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 U.S. Treasury c. The U.S. Mint d. The federal government And involves: a. Quantitative easing b. Acting as fiscal agents for the Federal government. A) increases; supply. A change in government spending, a change in taxes, and monetary policy. If the Fed sells $1 million of government bonds, what is the effect on the economy's reserves and money supply? E.the Phillips curve will shift down. Generally, when the Federal Reserve lowers interest rates, investment spending [{Blank}] and GDP [{Blank}]. Note The higher the reserve requirement, the less profit a bank makes with its money. b) increases, so the money supply decreases. are the minimum amount of reserves a bank is required to hold. a. The shape of the curve determines the impact of an aggregate demand shift on prices and output. Raise discount rate 2. Its marginal revenue curve is below its demand curve. c. Offer rat, 1. How would this affect the money supply? 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. If the Fed wants to raise short-term interest rates, it should a. act to increase the money supply. Makers, but perfectly competitive firms are price takers. What types of accounts are listed on the post-closing trial balance? Previous question Next question d. decrease the discount rate. The required reserve. 16. 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. Otherwise, click the red Don't know box. Multiple Choice . The result is imperfect monitoring, which creates profit opportunities for speculators, who do not act as dealers but simply Explain the statement. 2) If, If the Fed increases the supply of money in the market, bond prices will and interest rates will. Answer: Answer: B. 1. Which of the following is NOT a basic monetary policy tool used by the Fed? 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. C. excess reserves at commercial banks will increase. Fill in either rise/fall or increase/decrease. If $200,000 is deposited in the bank, then ceteris paribus: Excess reserves will increase by $170,000. b. foreign countries only. The difference between price and average total cost multiplied by the quantity sold. The key decision maker for general Federal Reserve policy is the: Free . 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. If there is a recession, the Fed would most likely a. encourage banks to provide loans by. If the Fed sells $1 million of government bonds, what is the effect on the economy s reserves and money supply? c) overseeing the buying and selling of government securities in the open market. Calculate after-tax operating income earned by United States and French divisions from transferring 200,000 chainsaws (a) at full manufacturing cost per unit and (b) a market price of comparable imports. 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. Privacy Policy and d, If the Federal Reserve wants to increase output, it increases A. government spending. To see how well you know the information, try the Quiz or Test activity. Suppose that the sellers of government securities redeem these checks drawn on the New York Fed for currency. Suppose that banks are able to issue private IOU's, such that individuals deposit goods with the bank and the bank can promise a return on the deposit. B. Lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public. B) The lending capacity of the banking system decreases. b) Lowering the nominal interest rate. \text{Full manufacturing cost per chainsaw} & \text{\$175}\\ Assuming the economy is in the upward sloping portion of the eclectic aggregate supply curve, what should happen to the price level and output as a result of the Fed's action, ceteris paribus? d) borrow reserves from the Federal Reserve. Bob, a college student looking for summer work. Open market operations When the Fed sells government securities, it: a. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public. An office worker who loses her job because she does not have the necessary computer skills is, ceteris paribus: Which of the following is likely to reduce the level of structural unemployment? \textbf{Year Ended December 31, 2019}\\ B. decreases the money supply, which leads to increased interest rates and a rise in investment spending. Which of the following is likely to cause a leftward shift in the aggregate supply curve, ceteris paribus? U.S.incometaxrateontheU.S.divisionsoperatingincomeFrenchincometaxrateontheFrenchdivisionsoperatingincomeFrenchimportdutyVariablemanufacturingcostperchainsawFullmanufacturingcostperchainsawSellingprice(netofmarketinganddistributioncosts)inFrance40%45%20%$100$175$300. The reserve ratio is 20%. Determine the December 31, 2012, balances in Wave Waters shareholders equity accounts and total shareholders equity on this date. 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. All rights reserved. The Fed approved a 0.25 percentage point rate hike, the first increase since December 2018. Ceteris paribus, if the reserve requirement is decreased to 0.05, then excess reserves will . Changing the reserve requirement is expensive for banks. b. it buys Treasury securities, which decreases the money supply. Issuanceofstock. Cashdividends. U.S.incometaxrateontheU.S.divisionsoperatingincome, FrenchincometaxrateontheFrenchdivisionsoperatingincome, Sellingprice(netofmarketinganddistributioncosts)inFrance, Alexander Holmes, Barbara Illowsky, Susan Dean, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Fundamentals of Engineering Economic Analysis, David Besanko, Mark Shanley, Scott Schaefer, Don Herrmann, J. David Spiceland, Wayne Thomas. b. c). C. decisions by the Fed to raise or lower interest rates. If the fed increases the money supply, what will happen to each of the following (other things being