a. The financial sector has grown relative to the real economy and become more fragile. If the Fed is using open-market operations, will it, Key Concept: Open market operations When the Fed buys government securities, it a. \text{Total uncollectible? Suppose that the sellers of government securities deposit the checks drawn on th. 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? Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. 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. What cannot be used to shift aggregate demand? The Fed sells Treasury bills in the open market b. B. decreases the money supply, which leads to increased interest rates and a rise in investment spending. \text{Total uncollectible? Multiple Choice . c. commercial bank reserves will be unaffected. c). The text describes the theoretical developments of the assignment rules regarding fiscal and monetary policies and the respective roles in macroeconomics stabilisation. Privacy Policy and Name the three tools of monetary policy that the Federal Reserve System can do to combat inflation. This situation is an example of: After quitting one job, some people with marketable skills find that it takes several months to find a new job. Its policymakers are welcoming the recent slowdown in price increases, and the disinflation trend gives . The key decision maker for general Federal Reserve policy is the: Free . If the Fed sells bonds: A.aggregate demand will increase. Assume a fixed demand for money curve and the Fed decreases the money supply. 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. Issuanceofstock.Cashdividends.Balance,December31,2012.$3ParCommonStock$375120AdditionalPaid-inCapital$2,225240RetainedEarnings$4,200990(69)AccumulatedOtherComprehensiveIncome$123TotalShareholdersEquity$6,812. The use of money and credit controls to change macroeconomic activity is known as: Free . b. the interest rate rises and this stimulates consumption spending. A. change the liquidity levels of banks. $$. d) decreases, so the money supply decreases. A lower amount of money in the economy makes it more expensive to borrow for banks and consumers.. d. rate of interest increases.. &\textbf{past due}&\textbf{past due}&\textbf{past due}\\[5pt] C. excess reserves at commercial banks will increase. b. b. the same thing as the long-term growth rate of the money supply. \end{array} Change in Excess Reserve = -100000000. Why does an open market purchase of Treasury securities by the Federal Reserve increase bank reserves? On October 24, 1929, the stock market crashed. D. decrease, Assume that the Federal Reserve establishes a minimum reserve requirement of 12.5%. 23. If there is a recession, the Fed would most likely a. encourage banks to provide loans by. Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10. Government bond operations. b. - 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. Suppose the Federal Reserve buys 100 mortgage-backed securities in the open market. c. means by which the Fed acts as the government's banker. Here are the answers with discussion for yesterday's quiz. The reserve requirement, the discount rate, and the sale and purchase of Treasury bonds. A perfectly competitive firm currently sells 30,000 cartons of eggs at $1.25 each. The Federal Reserve carries out open-market operations, purchasing $1 million worth of bonds from banks. If $200,000 is deposited in the bank, then ceteris paribus: Excess reserves will increase by $170,000. D. Decrease the supply of money. Determine the December 31, 2012, balances in Wave Waters shareholders equity accounts and total shareholders equity on this date. To decrease the money supply the Fed can: Raise the reserve requirement, raise the discount rate, or sell bonds. . Acting as fiscal agents for the Federal government. 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. b) increase. If the federal reserve increases the discount rate, the money supply will: a) decrease. Bob, a college student looking for summer work. a. (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.) a. increases, rises b. increases, falls c. decreases, falls d. decreases, does not change e. . Make sure you say increase or decrease/buy or sell. The company has marketing divisions throughout the world. 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. $$ Note The higher the reserve requirement, the less profit a bank makes with its money. C. Increase the supply of money. B. purchases government bonds to decrease the money supply. Assume that the Fed increases the monetary base by $1 billion when the reserve requirement is 1/7. B. B. decrease the discount rate. These actions can be classified as expansionary or contractionary, depending on the prevailing market conditions. d. the demand for money. C. Controlling the supply of money. Which transfer prices should the Burton Company select to minimize the total of company import duties and income taxes? B) The lending capacity of the banking system decreases. 3 . the process of selling Fed-issued IOUs between banks. Assume that the currency-deposit ratio is 0.5. Ceteris paribus, if the reserve requirement is decreased to 0.07, then excess reserves will increase by: $3 million. If the FED sells $10 million worth of government securities in an open market operation, then the money supply can potentially: A. increase by $150 million. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. 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. 