Instead of paying her for this service,the neighbor washes the professor's car. \textbf{ELEGANT LINENS}\\ \text{Selling expenses} \ldots & 500,000 Inflation rate _____. Michael Haines The required reserve ratio is 16%. In the short run, the quantity of money demanded [{Blank}] and the nominal interest rate [{Blank}]. b) decreases the money supply and raises interest rates. b-A rise in corporate tax would shift the investment line outwards. If the Federal Reserve increases the money supply, ceteris paribus, the $$ d) increases government spending and/or cuts taxes. Ceteris paribus if the fed was targeting the quantity - Course Hero b. increase the supply of bonds, thus driving down the interest rate. To fight a recession, the Fed should conduct what kind of monetary policy to do what to interest rates and shift aggregate demand to the: A. contractionary; increase; left B. contractionary; decrease; Assume the demand for money curve is stationary and the Fed increases the money supply. 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. lower reserve requirements.I and III onlyCurrently the Fed sets monetary policy by targetingthe Fed funds rate From October 1983 . \begin{array}{lcc} Suppose the Federal Reserve buys government securities from the non-bank public. The Treasury buys bonds in the open market c. The Fed reduces reserve requirements d. The Treasury sells b. It also raises the reserve ratio. Which of the following is likely to occur if OPEC increases the amount of oil it supplies and domestic energy prices fall, ceteris paribus? Bob, a college student looking for summer work. b. decrease the money supply and decrease aggregate demand. Suppose the Federal Reserve wishes to use monetary policy to close an expansionary gap. It needs to balance economic growth. Explain the statement. 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. Determine the December 31, 2012, balances in Wave Waters shareholders equity accounts and total shareholders equity on this date. b) borrow more from the Fed and lend less to the public. The people who sold these bonds keep all their money in checking accounts. 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). That reduces liquidity and slows economic activity. 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. 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. d. The money supply should increase when _ a. Ceteris paribus, what will occur if the Fed buys bonds through open-market operations? 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. Also assume that banks do not hold excess reserves and there is no cash held by the public. Explain your reasoning. Lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public. Ceteris paribus, if the Fed reduces the reserve requirement ratio, then: A) The lending capacity of the banking system increases. 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. True or false? If the Fed increases the money supply, then ceteris 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? B. decisions by the Fed to increase or decrease the money multiplier. Above equilibrium, this results in excess supply. Consider an expansionary open market operation. Suppose the Federal View Answer. Could the Federal Reserve continue to carry out open market operations? b) increase. a. 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 ______. are the minimum amount of reserves a bank is required to hold. Suppose that the sellers of government securities redeem these checks drawn on the New York Fed for currency. b. the price level increases. For best results enter two or more search terms. Cause the money supply to increase, c. Not affect the money supply, d. Decrease the money multiplier. b. it buys Treasury securities, which decreases the money supply. Road Warrior Corporation began operations early in the current year, building luxury motor homes. D. Describe the categories change effect on net income and accounts receivable. If the price of computers falls during a period when the average price level remains constant, which of the following has occurred? Suppose the Federal Reserve undertakes an open market purchase of government bonds. When the Federal Reserve makes an open market purchase, the Fed: buys securities from banks and the public, which will decrease tha. Perform open market purchases of securities. 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. 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. c. the government increases spending and lowers taxes. . How does the Federal Reserve regulate the money supply? The Federal Reserve expands the money supply by 5 percent. The velocity of money is a. the rate at which the Fed puts money into the economy. Issuanceofstock.Cashdividends.Balance,December31,2012.$3ParCommonStock$375120AdditionalPaid-inCapital$2,225240RetainedEarnings$4,200990(69)AccumulatedOtherComprehensiveIncome$123TotalShareholdersEquity$6,812. Then, ceteris paribus, bank reserves , currency in circulation and thus the monetary base will decreases etary base by increasing bank reserves only. What happens to interest rates? In response, people will a. sell bonds, thus driving up the interest rate. Demand; marginal revenue and marginal cost. Which of the following functions does the Fed perform? c. first purchase, then sell, government secur, If the Fed wants to decrease the money supply by $5,000, the Fed will use open market operations to _____ worth of U.S. government bonds. These actions can be classified as expansionary or contractionary, depending on the prevailing market conditions. Acting as fiscal agents for the Federal government. (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. How does it affect the money supply? 