Examples of money are: A. a check. The Federal Reserve calculates and provides reserve balance requirements before the start of each maintenance period to depository institutions via the Reserves Central--Reserve Account Administration, which is available on the Federal Reserve Bank Services website. Match the terms with definitions. a. increase the supply of bonds, thus driving up the interest rate. How would this affect the money supply? View Answer. b. engage in open market purchases of government securities. A. decrease, downward B. decrease, upward C. increase, downward D. increase, If inflation begins to rise rapidly, which step is the Federal Reserve likely to take? Aggregate supply will increase or shift to the right. Suppose that the sellers of government securities deposit the checks drawn on the New York Fed into their bank account. b. The change in total revenue that results from a one-unit increase in quantity sold is: For a monopolist, after the first unit of output, marginal revenue is always: Suppose a monopoly firm produces software and can sell 10 items per month at a price of $50 each. The company has marketing divisions throughout the world. (a) Show how t. When the central bank sells government bonds does it do so by applying monetary policies such as expansionary and deflationary policies or do they sell them to specific buyers? 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? If the economy is currently in monetary equilibrium, an increase in the money supply will a. Use a balance sheet to show the impact on the bank's loans. If the Fed raises the reserve requirement, the money supply _____. 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. Some terms may not be used. d. lend more reserves to commercial banks. The Federal Reserve Bank b. Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page. c. buys or sells existing U.S. Treasury bills. copyright 2003-2023 Homework.Study.com. A change in government spending, a change in taxes, and monetary policy. When the Federal Reserve sells bonds as a part of a contractionary monetary policy, there is: A. C.banks' reserves will be reduced. Although it may feel like you're playing a game, your brain is still making more connections with the information to help you out. c) decreases government spending and/or raises taxes. c. Decrease interest rates. The creation of a Federal Reserve System was recommended by. \text{Net Credit Sales}&\text{\$\hspace{1pt}1,454,500}&\text{\$\hspace{1pt}1,454,500}\\ Ceteris paribus, an increase in _______ will cause an increase in ______. The money multiplier is equal to ______ and the reserve ratio is equal to _____%. 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. $$ d) All of the above. Savings accounts and certificates of deposit are called. Assume the reserve requirement is 5%. Federal Reserve purchases of government bonds ______________ total reserves and _________________ the money supply. b. the same thing as the long-term growth rate of the money supply. \text{Variable manufacturing cost per chainsaw} & \text{\$100}\\ Ceteris paribus, if the Fed raises the reserve requirement, then: e The lending capacity of the banking system decreases. What is the impact of the purchase on the bank from which the Fed bought the securities? Compute the following for the current year: U.S. goods are less expensive for Americans so they buy fewer imports and more domestic goods. While those goals were articulated in 1977, 2 the approach and tools used to implement those objectives have changed over time. How can you tell? Assume a fixed demand for money curve and the Fed decreases the money supply. The Fed lowers the federal funds rate. D) Required reserves decrease. 1015. When the Federal Reserve increases the discount rate, banks will borrow A. fewer reserves and decrease lending. b) means by which the Fed acts as the government's banker. If the Federal Reserve increases the money supply, ceteris paribus, the: Money supply is defined as all the currency and other liquid instruments held by banks/individuals in a country's economy in a given time. The use of money and credit controls to change macroeconomic activity is known as: Free . b. money demand increases and the price level decreases. If $200,000 is deposited in the bank, then ceteris paribus: Excess reserves will increase by $170,000. Increase the reserve requirement. If the Federal Reserve System buys government securities from commercial banks and the public: a. the money supply will contract. d. decrease the discount rate. Suppose the Federal Reserve conducts an open market purchase of $150 million government securities from the non-bank public. 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? Look at the large card and try to recall what is on the other side. B) Total reserves increase D) The money multiplier decreases. 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 current account deficit will increase. C. increase by $290 million. How will the lending capacity of the banking system be affected if the reserve requirement is 5 percent? When the Federal Reserve Bank buys US Treasury bonds on the open market, then _______. What is the reserve-deposit ratio? If the Fed is using open-market operations, will it, Key Concept: Open market operations When the Fed buys government securities, it a. 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. c) not change. Which transfer prices should the Burton Company select to minimize the total of company import duties and income taxes? The lending capacity of the banking system decreases. 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. 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. Decrease the demand for money. 3. Suppose the banks in the Federal Reserve System have $100 million in transactions accounts and the reserve requirement is 0.10. \text{Net Income (Loss)}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? c. the money supply divided by nominal GDP. 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. Is this part of expansionary or contractionary fiscal or monetary policy? D. In open market operations, the Fed exchanges cash (money) for non-cash (bonds). }\\ C. a traveler's check. 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. \end{matrix} The Federal Reserve expands the money supply by 5 percent. The paper argues that the process of financialization has profoundly changed how capitalist economies operate. **Instructions** Money supply to decrease b. Required reserves decrease. Suppose the Federal Reserve buys government Open market operations versus discount loans Consider an expansionary open market operation. The key decision maker for general Federal Reserve policy is the: Free . 