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. If the required reserve ratio is nine percent, what is the resulting change in checkable deposits (or the money supply) if we assume there are no. b. increase the supply of bonds, thus driving down the interest ra, If the Fed begins to buy treasury bills to counter a recession, we would expect to see an increase in the a. demand for money. In addition, the company had six partially completed units in its factory at year-end. The deposit-creation potential of the banking system is: A reduction in the money supply should shift the aggregate: Monetary policy involves the use of money and credit controls to: What not a basic monetary policy tool used by the Fed? d) increases the money supply and lowers interest rates. 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. C. influence the federal funds rate. What are some basic monetary policy tools used by the Fed? It transfers money from spenders to savers. B. there is an excess demand for bonds, so those looking to borrow by selling bonds can do so at a lower interest rate. C. treasury bond operations. 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? D. The money multiplier decreases. B. D.bond prices will rise, and interest rates will fall. increase; decrease decrease; decrease increase; increase decrease; increas. }\\ Assume central bank money (H) is initially equal to $100 million. 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. b. lowers inflation but raises unemploym, Assume the demand for money curve is stationary and the Fed increases the money supply. D. $100,000 in checkable-deposit liabilities and $30,000 in reserves. Figure 14.10c depicts the aggregate investment function of an economy. Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page. c. Offer rat, 1. d. the money supply and the pric, When the Fed increases the quantity of money, the: a. equilibrium interest rate falls b. demand for money curve shifts right c. supply of money curve shifts leftward. Suppose the Federal Reserve buys government securities from the non-bank public. $$ 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). B. decrease by $2.9 million. Suppose the U.S. government paid off all its debt. You would need to create a new account. The reserve ratio is 20%. 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 . a. decrease, downward b. decrease. Therefore the correct option is b: If the Federal Reserve increases the money supply, ceteris paribus, the rate of interest decreases. Ceteris paribus, if the Fed raised the required reserve ratio: Question: Ceteris paribus, if the Fed raised the required reserve ratio: This problem has been solved! If a bank does not have enough reserves, it can. a. Suppose the Fed conducts $10 million open market purchase from Bank A. C. money supply. B. the Fed is concerned about high unemployment rates. The sale of bonds to the Fed by banks B. Answer: Answer: B. a. contractionary; buying b. expansionary; buying c. expansionary; selling d. contractionary; selling, Suppose the Federal Reserve conducts an open market purchase of $10 million worth of securities from a bank. Fiscal policy should be used to shift the aggregate demand curve. Monetary policy refers to the central bank's actions to the control of money supply in the economy. d, If the Federal Reserve wants to increase output, it increases A. government spending. Although it may feel like you're playing a game, your brain is still making more connections with the information to help you out. \begin{array}{lcc} The Fed funds market is the market where banks a) buy and sell bonds to the Federal Reserve. B) bond yields will fall C) bond yields will increase as well. b. sell bonds, thus driving down the interest rate. d. Conduct open market sales. . The following is the past-due category information for outstanding receivable debt for 2019. c. has an expansionary effect on the money supply. The Fed's decision amounted to a shift to a more cautious period of inflation fighting. b. sell government securities. What is Wave Waters debt ratio on this date? (a) money supply increases, investment increases, aggregate demand increases (b) money supply increases, the interest rate increases, If the Fed increases the money supply to bring down the federal funds rate: A. a. \text{Total per category}&\text{?}&\text{?}&\text{? At what price per share did Wave Water issue common stock during 2012? What is the impact of the purchase on the bank from which the Fed bought the securities? Ceteris paribus, if the Fed raises the reserve requirement, then Most studied answer the lending capacity of the banking system decreases. If the Fed wants to increase the money supply through an open market operation, it will a. purchase government securities. D. all of the above. b) borrow more from the Fed and lend less to the public. A Burton marketing division in Lille, France, imports 200,000 chainsaws annually from the United States. \text{Accounts receivable amount}&\text{\$\hspace{1pt}263,000}&\text{\$\hspace{1pt}134,200}&\text{\$\hspace{1pt}64,200}\\ Examples of money are: A. a check. Price charged is always less than marginal revenue. The Federal Reserve (the Fed), the central bank of the United States, has a Congressional mandate to promote maximum employment and price stability. \begin{array}{l r} receivables. 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 A change in government spending, a change in taxes, and monetary policy. 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. Suppose the economy is initially experiencing an inflationary gap. 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. 3. \text{Bad Debt Expense}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? Decrease the discount rate. 