ceteris paribus, if the fed raises the reserve requirement, then:
}\\ Here are the answers with discussion for yesterday's quiz. b. rate of interest decreases. The French import duty is charged on the price at which the product is transferred into France. b. 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. We develop a model of price formation in a dealership market where monitoring of the information flow requires costly effort. C. increase by $290 million. b. Compute the following for the current year: 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%. Suppose the Federal Reserve Bank buys Treasury securities. If the Fed buys more bonds from the public, then the money supply will: Increase and the aggregate demand curve will shift to the right. increase; decrease decrease; decrease increase; increase decrease; increas. If the Federal Reserve raises interest rates, it means the money supply starts to deplete. b) increase. Suppose the Federal Reserve buys government securities from commercial banks. 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). The financial sector has grown relative to the real economy and become more fragile. c. the interest rate rises and this. The fixed monthly cost is $21,000, and the variable cost. $$ Of these, 43 were sold for $\$ 105,000$ each and two remain in finished goods inventory. If a bank does not have enough reserves, it can. 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%. 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. a. monetary base b. D. Decrease the supply of money. If the Fed sells $1 million of government bonds, what is the effect on the economy s reserves and money supply? Therefore the correct option is b: If the Federal Reserve increases the money supply, ceteris paribus, the rate of interest decreases. Open-market operations occur when the Federal Reserve: a. buys U.S. Treasury bills from the federal government. Biagio Bossone. A Burton marketing division in Lille, France, imports 200,000 chainsaws annually from the United States. 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. The company has marketing divisions throughout the world. Given an inflationary gap, the Federal Reserve will use monetary policy to do what to interest rates and to aggregate demand? If the Federal Reserve would like to increase the money supply, it can the reserve ratio, the discount rate, or government securities in open market operations. If the Fed conducts an open-market sale, bank reserves _ and the money supply is likely to _. 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. C. decrease interest rates. Suppose the Federal Reserve engages in open-market operations. b. decrease, upward. Michael Haines b. sell government securities. Working Paper No. Determine the December 31, 2012, balances in Wave Waters shareholders equity accounts and total shareholders equity on this date. A decrease in the reserve ratio will: a. 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. Decrease the discount rate. The four components of aggregate demand are: Consumption, investment, government spending, and net exports. The sale of bonds to the Fed by the public C. Increases in banks' excess reserves D. Increases in. 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. 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. Suppose commercial banks use excess reserves to buy government bonds from the public. Fill in either rise/fall or increase/decrease. Required reserves decrease. b. lowers inflation but raises unemploym, Assume the demand for money curve is stationary and the Fed increases the money supply. \text{Net Income (Loss)}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? 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. Cause the money supply to increase, c. Not affect the money supply, d. Decrease the money multiplier. \end{array} If the Fed sells bonds: A.aggregate demand will increase. c. the money supply is likely to increase. Use these flashcards to help memorize information. 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? b) borrow more from the Fed and lend less to the public. When the Fed decreases the discount rate, banks will a) borrow more from the Fed and lend more to the public. \begin{array}{lcc} b) Lowering the nominal interest rate. b) an open market sale and expansionary monetary policy. Suppose the banks in the Federal Reserve System have $100 million in transactions accounts and the reserve requirement is 0.10. . c) an open market sale. d. sells U.S. Treasury bills to the federal government. As a result, the money supply will: a. increase by $1 billion. What can be used to shift aggregate demand? \begin{array}{c} 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. Would the effect on aggregate demand be larger if the Federal Reserve held the money supply constant in response or if the Fed were committed to maintaining a fixed interest rate? }\\ B. If the fed increases the money supply, what will happen to each of the following (other things being equal)? (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? 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? b. A. buy $25,000 B. sell $25,000 C. sell $5,000 D. buy $1,000 E. sell $1,000, In times of economic downturn, the Federal Reserve will engage in ___ monetary policy by ___ bonds. 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. Figure 14.10c depicts the aggregate investment function of an economy. In order to increase sales by one item per month, the monopolist must lower the price of its software by $1 to $49. Ceteris paribus, if the Fed reduces the reserve requirement ratio, then: A) The lending capacity of the banking system increases. Excess reserves increase. Savings accounts and certificates of deposit are called. Ceteris paribus, if the Fed reduces the reserve requirement, then: A. Was there a profit or a loss for the year ended December 31, 2012? \text{Gross Margin}&\text{\hspace{5pt}1,369,250}&\text{\hspace{5pt}1,369,250}\\ \text{Total uncollectible? 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. B. decreases the money supply, which leads to increased interest rates and a rise in investment spending. Increase; appreciate b. Increase / Decrease b. The number and relative size of firms in an industry. b) increases, so the money supply decreases. 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. increases; rises b. does not change; falls c. decreases; rises d. decreases; falls e. increases; falls. B) means by which the Fed acts as the government's banker. a) 0.25 b) 0, Suppose the reserve requirement for checking deposits is 10 percent and banks do not hold any excess reserves. It creates money, it creates a transactions-account balance for the borrower, and the money supply increases. When the sellers deposit their checks in their bank accounts, their reserves will increase due to the deposits made. 1. Open market operations c. Printing mo. The use of money and credit controls to change macroeconomic activity is known as: Monetary policy. 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. \text{Direct materials used} \ldots & \$ 750,000\\ You would need to create a new account. To manage earnings more favorably, Elegant Linens considers changing the past-due categories as follows. a) increases; decreases, b) decreases; increases, c) decreases; decreases, d) increases; increases. International Financial Advisor. CBDC Next-Level: A New Architecture for Financial "Super-Stability" by. The change is negative it means that excess reserve falls by -100000000 or 100 million. Should the Fed increase or decrease the money supply? The money supply increases. \text{Accounts receivable amount}&\text{\$\hspace{1pt}232,000}&\text{\$\hspace{1pt}129,000}&\text{\$\hspace{1pt}100,400}\\ d. has a contractionary effect on the money supply. Make sure you say increase or decrease/buy or sell. 