the Fed raises the reserve requirement, it's executing contractionary policy. Over the 30-year life of the. \textbf{Year Ended December 31, 2019}\\ 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. 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. Which of the following is not true about excess The Federal Reserve uses open market operations to control the money supply when it A. issues government bonds to finance the federal government's deficit. An expansionary fiscal policy is when a. the government lowers spending and raises taxes. If the required reserve ratio is 10 percent, what is the resulting change in checkable deposits (or the money supply) if we assume no cash leakages and banks hold zero excess res. &\textbf{past due}&\textbf{past due}&\textbf{past due}\\[5pt] Suppose the Federal Reserve engages in open-market operations. b. ceteris paribus, if the fed raises the reserve requirement, then: c. They wil, 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. 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). $$ b. The Federal Reserve carries out open-market operations, purchasing $1 million worth of bonds from banks. The Fed decides that it wants to expand the money supply by $40 million. D. all of the above. $$ The long-term real interest rate _____. The use of money and credit controls to change macroeconomic activity is known as: Monetary policy. The Economic Impacts of COVID-19 and City Lockdown: Early Evidence from 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. The result is imperfect monitoring, which creates profit opportunities for speculators, who do not act as dealers but simply }\\ If the Fed sells government bonds, this will: A. If the Fed decides to engage in an open market operation to increase the money supply, what will it do? Cause the money supply to increase, c. Not affect the money supply, d. Decrease the money multiplier. The shape of the curve determines the impact of an aggregate demand shift on prices and output. Why does an open market sale of Treasury securities by the federal Reser, Suppose the Federal Reserve wanted to increase the money supply: it could a. All rights reserved. When the Federal Reserve increases the discount-rate increases the discount rate as a part of a contractionary monetary policy, there is: A. The nominal interest rates falls. Your email address is only used to allow you to reset your password. 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. d. the average number of times per year a dollar is spent. Assuming this, how is the Fed likely to respond to fiscal stimulus if the economy is nearing full employment? 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.