equal)? Assume central bank money (H) is initially equal to $100 million. Aggregate demand will decrease or shift to the left. The change is negative it means that excess reserve falls by -100000000 or 100 million. Interest Rates / Real GDP a. What is the impact of the purchase on the bank from which the Fed bought the securities? Consider an expansionary open market operation. Suppose during the same period average prices in the economy rose by 150 percent.The paintings owner, relative to those who do not own paintings, experienced a: Lower real wealth as a result of the wealth effect. \text{Variable manufacturing cost per chainsaw} & \text{\$100}\\ 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. b. A stock person who is laid off by a department store because retail sales across the country have decreased is _______ unemployed. To decrease the money supply the Fed can: Raise the reserve requirement, raise the discount rate, or sell bonds. Road Warrior Corporation began operations early in the current year, building luxury motor homes. It allows people to obtain more goods than they can using money. 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). Suppose the Federal Reserve wishes to use monetary policy to close an expansionary gap. \textbf{Comparative Income Statements}\\ Assume that the Fed increases the monetary base by $1 billion when the reserve requirement is 1/7. \text{Net Income (Loss)}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? d) increases the money supply and lowers interest rates. Transcribed Image Text: Question Now we introduce banks that will act as liquidity providers in the economy. 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. The aggregate demand curve is downward sloping because, ceteris paribus: People are willing and able to buy more goods and services at lower average prices. b. a. The Fed has most likely reduced the, If the Fed wishes to increase the money supply it can, If the Fed wishes to decrease the money supply it can, The rate of interest banks charge each other for lending reserves is the, 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, consists of seven members appointed by the President of the United States, who together act as the key decision-making entity for monetary policy, Bank reserves in excess of required reserves, Ceteris paribus, if the Fed raises the discount rate, then, the incentive to borrow reserves decreases. 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. Raise the reserve requirement, increase the discount rate, or . c) decreases, so the money supply increases. When aggregate demand exceeds the full-employment level of output, the result is: LEFT ARROW - move card to the Don't know pile. 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. 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. If you knew the answer, click the green Know box. Inflation rate _____. Officials indicated an aggressive path ahead, with rate rises coming at each of the . $$ The Fed decides that it wants to expand the money supply by $40 million. b) means by which the Fed acts as the government's banker. c. means by which the Fed acts as the government's banker. Where do you suppose the Fed gets the cash, to do this ? 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? D. All of the above. Above equilibrium, this results in excess supply. b. engage in open market purchases of government securities. b. Which of the following functions does the Fed perform? Our experts can answer your tough homework and study questions. Assume the Federal Reserve decides to sell $25 billion worth of U.S. Treasury bonds i. 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. Suppose the Federal Reserve conducts an open market purchase of $150 million government securities from the non-bank public. b. means by which the Fed supplies the economy with currency. }\\ Suppose government spending increases. This action increased the money supply by $2 million. C. Increase the supply of money. c. buys or sells existing U.S. Treasury bills. If the Fed raises the reserve requirement, the money supply _____. 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. The Fed funds market is the market where banks a) buy and sell bonds to the Federal Reserve. b. money demand increases and the price level decreases. 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. Assume the required reserve ratio is 10 percent and the FOMC orders an open market sale of $50 million in government securities to banks. Suppose the banks in the Federal Reserve System have $100 million in transactions accounts and the reserve requirement is 0.10. 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 ____. Consider an expansionary open market operation. $$ In terms of pricing, which of the following is not true for a monopolist? The velocity of money is a. the rate at which the Fed puts money into the economy. 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 A. d) means by which the Fed supplies the, Suppose the Fed wishes to use monetary policy to close an expansionary gap. &\textbf{0-30 days}&\textbf{31-90 days}&\textbf{Over 90 days}\\ If the Federal Reserve raises interest rates, it means the money supply starts to deplete. c. Fed sells bonds. (a) money supply increases, investment increases, aggregate demand increases (b) money supply increases, the interest rate increases, If the Fed increases the money supply to bring down the federal funds rate: A. The monetary base in the economy will increase. b. an increase in the demand for money balances. Which of the following lends reserves to private banks? 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. 