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}]. Fill in either rise/fall or increase/decrease. In terms of pricing, which of the following is not true for a monopolist? Suppose further that the required reserve, Explain briefly: a. a. a)increases; increases b)increases; decreases c)decreases; increase, 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). }\\ Suppose that the sellers of government securities deposit the checks drawn on the New York Fed into their bank account. If the Fed purchases $10 million in government securities, then wh. The Federal Reserve carries out open-market operations, purchasing $1 million worth of bonds from banks. 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. Raise discount rate 2. An increase in the money supply and a decrease in the interest rate. Patricia's nominal annual income in 2009 was $60,000. d. commercial bank, Assume all money is held in the form of currency. What is meant by open market operations? d. a decrease in the quantity de. In order to maintain price stability, the Federal Reserve has decided to engage in monetary restraint. Currency circulation in the economy will increase since the non-bank public will have sold their securities. The Federal Reserve expands the money supply by 5 percent. Toby Vail. Suppose the economy is initially experiencing an inflationary gap. D. the buying and selling of stocks i, Suppose again that Third National Bank has reserves of $20,000 and check able deposits of $100,000. a) decrease, downward b) decrease, upward c) inc. c. When the Fed decreases the interest rate it p; The Board of Governors has ___ members,and they are appointed for ___ year terms. The required reserve ratio is 16%. a-Ceteris paribus, an increase in the interest rate would lead to a fall in investment due to an inward shift of the investment line. If the economy is currently in monetary equilibrium, an increase in the money supply will a. What is the reserve-deposit ratio? b. the interest rate rises and this stimulates consumption spending. b. Q01 . Enter the email address you signed up with and we'll email you a reset link. Increase; depreciate c. Decrease; de, Under expansionary monetary policy, the Federal Reserve increases the money supply, allowing the banking system to make additional loans - which increases the money supply even more - resulting in higher economic growth. Ceteris paribus, based on the aggregate supply curve, if the price level _______ the quantity of real output _______ increases. When the Fed buys government bonds, the reserve of the banking system: a) increases, so the money supply increases. 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. Suppose that the sellers of government securities redeem these checks drawn on the New York Fed for currency. A. How can you tell? 26. All other trademarks and copyrights are the property of their respective owners. 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. \text{General and Administrative Expense}&\text{\hspace{12pt}425,000}&\text{\hspace{12pt}425,000}\\ All persons over age 16 who are either working for pay or actively seeking paid employment refers to: Who is an example of a part of the labor force? It needs to balance economic growth. When the Fed raises the reserve requirement, it's executing contractionary policy. B. buy bonds lowering the price of bonds and driving up the interest rates. 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? b) increases the money supply and lowers interest rates. 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 ____. D. $100,000 in checkable-deposit liabilities and $30,000 in reserves. Increase government spending. b. 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 ______. The velocity of money is a. the rate at which the Fed puts money into the economy. 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 _______ . 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. the interest rate increases c. the Federal Reserve purchases bonds. E.the Phillips curve will shift down. All other trademarks and copyrights are the property of their respective owners. receivables. A. to send you a reset link. All rights reserved. The Fed approved a 0.25 percentage point rate hike, the first increase since December 2018. b. engage in open market purchases of government securities. (Banks must hold more funds used for loans in reserve and there is a greater leakage as subsequent deposits will yield smaller excess reserves for banks receiving them.) 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? c. Decrease interest rates. B. decrease by $2.9 million. The new reserve requirement exemption amount and low reserve tranche will be effective for all depository institutions beginning January 1, 2022. \text{French income tax rate on the French division's operating income} & \text{45\\\%}\\ If Bank A and all the other banks use reserves to purchase only securities, what will happen to deposits in the banking system and how much does it expand? Which transfer prices should the Burton Company select to minimize the total of company import duties and income taxes? 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. Keynes viewed the economy as inherently unstable and suggested that during a recession policy makers should: Cut taxes and/or increase government spending. The current account deficit will increase. $$ If the Fed uses open-market operations, should it buy or sell government securities? e. raise the reserve requirement. a. increases, increase, increase b. increases, increase, decrease c. decreases, increase, decrease d. increases, decrease, increa, If the Federal Reserve increases the discount rate, how are interest rates and real GDP affected? C. the price level in the economy will rise, thus i. The use of money and credit controls to change macroeconomic activity is known as: Free . When the Federal Reserve makes an open market purchase, the Fed: buys securities from banks and the public, which will decrease tha. The money multiplier is equal to ______ and the reserve ratio is equal to _____%. 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? Federal Reserve purchases of government bonds ______________ total reserves and _________________ the money supply. \end{matrix} The Federal Reserve conducts open market operations when it wants to [{Blank}]? Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page. If $200,000 is deposited in the bank, then ceteris paribus: Excess reserves will increase by $170,000. Interest rates b. What types of accounts are listed on the post-closing trial balance? If not, how will the Central Bank control inflation? b. 16. Issuanceofstock.Cashdividends.Balance,December31,2012.$3ParCommonStock$375120AdditionalPaid-inCapital$2,225240RetainedEarnings$4,200990(69)AccumulatedOtherComprehensiveIncome$123TotalShareholdersEquity$6,812. The Federal Open Market Committee is responsible for: a) reducing the Fed's reliance on open market operations. \text{Total uncollectible? b. increase causing an increase in investment spending shifting aggregate demand, When the Federal Reserve increases the money supply, it aggregate demand and moves the economy along the Phillips curve to a point with inflation and unemployment.