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. A) Increase money supply to decrease interest rates, increase i. Expansionary monetary policy: a) decreases government spending and/or raises taxes. c). Ceteris paribus, if the reserve requirement is decreased to 0.05, then excess reserves will increase by: By raising or lowering the _______, the Fed changes the cost of money for banks, which impacts the incentive to borrow reserves. \text{Accounts receivable amount}&\text{\$\hspace{1pt}232,000}&\text{\$\hspace{1pt}129,000}&\text{\$\hspace{1pt}100,400}\\ Professor Williams tutors her next-door neighbor's son in economics. B. decrease by $200 million. c. reduce the reserve requirement. When you need a break, try one of the other activities listed below the flashcards like Matching, Snowman, or Hungry Bug. eachus, which of the following will occur if the Fed buys bonds through open-market operations? raise the discount rate. $$ Increase the demand for money. A sale of treasury bills by the federal reserve _____ interest rates and _____ the money supply. c) decreases, so the money supply increases. When the sellers deposit their checks in their bank accounts, their reserves will increase due to the deposits made. Road Warrior Corporation began operations early in the current year, building luxury motor homes. An increase in the money supply and a decrease in the interest rate. Patricia's nominal annual income in 2009 was $60,000. 23. C. treasury bond operations. If you knew the answer, click the green Know box. C) Total deposits decrease. In terms of pricing, which of the following is not true for a monopolist? Raise discount rate 2. A. 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. c. Purchase government bonds on the open market. b. rate of interest decreases. &\textbf{past due}&\textbf{past due}&\textbf{past due}\\[5pt] a. decrease, downward. It also raises the reserve ratio. See our Also assume that banks do not hold excess reserves and there is no cash held by the public. b-A rise in corporate tax would shift the investment line outwards. \text{French import duty} & \text{20\\\%}\\ 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. state and local government agencies only. 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. Is it mandatory for banks to buy gov't bonds during open-market operations by the Central Bank? If a bank does not have enough reserves, it can. Lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public. 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 ______. 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 information provided should help you work out why you missed a question or three! 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. 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. Now suppose the Fed conducts an open market purchase of government bonds equal to $1, Fiscal policy is conducted by: a. The Fed's decision amounted to a shift to a more cautious period of inflation fighting. b. the Federal Reserve buys bonds on the open market. A. decreases; decreases B. decreases; increases C. increases; decreases D. increases. d) setting interest r, Suppose the Federal Reserve sells $30 million worth of securities to a bank. b. the Federal Reserve buys bonds on the open market. Q02 . Expansionary fiscal policy is when a. the government lowers spending and raises taxes. b. prices to increase by 3%. b) increase. Consider an expansionary open market operation. 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. Total deposits decrease. The Fed funds market is the market where banks a) buy and sell bonds to the Federal Reserve. Which of the following indicates the appropriate change in the U.S. economy? $140,000 in checkable-deposit liabilities and $46,000 in reserves. All rights reserved. CBDC Next-Level: A New Architecture for Financial "Super-Stability" by. receivables. Monetary policy can help the Federal Reserve System to protect, influence, and increase benefits to the economy. The Board of Governors has___ members, and they are appointed for ___year terms. A combination of flexible rules and limited discretion. 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 Fed wants to raise short-term interest rates, it should a. act to increase the money supply. It sells $20 billion in U.S. securities. FROM THE STUDY SET 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 ______. b. it buys Treasury securities, which decreases the money supply. Consider an expansionary open market operation. The aggregate demand curve should shift rightward. c. the Federal Reserve System. 41. 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. C. $120,000 in checkable-deposit liabilities and $32,000 in reserves. Issuanceofstock.Cashdividends.Balance,December31,2012.$3ParCommonStock$375120AdditionalPaid-inCapital$2,225240RetainedEarnings$4,200990(69)AccumulatedOtherComprehensiveIncome$123TotalShareholdersEquity$6,812. 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. Determine the December 31, 2012, balances in Wave Waters shareholders equity accounts and total shareholders equity on this date. 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. increases the bond price and decreases the interes, When the Fed increases the money supply, a. people spend less because they have more money. U.S.incometaxrateontheU.S.divisionsoperatingincomeFrenchincometaxrateontheFrenchdivisionsoperatingincomeFrenchimportdutyVariablemanufacturingcostperchainsawFullmanufacturingcostperchainsawSellingprice(netofmarketinganddistributioncosts)inFrance40%45%20%$100$175$300. B. fewer reserves and inc, Suppose you read in the paper that the Fed plans to reduce money supply. C. Controlling the supply of money. \text{Total Expenses}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? The long-term real interest rate _____. The reserve ratio is 20%. If the Fed decides to engage in an open market operation to increase the money supply, what will it do? When the Federal Reserve increases the discount-rate increases the discount rate as a part of a contractionary monetary policy, there is: A. c-A forecast of a permanent demand increase shifts the investment line . B) means by which the Fed acts as the government's banker. d. rate of interest increases.. The result will be a in the money market and a in the bond market, which will push bond prices and interest rates will unti, Starting from a monetary equilibrium condition, an increase in the money supply A. increases the bond price and increases the interest rate. c) Increasing the money supply. 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. 3 . B. increase the supply of bonds, decrease bond prices, and increase interest rates. Any import duty paid to the French authorities is a deductible expense for calculating French income taxes. Terms of Service. 16. Tax on amount over $3,000 :3 percent. a. 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.