c. prices to increase by 2%. Which of the following is likely to cause a leftward shift in the aggregate supply curve, ceteris paribus? Decrease by $100, Suppose the Federal Reserve buys 3 treasury bonds from the public. 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). Econ Final Flashcards - Cram.com 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. 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. b. Find the taxable wages. Changing the reserve requirement is expensive for banks. 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? The nominal interest rates rises. b. foreign countries only. \text{French income tax rate on the French division's operating income} & \text{45\\\%}\\ C. Controlling the supply of money. Transcribed Image Text: Question Now we introduce banks that will act as liquidity providers in the economy. See Answer Ceteris paribus, if the Fed raised the required reserve ratio: Expert Answer \text{Net Credit Sales}&\text{\$\hspace{1pt}1,454,500}&\text{\$\hspace{1pt}1,454,500}\\ \begin{array}{l r} How does the Federal Reserve regulate the money supply? Multiple . This is an example of which type of unemployment? C. the Fed is seeking, All else equal, if the Federal Reserve decreases the money supply, interest rates will _ and the dollar will _ against other currencies. B. a dollar bill. Generally, when the Federal Reserve lowers interest rates, investment spending [{Blank}] and GDP [{Blank}]. 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. If the Fed sells $1 million of government bonds, what is the effect on the economy's reserves and money supply? 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. Its marginal revenue curve is below its demand curve. b) running the check-clearing process. \text{Total uncollectible? Ceteris paribus, if the Fed raises the reserve requirement, then Most studied answer the lending capacity of the banking system decreases. c. an increase in the demand for bonds and a rise in bond prices. \text{Manufacturing overhead} \ldots & 1,200,000 \\ 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. \text{Expenses:}\\ 1. Over the 30-year life of the. The company has marketing divisions throughout the world. B. decreases the money supply, which leads to increased interest rates and a rise in investment spending. In the money market, an excess demand of money will: A. increase the supply of bonds, increase bond prices, and decrease interest rates. If the Fed sells government bonds, this will: A. The Dutch East India Company (also known by the abbreviation "VOC" in Dutch) was the first publicly listed company ever to pay regular dividends. When you need a break, try one of the other activities listed below the flashcards like Matching, Snowman, or Hungry Bug. The VOC was also the first recorded joint-stock company to get a fixed capital stock. Chapter 14 MCQs.docx - Chapter 14 1. a) b) c) d) Which of a. decrease, downward. To manage earnings more favorably, Elegant Linens considers changing the past-due categories as follows. Inflation rate _____. a. Ceteris paribus, an increase in _______ will cause an increase in ______. Now suppose the Fed lowers. \text{Accounts receivable amount}&\text{\$\hspace{1pt}232,000}&\text{\$\hspace{1pt}129,000}&\text{\$\hspace{1pt}100,400}\\ b. the Federal Reserve buys bonds on the open market. Assume that the currency-deposit ratio is 0.5. Reserve Requirement: Definition, Impact on Economy - The Balance Suppose that the sellers of government securities deposit the checks drawn on th. 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. $$ What impact would this action have on the economy? The change is negative it means that excess reserve falls by -100000000 or 100 million. A change in the reserve requirement affects: The money multiplier and excess reserves. B. taxes. 2. Cbdc"" - An easing of monetary policy interest rates, which the demand for a currency and the fundamental value of the exchange rate. 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. [Solved] Ceteris Paribus,if the Fed Raises the Reserve Requirement,then The use of money and credit controls to change macroeconomic activity is known as: Monetary policy. c. real income increases. Chapter 14 Macro - Subjecto.com Annual gross pay of $18,200. &\textbf{past due}&\textbf{past due}&\textbf{past due}\\[5pt] Martin takes $150 out of his checking account and hides it in his house as cash. d) Lowering the real interest rate. Suppose a bank has $50,000 in transactions accounts and a minimum reserve requirement of 10 percent. D. Transaction demand for, To ease monetary policy to fight a recession, the Federal Reserve would ____. c. first purchase, then sell, government securities. View Answer. It is considered to be less efficient for an economy than the use of money. b) borrow reserves from the public. B. the Fed is concerned about high unemployment rates. Federal Reserve purchases of government bonds ______________ total reserves and _________________ the money supply. 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. Increase; appreciate b. d, If the Federal Reserve wants to increase output, it increases A. government spending. Why does an open market purchase of Treasury securities by the Federal Reserve increase bank reserves? Which of the following functions does the Fed perform? If market interest rates rise, the selling price of existing bonds in the market will, ceteris paribus, . A sale of treasury bills by the federal reserve _____ interest rates and _____ the money supply. Decrease the discount rate. 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. How would this affect the money supply? d. The money supply should increase when _ a. Of these, 43 were sold for $\$ 105,000$ each and two remain in finished goods inventory. \text{Total uncollectible? Sell government securities 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 the incentive to borrow funds increases b. sell government securities. Raise the reserve requirement, increase the discount rate, or . 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. The Great Depression was caused by a steep decline in the money supply when the stock market crashed in 1929. \end{array} c-A forecast of a permanent demand increase shifts the investment line . What happens if the Federal Reserve lowers the reserve - Investopedia When the Fed raises the reserve requirement, it's executing contractionary policy. To see how well you know the information, try the Quiz or Test activity. 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. 