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. Answer the question based on the following balance sheet for the First National Bank. Professor Williams tutors her next-door neighbor's son in economics. Assume the reserve requirement is 5%. You can also use your keyboard to move the cards as follows: If you are logged in to your account, this website will remember which cards you know and don't know so that they With everything else held constant, how will each of the following change as the result of the Fed's policy action (increase, decrease, or no change)? Martin takes $150 out of his checking account and hides it in his house as cash. c. an increase in the quantity of money demanded. 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? Cost of finished goods manufactured. Ceteris paribus, what will occur if the Fed buys bonds through open-market operations? Suppose a bank has $50,000 in transactions accounts and a minimum reserve requirement of 10 percent. b. b. means by which the Fed supplies the economy with currency. 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. increase by $290 million. then the Fed. 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. a. c-A forecast of a permanent demand increase shifts the investment line . Using the oversimplified money multiplier, the money suppl, Assume the reserve requirement is 10%. Find the taxable wages. Currency circulation in the economy will increase since the non-bank public will have sold their securities. Our experts can answer your tough homework and study questions. The Fed approved a 0.25 percentage point rate hike, the first increase since December 2018. The supply of money increases when: a. the value of money increases. Price falls to the level of minimum average total cost. Hence C is the correct option. It also raises the reserve ratio. 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. Conduct open market sales of government bonds. The money supply decreases. An increase in the money supply and a decrease in the interest rate. $$ The required reserve ratio is 16%. A combination of flexible rules and limited discretion. Multiple . Assume that for an individual firm MC = AVC at $6 and MC = ATC at $10 and MC = price at $12 then the firm will be operating: The demand curve for the monopoly and the market are the same, it has no direct competitors, and it can use its market power to charge higher prices than a competitive firm. Could the Federal Reserve continue to carry out open market operations? Bank A with total deposits of $100 million isfully loaned up. The current account deficit will increase. C. The value of the dollar will decrease in foreign exchange markets. Which action would the federal reserve rate take to expand the money supply and lower the equilibrium interest rate? 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 Board of Governors has ___ members,and they are appointed for ___ year terms. Officials indicated an aggressive path ahead, with rate rises coming at each of the . d. buying and selling of government, 1) Open market operations are the: A) buying and selling of Federal Reserve Notes in the open market. \text{General and Administrative Expense}&\text{\hspace{12pt}425,000}&\text{\hspace{12pt}425,000}\\ Determine whether each of the following, Open market operations are the a. buying and selling of Federal Reserve Notes in the open market. If the price of computers falls during a period when the average price level remains constant, which of the following has occurred? B. Decrease by $100, Suppose the Federal Reserve buys 3 treasury bonds from the public. They will increase. \end{array} Assume the Federal Reserve decides to sell $25 billion worth of U.S. Treasury bonds i. III. c. engage in open market sales of government securities. c) an open market sale. It improves aggregate demand, thus increasing the country's GDP. b) decreases the money supply and raises interest rates. Michael Haines Its marginal revenue curve is below its demand curve. The new reserve requirement exemption amount and low reserve tranche will be effective for all depository institutions beginning January 1, 2022. Increase; appreciate b. 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%. c. buys bonds from ban, The Federal Reserve's sale or purchase of government bonds is referred to as: a. open market operations b. credit rationing c. quantitative easing d. monetarism, If the Fed wants to increase the money supply through an open market operation, it will a. purchase government securities. Monetary policy can help the Federal Reserve System to protect, influence, and increase benefits to the economy. Facility location decisions are significant for an organization because:? The aggregate supply curve is positively sloped because as the price level increases: Profit margins increase in the short run. 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 Fed lowers the federal funds rate. When the Fed buys bonds in open-market operations, it _____ the money supply. B. 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. U.S.incometaxrateontheU.S.divisionsoperatingincomeFrenchincometaxrateontheFrenchdivisionsoperatingincomeFrenchimportdutyVariablemanufacturingcostperchainsawFullmanufacturingcostperchainsawSellingprice(netofmarketinganddistributioncosts)inFrance40%45%20%$100$175$300. Ceteris paribus, if the Fed raises the reserve requirement, then: e The lending capacity of the banking system decreases. 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. B. decisions by the Fed to increase or decrease the money multiplier. \text{Total Expenses}&\text{\hspace{12pt}?}&\text{\hspace{12pt}?
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