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. The lender who forecloses will then end up with about $40,000. The Board of Governors has___ members, and they are appointed for ___year terms. Use these flashcards to help memorize information. Suppose the U.S. government paid off all its debt. Conduct open market sales of government bonds. If the Fed raises the reserve requirement, the money supply _____. $$ B. decrease by $2.9 million. c. the money supply is likely to increase. \begin{array}{l r} c. Increase the required reserve, Suppose the Federal Reserve s trading desk buys $500,000 in T-bills from a securities dealer who then deposits the Fed's check-in Best National Bank. "The federal bank can use open market operations as an instrument of monetary policy to manipulate interest rates and control supply of money." C. Controlling the supply of money. Ceteris paribus, if the Fed raises the reserve requirement, then: e The lending capacity of the banking system decreases. 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. They will remain unchanged. Ceteris paribus, if the reserve requirement is decreased to 0.07, then excess reserves will increase by: $3 million. In a graph of the aggregate demand curve, an increase in investment by businesses is represented by a: Ceteris paribus, which of the following changes in the aggregate demand curve best characterizes a cutback in exports? Holding the deposits or reserves of commercial banks. In the money market, an excess demand of money will: A. increase the supply of bonds, increase bond prices, and decrease interest rates. You can also use your keyboard to move the cards as follows: If you are logged in to your account, this website will remember which cards you know and don't know so that they You'll get a detailed solution from a subject matter expert that helps you learn core concepts. eachus, which of the following will occur if the Fed buys bonds through open-market operations? Here are the answers with discussion for yesterday's quiz. Price falls to the level of minimum average total cost. 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. D.bond prices will rise, and interest rates will fall. Annual gross pay of $18,200. Multiple . b. the interest rate rises and this stimulates consumption spending. \text{Manufacturing overhead} \ldots & 1,200,000 \\ 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 Federal Reserve uses open market operations to control the money supply when it A. issues government bonds to finance the federal government's deficit. C) Total deposits decrease. a. b. sell bonds, thus driving down the interest rate. c. Purchase government bonds on the open market. Interest rates typically rise in a recession because the demand for money increases when real income falls. ceteris paribus, if the fed raises the reserve requirement, then: Posted on . The Federal Reserve (or Fed) often executes its policy by selling or buying U.S. government securities in the open market, which in turn influences the quantity of real money balances. 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. Currency, transactions accounts, and traveler's checks. (Income taxes are not included in the computation of the cost-based transfer prices.) c. buy bonds, thus driving up the interest rate. \text{Income tax expense} \ldots & 100,000 \\ Why does an open market purchase of Treasury securities by the Federal Reserve increase bank reserves? Government bond operations. then the Fed. If they have it, does that mean it exists already ? The use of money and credit controls to change macroeconomic activity is known as: Free . Suppose the Federal Reserve Bank buys Treasury securities. \end{array} Decrease the demand for money. Raise reserve requirements 3. C. increase the supply of bonds, If the money supply increases, what happens in the money market (assuming money demand is downward sloping)? Suppose that the sellers of government securities deposit the checks drawn on th. The current account deficit will increase. d. The Federal Reserve sells bonds on the open market. B. expansionary monetary policy by selling Treasury securities. 2. d. the U.S. Treasury. 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 ______. Expansionary fiscal policy is when a. the government lowers spending and raises taxes. For the federal deficit to be lowered, a) the federal gov't must decrease its spending and increase net exports. Q01 . 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. The nominal interest rates falls. b. will cause banks to make more loans. When the Fed buys bonds in open-market operations, it _____ the money supply. 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. Assume the reserve requirement is 5%. If the price of computers falls during a period when the average price level remains constant, which of the following has occurred? If the Fed sells $5 million worth of government securities to the public, what will be the change in the money supply? . c. the money supply divided by nominal GDP. \text{Percent uncollectible}&\text{8\\\%}&\text{17\\\%}&\text{31\\\%}\\ Is this part of expansionary or contractionary fiscal or monetary policy? The supply of money increases when: a. the value of money increases. Explain. The nominal interest rates rises. \text{Percent uncollectible}&\text{8\\\%}&\text{17\\\%}&\text{31\\\%}\\ a. decreases; falls b. decreases; rises c. does not change; falls d. increases; rises e. increases; falls, At 3% unemployment which is likely to happen, the Federal Reserve should: A. sell bonds increasing the price of bonds and driving up the interest rates. b. the Federal Reserve buys bonds on the open market. The difference between equilibrium output and full-employment output. 1. Instead of paying her for this service,the neighbor washes the professor's car. 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.