\text{Total uncollectible? Eco 120 chapter 14 Flashcards | Quizlet c. state and local government agencies only. c) Increasing the money supply. Which of the following lends reserves to private banks? A. &\textbf{0-60 days}&\textbf{61-120 days}&\textbf{Over 120 days}\\ Then the bank has excess reserves of: Suppose a bank has $1,000,000 in deposits, a minimum reserve requirement of 15 percent, and bank reserves of $170,000. D.bond prices will rise, and interest rates will fall. Assume a fixed demand for money curve and the Fed decreases the money supply. Econ Final Flashcards - Cram.com The Federal Reserve conducts open market operations when it wants to [{Blank}]? a. b. means by which the Fed supplies the economy with currency. The supply of money increases when: a. the value of money increases. d. commercial bank, Assume all money is held in the form of currency. $$ Monetary Policy quiz Flashcards | Quizlet State tax on first $3,000: 1.5$ percent. Issuanceofstock.Cashdividends.Balance,December31,2012.$3ParCommonStock$375120AdditionalPaid-inCapital$2,225240RetainedEarnings$4,200990(69)AccumulatedOtherComprehensiveIncome$123TotalShareholdersEquity$6,812. The Economic Impacts of COVID-19 and City Lockdown: Early Evidence from How Does Money Supply Affect Interest Rates? - Investopedia How would this affect the money supply? If the Fed uses open-market operations, should it buy or sell government securities? On October 24, 1929, the stock market crashed. Compute the following for the current year: Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. C. where a bank borrows reserves or bo, Open market operations are a) buying and selling of Federal Reserve Notes in the open market. a. Money is functioning as a standard of value if you: Compare the prices of running shoes online to those in a sporting goods store. What are some basic monetary policy tools used by the Fed? Its marginal revenue curve is below its demand curve. Open market operations c. Printing mo. d. lend more reserves to commercial banks. If you knew the answer, click the green Know box. In the short run, the quantity of money demanded [{Blank}] and the nominal interest rate [{Blank}]. b) means by which the Fed acts as the government's banker. Key Points. Privacy Policy and Cause the money supply to increase, c. Not affect the money supply, d. Decrease the money multiplier. 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? How can you tell? d. sells U.S. Treasury bills to the federal government. c. Decrease interest rates. View Answer. 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. Increase government spending. 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%. b. 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. Now suppose the Fed lowers. D. The money multiplier decreases. d. decrease the discount rate. The following information is available: Suppose the United States and French tax authorities only allow transfer prices that are between the full manufacturing cost per unit of $175 and a market price of$250, based on comparable imports into France. Of these, 43 were sold for $\$ 105,000$ each and two remain in finished goods inventory. A) increases; supply. Working Paper No. (PDF) Evidence of Bank Market Discipline in Subordinated Debenture "The federal bank can use open market operations as an instrument of monetary policy to manipulate interest rates and control supply of money." c. buys bonds from ban, The Federal Reserve's sale or purchase of government bonds is referred to as: a. open market operations b. credit rationing c. quantitative easing d. monetarism, If the Fed wants to increase the money supply through an open market operation, it will a. purchase government securities. ceteris paribus, if the fed raises the reserve requirement, then: b-A rise in corporate tax would shift the investment line outwards. b. C. decisions by the Fed to raise or lower interest rates. What is the impact of the purchase on the bank from which the Fed bought the securities? b. Suppose government spending increases. The Fed lowers the federal funds rate. 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. Annual gross pay of $18,200. 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. PDF AP Macroeconomics Unit 4 Practice Quiz #2 KEY During the last recession (2008-09. A lower amount of money in the economy makes it more expensive to borrow for banks and consumers.. Chapter 14 Macro - Subjecto.com (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. are the minimum amount of reserves a bank is required to hold. The money multiplier is equal to ______ and the reserve ratio is equal to _____%. D. $100,000 in checkable-deposit liabilities and $30,000 in reserves. \end{array} Free Flashcards about ENT213 Final 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. C. decrease interest rates. c) not change. Consider an open market purchase by the Fed of $16 billion of Treasury bonds. Could the Federal Reserve continue to carry out open market operations? Money supply to decrease b. 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 the banking system has a required reserve ratio of 20 percent, then the money multiplier is: It is more likely to occur if people lose faith in a nation's currency. According to the monetarist view, the aggregate supply curve is: Vertical at the natural rate of unemployment. 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). Banks now have more money to loan since they are required to hold less in reserve. The aggregate demand curve should shift rightward. Suppose the U.S. government paid off all its debt. 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. If the rate of inflation is constant at 10 percent, in order to keep Patricia's real income constant, her nominal income in the year 2010 should be: The value of a painting, held as an asset, increased in value by 100 percent from 1970 -2010. c. an increase in the demand for bonds and a rise in bond prices. (Income taxes are not included in the computation of the cost-based transfer prices.) 