2. &\textbf{0-60 days}&\textbf{61-120 days}&\textbf{Over 120 days}\\ are the minimum amount of reserves a bank is required to hold. C. the price level in the economy will rise, thus i. c. reduce the reserve requirement. a. It forces them to modify their procedures. \begin{array}{c} (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.) 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. C. $120,000 in checkable-deposit liabilities and $32,000 in reserves. The Fed approved a 0.25 percentage point rate hike, the first increase since December 2018. }\\ b. buys or sells foreign currency. This problem has been solved! "The federal bank can use open market operations as an instrument of monetary policy to manipulate interest rates and control supply of money." b. the interest rate rises and this stimulates consumption spending. 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. Note The higher the reserve requirement, the less profit a bank makes with its money. Where do you suppose the Fed gets the cash, to do this ? Which of the following lends reserves to private banks? The number and relative size of firms in an industry. 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). Which of the following is consistent with what Keynes believed? d. the average number of times per year a dollar is spent. b. a decrease in the demand for money. The Federal Reserve Bank b. Suppose the Federal Reserve buys government securities from the non-bank public. \text{U.S. income tax rate on the U.S. division's operating income} & \text{40\\\%}\\ The following is the past-due category information for outstanding receivable debt for 2019. 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 _______. __ Money paid to stockholders from earnings of a corporation. 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. Tax on amount over $3,000 :3 percent. C. increase the supply of bonds, If the money supply increases, what happens in the money market (assuming money demand is downward sloping)? Ceteris paribus, if the reserve requirement is decreased to 0.05, then excess reserves will . 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. When aggregate demand exceeds the full-employment level of output, the result is: LEFT ARROW - move card to the Don't know pile. The Fed lowers the federal funds rate. \text{Net Income (Loss)}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? 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? Privacy Policy and Suppose the banks in the Federal Reserve System have $100 million in transactions accounts and the reserve requirement is 0.10. 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. It creates money, it creates a transactions-account balance for the borrower, and the money supply increases. 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. Buy Treasury bonds, bills, or notes on the bond market. 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? c. Fed sells bonds. 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. Previous question Next question receivables. $$. a) Given the required reserve ratio, RR/D=0.10, the excess reserves to deposits ratio, ER/D=0.06, the currency to deposits ratio, Assume that any money lent by a bank is always deposited back in the banking system as a checkable deposit and that the required reserve ratio is 15%. c). 1. 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 ______. When the Fed buys government Securities in the open market (a) bank reserves increase (b) bank reserves decline (c) money supply increases but bank reserves remain unchanged (d) money supply declines but bank reserves remain unchanged. D. Decrease the supply of money. Toby Vail. b. rate of interest decreases. }\\ How will the lending capacity of the banking system be affected if the reserve requirement is 5 percent? Keynes viewed the economy as inherently unstable and suggested that during a recession policy makers should: Cut taxes and/or increase government spending. Suppose the Federal Reserve decided to sell $35 billion worth of government securities in the open market. If the Fed raises the reserve requirement, the money supply _____. 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). Which of the following is likely to occur if OPEC increases the amount of oil it supplies and domestic energy prices fall, ceteris paribus? Expansionary fiscal policy is when a. the government lowers spending and raises taxes. If the Federal Reserve wants to decrease the money supply, it should: a. \text{Selling expenses} \ldots & 500,000 Instead of paying her for this service,the neighbor washes the professor's car. In order to maintain price stability, the Federal Reserve has decided to engage in monetary restraint. 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 _______ . - By buying and selling bonds through open-market operations - By buying and selling stocks - By setting the interes, Suppose the Fed decided to purchase $100 billion worth of government securities in the open market, directly deposited into the banking system. c. it borrows money, Consider how the following scenario would affect the money supply and, as a result, interest rates in the economy. How does it affect the money supply? 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 ____. Assume that banks use all funds except required, 13. Suppose further that the required reserve, Explain briefly: a. 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. Wave Waters total liabilities on December 31, 2012, are $7,800. b. C. where a bank borrows reserves or bo, Open market operations are a) buying and selling of Federal Reserve Notes in the open market. If the Open-Market Committee of the Federal Reserve sells securities, this action tends to: a. decrease the money supply. Federal Reserve approves first interest rate hike in more than three B. increase the supply of bonds, decrease bond prices, and increase interest rates. decreases, rises, If the Federal Reserve reduces interest rates, it wants: a. The creation of a Federal Reserve System was recommended by. 1015. In the market for reserves, if the federal funds rate is above the interest rate paid on excess reserves, an open market sale ________ the ________ of reserves, causing the federal funds rate to increase, everything else held constant. Explain the statement. The aggregate demand curve should shift rightward. Consider the money multiplier and assume the, Suppose that the reserve requirement ratio is 4% and that the Fed uses open market operations (OMO) by BUYING $200 million worth of Treasury securities.

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