d. has a contractionary effect on the money supply. Match the terms with definitions. Raise the reserve requirement, increase the discount rate, or . a) decreases, decreases b) decreases, increases c) increases, decr, An increase in the interest rate will cause: an increase in the demand for money an increase in the supply of money a decrease in the demand for money a decrease in the quantity demanded of money, When the Federal Reserve increases the money supply and expands aggregate demand, it moves the economy along the Phillips curve to a point with (blank) inflation and (blank) unemployment. Name the three tools of monetary policy that the Federal Reserve System can do to combat inflation. Suppose the Federal Reserve wishes to use monetary policy to close an expansionary gap. b. increase the supply of bonds, thus driving down the interest rate. D. The value o, If the nominal interest rate were to increase, then: a. money demand decreases and the price level increases. b. Here are the answers with discussion for yesterday's quiz. \text{Percent uncollectible}&\text{8\\\%}&\text{17\\\%}&\text{31\\\%}\\ \begin{array}{lcc} \text{Cost of Goods Sold}&\underline{\text{\hspace{19pt}85,250}}&\underline{\text{\hspace{19pt}85,250}}\\ Fill in either rise/fall or increase/decrease. B. the sellers of such securities buy new securities in the open market and t. Assume there is no leakage from the banking system and that all commercial banks are loaned up. A perfectly competitive firm currently sells 30,000 cartons of eggs at $1.25 each. 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. A Burton marketing division in Lille, France, imports 200,000 chainsaws annually from the United States. d. rate of interest increases.. B. buy bonds lowering the price of bonds and driving up the interest rates. Expansionary fiscal policy is when a. the government lowers spending and raises taxes. \text{Selling price (net of marketing and distribution costs) in France} & \text{\$300}\\ B. decrease the discount rate. Answer: Answer: B. 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. b. A perfectly competitive firm is a price taker because: It has no control over the market price of its product. Increase / Decrease b. a. If the Fed sells $1 million of government bonds, what is the effect on the economy's reserves and money supply? The equilibrium price level and equilibrium output should both increase. 1. Currency, transactions accounts, and traveler's checks. b. buys or sells foreign currency. 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. The current account deficit will increase. U.S. goods are less expensive for Americans so they buy fewer imports and more domestic goods. Patricia's nominal annual income in 2009 was $60,000. C) Total deposits decrease. Suppose the economy is initially experiencing an inflationary gap. \end{array} 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. A. If the Federal Reserve wants to decrease the money supply, it should: a. If the Federal Reserve increases the discount rate: a. the federal funds rate must decrease. If the Fed sells $1 million of government bonds, what is the effect on the economy s reserves and money supply? A decrease in the reserve ratio will: a. What can be used to shift aggregate demand? A) Increase money supply to decrease interest rates, increase i. Expansionary monetary policy: a) decreases government spending and/or raises taxes. e. increase inflation. Then click the card to flip it. B. decisions by the Fed to increase or decrease the money multiplier. $$ Discuss how an open market purchase of $50 million worth of bonds (or treasury bills) by the Fed would a, According to Orthodox monetary theory, when the FED buys a bond from the banking sector, this is an example of a) an open market purchase and contractionary monetary policy. \begin{array}{lcc} 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. D. interest rates will increase. The supply of money increases when: a. the value of money increases. Ceteris paribus, what will occur if the Fed buys bonds through open-market operations? B. there is an excess demand for bonds, so those looking to borrow by selling bonds can do so at a lower interest rate. The VOC was also the first recorded joint-stock company to get a fixed capital stock. 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. b. the Federal Reserve buys bonds on the open market. The fixed monthly cost is $21,000, and the variable cost. B) The lending capacity of the banking system decreases. Your email address is only used to allow you to reset your password. Suppose the banks in the Federal Reserve System have $100 million in transactions accounts and the reserve requirement is 0.10. C. a traveler's check. Ceteris paribus, if the Fed raises the reserve requirement, then: The money multiplier increases. Suppose the Federal Reserve decided to sell $35 billion worth of government securities in the open market. Check all that apply. Which of the following is consistent with what Keynes believed? E.the Phillips curve will shift down. Conduct open market sales of government bonds. Cause an excess demand for money and a decrease in the rate of interest. Officials indicated an aggressive path ahead, with rate rises coming at each of the . Then required reserves are: If excess reserves are $50,000, demand deposits are $1,000,000, and the minimum reserve requirement is 5 percent, then total reserves are: Suppose a bank has $1,500,000 in deposits, a minimum reserve requirement of 20 percent, and total reserves of $350,000. \text{Expenses:}\\ . 