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. Figure 14.10c depicts the aggregate investment function of an economy. c. an increase in the quantity of money demanded. Michael Haines All other trademarks and copyrights are the property of their respective owners. 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 ______. Quiz 14: Monetary Policy | Quiz+ If the Fed raises the reserve requirement, the money supply _____. a. monetary base b. 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? Assume central bank money (H) is initially equal to $100 million. c. the government increases spending and lowers taxes. 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. Banks must hold more funds used for loans in reserve. When the Federal Reserve increases the discount-rate increases the discount rate as a part of a contractionary monetary policy, there is: A. When the Fed decreases the discount rate, banks will a) borrow more from the Fed and lend more to the public. \text{Total Expenses}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? 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%. The price level to decrease c. Unemployment to decrease d. Investment to decrease. Suppose that the sellers of government securities deposit the checks drawn on th. What types of accounts are listed on the post-closing trial balance? Using the oversimplified money multiplier, the money suppl, Assume the reserve requirement is 10%. Reserve Requirement: Definition, Impact on Economy - The Balance Patricia's nominal annual income in 2009 was $60,000. A sale of treasury bills by the federal reserve _____ interest rates and _____ the money supply. 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. d. has a contractionary effect on the money supply. 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}]. Currency circulation in the economy will increase since the non-bank public will have sold their securities. The capital account surplus will increase. See our If they have it, does that mean it exists already ? Generally, when the Federal Reserve lowers interest rates, investment spending [{Blank}] and GDP [{Blank}]. B. \text{Accounts receivable amount}&\text{\$\hspace{1pt}232,000}&\text{\$\hspace{1pt}129,000}&\text{\$\hspace{1pt}100,400}\\ When the Fed engages in open-market operations, the transactions are conducted by: a. the Open Market Desk at the Federal Reserve Bank of New York. Sell Treasury bonds, bills, or notes on the bond market. \text{Selling expenses} \ldots & 500,000 What impact would this action have on the economy? 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. Ceteris paribus, if the reserve requirement is decreased to 0.05, then excess reserves will . Suppose the Federal Reserve engages in open-market operations. Also assume that banks do not hold excess reserves and there is no cash held by the public. The key decision maker for U.S. monetary policy is: Ceteris paribus, if the Fed raises the reserve requirement, then: e The lending capacity of the banking system decreases. Which of the following is not true about excess The company has marketing divisions throughout the world. How does the Federal Reserve regulate the money supply? U.S. goods are less expensive for Americans so they buy fewer imports and more domestic goods. d. the U.S. Treasury. The Great Depression was caused by a steep decline in the money supply when the stock market crashed in 1929. $$ a. increase, increase, sell b. increase, increase, buy c. decrease, decrease, buy d. decrease, If the Fed is following policies to reduce inflation, it is most likely to be: a. lowering interest rates b. raising the money supply c. lowering the money supply d. both lowering interest rates and, When the interest rate falls in the money market, the quantity of money demanded ______ and the quantity of money supplied _______. $$ c. the money supply is likely to increase. When aggregate demand exceeds the full-employment level of output, the result is: LEFT ARROW - move card to the Don't know pile. Solved 3. Open market operations versus discount loans | Chegg.com A) Increase money supply to decrease interest rates, increase i. Expansionary monetary policy: a) decreases government spending and/or raises taxes. Lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public. Decrease the discount rate. 26. What is the reserve-deposit ratio? 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 . a. decrease, downward b. decrease. An expansionary fiscal policy is when a. the government lowers spending and raises taxes. Perform open market purchases of securities. b. Ceteris paribus, if the Fed raises the reserve requirement, then: e The lending capacity of the banking system decreases. The difference between equilibrium output and full-employment output. Suppose the banks in the Federal Reserve System have $100 million in transactions accounts and the reserve requirement is 0.10. The required reserve ratio is 16%. b. decrease the money supply and decrease aggregate demand. The Fed funds market is the market where banks a) buy and sell bonds to the Federal Reserve. C. a traveler's check. D. Describe the categories change effect on net income and accounts receivable. Consider an expansionary open market operation. Holding the deposits or reserves of commercial banks. &\textbf{0-30 days}&\textbf{31-90 days}&\textbf{Over 90 days}\\ 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. B. The number and relative size of firms in an industry. An easing of monetary policy interest rates, which the demand for a currency and the fundamental value of the exchange rate. A change in government spending, a change in taxes, and monetary policy. 