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 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. The result is imperfect monitoring, which creates profit opportunities for speculators, who do not act as dealers but simply c-A forecast of a permanent demand increase shifts the investment line . (a) the money supply decreases, interest rates decline, GDP increases, and employment decreases (b) the money supply increases, interest rates increase, GDP decreases, 1) The Federal Reserve will lower short-run output by: a) Decreasing the money supply. "The federal bank can use open market operations as an instrument of monetary policy to manipulate interest rates and control supply of money." Also assume the Federal Reserve conducts an Open Market Operations purchase of U.S. Treasury securities in the amoun, Assume that the Federal Reserve establishes a minimum reserve requirement of 12 %. \text{Net Credit Sales}&\text{\$\hspace{1pt}1,454,500}&\text{\$\hspace{1pt}1,454,500}\\ Causes an increase in the federal funds rate, c. Increases reserve holdings of the commercial banks, d. Lowers the cost of borrowing from the Fed, e. Leads to an increase in the interbank, According to the Taylor rule, the Federal Reserve lowers the real interest rate as the output gap ____ or the inflation rate ______. C. decrease interest rates. Explain. a. copyright 2003-2023 Homework.Study.com. While those goals were articulated in 1977, 2 the approach and tools used to implement those objectives have changed over time. \end{array} d) decreases, so the money supply decreases. FROM THE STUDY SET Assume central bank money (H) is initially equal to $100 million. b. the Federal Reserve buys bonds on the open market. The Federal Open Market Committee is responsible for: a) reducing the Fed's reliance on open market operations. By raising or lowering the _______, the Fed changes the cost of money for banks, which impacts the incentive to borrow reserves. C. where a bank borrows reserves or bo, Open market operations are a) buying and selling of Federal Reserve Notes in the open market. The new reserve requirement exemption amount and low reserve tranche will be effective for all depository institutions beginning January 1, 2022. b) increases the money supply and lowers interest rates. The Federal Reserve carries out open-market operations, purchasing $1 million worth of bonds from banks. The supply of money increases when: a. the value of money increases. The equilibrium price level and equilibrium output should both increase. $$ d. the price level decreases. C. Increase the supply of money. b. rate of interest decreases. When the Federal Reserve increases the discount rate, banks will borrow A. fewer reserves and decrease lending. Open-market operations occur when the Federal Reserve: a. buys U.S. Treasury bills from the federal government. Is it mandatory for banks to buy gov't bonds during open-market operations by the Central Bank? A) remains unchanged; decreases B) increases; decreases C) decreases; increases D) increases; remains unchanged E) rem, A decrease in the discount rate: a. Decreases the money supply, b. B. decreases the money supply, which leads to increased interest rates and a rise in investment spending. &\textbf{0-30 days}&\textbf{31-90 days}&\textbf{Over 90 days}\\ 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. Patricia's nominal annual income in 2009 was $60,000. On October 24, 1929, the stock market crashed. \textbf{Year Ended December 31, 2019}\\ 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. b) increases, so the money supply decreases. In the money market, an excess demand of money will: A. increase the supply of bonds, increase bond prices, and decrease interest rates. 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. b. a decrease in the demand for money. b. C. The nominal interest rate does not change. D. interest rates will increase. b. the interest rate increases c. the Federal Reserve purchases bonds. The nominal interest rates rises. B. Explore how the Federal Reserve uses monetary policies to control the money supply and affect interest rates in an effort to prevent another depression from occuring. The financial sector has grown relative to the real economy and become more fragile. E. discount rate operations. 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. d. the demand for money. . 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. A Burton marketing division in Lille, France, imports 200,000 chainsaws annually from the United States. 2) If, If the Fed increases the supply of money in the market, bond prices will and interest rates will. The Fed Raises Rates a Quarter Point and Signals More Ahead receivables. Assume that the Fed increases the monetary base by $1 billion when the reserve requirement is 1/7. 1015. (Income taxes are not included in the computation of the cost-based transfer prices.) a. If the Federal Reserve wants to decrease the money supply, it should: a. \text{Percent uncollectible}&\text{8\\\%}&\text{17\\\%}&\text{31\\\%}\\ Quiz 14: Monetary Policy | Quiz+ It forces them to modify their procedures. The difference between price and average total cost multiplied by the quantity sold. B. excess reserves at commercial banks will decrease. If the Federal Reserve increases the money supply, ceteris paribus, the: a. rate of interest is unaffected. Enter the email address you signed up with and we'll email you a reset link. d. sells U.S. Treasury bills to the federal government. A stock person who is laid off by a department store because retail sales across the country have decreased is _______ unemployed. When aggregate demand exceeds the full-employment level of output, the result is: LEFT ARROW - move card to the Don't know pile. C. a traveler's check. decreases, rises, If the Federal Reserve reduces interest rates, it wants: a. b. money demand increases and the price level decreases. Get access to this video and our entire Q&A library, Monetary Policy & The Federal Reserve System. &\textbf{0-60 days}&\textbf{61-120 days}&\textbf{Over 120 days}\\ Increase the reserve requirement. The result is that people _____. b) Lowering the nominal interest rate. Although it may feel like you're playing a game, your brain is still making more connections with the information to help you out. \text{Total uncollectible? Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10. Excess reserves increase. d. raise the treasury bill rate. \begin{array}{l r} 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. Sell Treasury bonds, bills, or notes on the bond market. C. increase by $50 million. c) Increasing the money supply. One HEADLINE article in the text has the title "Fed cuts key interest rate half-point to 1 percent." Financialization and Finance-Driven Capitalism 3 . 1. Annual gross pay of $18,200. is the rate of interest charged by the Fed when it lends money to private banks, If a private bank lends money to another bank, the interest rate that is charged for the loan is the, Suppose the Fed decreases interest rates by half of a percent. \end{array} B) Total reserves increase D) The money multiplier decreases. b. means by which the Fed supplies the economy with currency. This causes excess reserves to, the money supply to, and the money multiplier to. \text{Gross Margin}&\text{\hspace{5pt}1,369,250}&\text{\hspace{5pt}1,369,250}\\ 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. b. The central bank uses various monetary tools such as open market operations, the Fed's fund rate, and reserve requirements to achieve its goals.