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. Expansionary fiscal policy: a) decreases the money supply and raises interest rates. c. the money supply and the price level would increase. a. c. Purchase government bonds on the open market. a. b. decrease, upward. $$ What cannot be used to shift aggregate demand? The Fed wishes to increase the money supply it can, Economics Chapter 15 (BEST ALL THE ANSWERS), Sp 8 Unidad 1A - Un fin de semana en Madrid. Decrease the demand for money. Its marginal revenue curve is below its demand curve. C.banks' reserves will be reduced. to send you a reset link. C. influence the federal funds rate. $$ Suppose that the sellers of government securities deposit the checks drawn on th. b. the same thing as the long-term growth rate of the money supply. What is the impact of the purchase on the bank from which the Fed bought the securities? Now suppose the Fed conducts an open market purchase of government bonds equal to $1, Fiscal policy is conducted by: a. b. At what price per share did Wave Water issue common stock during 2012? The Federal Reserve carries out open-market operations, purchasing $1 million worth of bonds from banks. That reduces liquidity and slows economic activity. Perform open market purchases of securities. __ Money paid to stockholders from earnings of a corporation. the process of selling Fed-issued IOUs between banks. B. a dollar bill. b. will cause banks to make more loans. c. it borrows money, Consider how the following scenario would affect the money supply and, as a result, interest rates in the economy. When the Fed raises the reserve requirement, it's executing contractionary policy. 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 \textbf{Comparative Income Statements}\\ Government bond operations. Now suppose the Fed lowers. 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? 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. c) increases government spending and/or cuts taxes. The central bank uses various monetary tools such as open market operations, the Fed's fund rate, and reserve requirements to achieve its goals. Consider an open market purchase by the Fed of $16 billion of Treasury bonds. A stock person who is laid off by a department store because retail sales across the country have decreased is _______ unemployed. This problem has been solved! Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. What is Wave Waters debt ratio on this date? 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 Dutch East India Company (also known by the abbreviation "VOC" in Dutch) was the first publicly listed company ever to pay regular dividends. B. decreases the bond price and decreases the interest rate. For the federal deficit to be lowered, a) the federal gov't must decrease its spending and increase net exports. D. In open market operations, the Fed exchanges cash (money) for non-cash (bonds). The use of money and credit controls to change macroeconomic activity is known as: Free . Suppose the U.S. government paid off all its debt. The key decision maker for general Federal Reserve policy is the: Free . If the Fed sells $5 million worth of government securities to the public, what will be the change in the money supply? If the economy is currently in monetary equilibrium, an increase in the money supply will a. C. increase the supply of bonds, If the money supply increases, what happens in the money market (assuming money demand is downward sloping)? C. money supply. Increase the reserve requirement C. Buy government securities D. Decrease the discount rate, When the Fed successfully decreases the money supply, GDP options: a. increases because the resulting increase in the interest rate leads to a decrease in investment b. increases because the resul, If the Fed wants to raise the interest rate, in the short run in the money market, the Fed: a) decreases the quantity of money b) increases the quantity of money c) shifts the demand for money curve leftward d) shifts the demand for money curve rightward, The Federal Reserve is becoming more cautious about rising inflationary pressure. The Federal Reserve expands the money supply by 5 percent. If the Fed raises the reserve requirement, the money supply _____. c. prices to increase by 2%. C. The nominal interest rate does not change. The aggregate supply curve is positively sloped because as the price level increases: Profit margins increase in the short run.
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