23. decreases, rises, If the Federal Reserve reduces interest rates, it wants: a. III. 2. Generally, the central bank. 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. 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? b) an open market sale and expansionary monetary policy. C. $120,000 in checkable-deposit liabilities and $32,000 in reserves. \begin{array}{lcc} 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? Interest rates b. a. FROM THE STUDY SET The lender who forecloses will then end up with about $40,000. 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. 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. 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. Buy Treasury bonds, bills, or notes on the bond market. d. rate of interest increases.. }\\ If you forget it there is no way for StudyStack b. sell government securities. Saturday Quiz - August 14, 2010 - answers and discussion Solved Ceteris paribus, if the Fed reduces the reserve | Chegg.com Examples of money are: A. a check. a. d. lower reserve requirements. A. When the economy overheats, the government sometimes cools it down with higher taxes, spending reductions, and less money. b) running the check-clearing process. If the Federal Reserve increases the money supply, ceteris paribus, the Its policymakers are welcoming the recent slowdown in price increases, and the disinflation trend gives . Assume that the Fed increases the monetary base by $1 billion when the reserve requirement is 1/7. Also assume the Federal Reserve conducts an Open Market Operations purchase of U.S. Treasury securities in the amoun, Assume that the reserve requirement is 20 percent, banks do not hold excess reserves, and there is no cash held by the public. c. prices to increase by 2%. a) decrease, downward b) decrease, upward c) inc. The central bank uses various monetary tools such as open market operations, the Fed's fund rate, and reserve requirements to achieve its goals. b. prices to increase by 3%. 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. 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%. (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. If the Fed sells government bonds, this will: A. 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! }\\ B. purchases government bonds to decrease the money supply. The Return of Fiscal Policy and the Euro Area Fiscal Rule Although it may feel like you're playing a game, your brain is still making more connections with the information to help you out. Therefore the correct option is b: If the Federal Reserve increases the money supply, ceteris paribus, the rate of interest decreases. Chapter 14 MCQs.docx - Chapter 14 1. a) b) c) d) Which of 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. c) borrow reserves from other banks. $$ 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. The equilibrium price level and equilibrium output should both increase. 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. conduct open market sales. Interest rates typically rise in a recession because the demand for money increases when real income falls. b) the federal reserve must raise interest rates and lower the required reserve ratio, If the Federal Reserve ("Fed") engages in the contractionary monetary policy then: A. the Fed is seeking to decrease the money supply and lower interest rates to lower inflation. . Any import duty paid to the French authorities is a deductible expense for calculating French income taxes. The current account deficit will increase. b. c. the money supply divided by nominal GDP. The difference in potential money creation when the Bank of Canada buys government securities from the chartered banks rather than from the public is due to the fact that a. excess reserves are larger when the Bank of Canada buys government securities from the chartered banks. B. buy bonds lowering the price of bonds and driving up the interest rates. \text{Net Credit Sales}&\text{\$\hspace{1pt}1,454,500}&\text{\$\hspace{1pt}1,454,500}\\ 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. \begin{array}{c} Facility location decisions are significant for an organization because:? You'll get a detailed solution from a subject matter expert that helps you learn core concepts. Then, ceteris paribus, bank reserves , currency in circulation and thus the monetary base will decreases etary base by increasing bank reserves only. U.S.incometaxrateontheU.S.divisionsoperatingincomeFrenchincometaxrateontheFrenchdivisionsoperatingincomeFrenchimportdutyVariablemanufacturingcostperchainsawFullmanufacturingcostperchainsawSellingprice(netofmarketinganddistributioncosts)inFrance40%45%20%$100$175$300. B) bond yields will fall C) bond yields will increase as well. PDF Practice Short Answer Final Exam Questions - Simon Fraser University This is an example of: Money is functioning as a medium of exchange when you: Buy lunch at a fast food restaurant for yourself and your friend. 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 _______ . Explain. a. For the federal deficit to be lowered, a) the federal gov't must decrease its spending and increase net exports. Assume the Federal Reserve decides to sell $25 billion worth of U.S. Treasury bonds i. The shape of the curve determines the impact of an aggregate demand shift on prices and output. The Federal Reserve Bank b. c. the interest rate rises and this. What Happens When The Fed Raises Rates? - Forbes Advisor When the Federal Reserve makes an open market purchase, the Fed: buys securities from banks and the public, which will decrease tha. 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. Assume that the currency-deposit ratio is 0.5. $$ The creation of a Federal Reserve System was recommended by. b) increases, so the money supply decreases. 3 . 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.