E. discount rate operations. 41. Any import duty paid to the French authorities is a deductible expense for calculating French income taxes. B. excess reserves at commercial banks will decrease. What impact would this action have on the economy? It involves the direct exchange of one good or service for another. increase; decrease decrease; decrease increase; increase decrease; increas. If there is a recession, the Fed would most likely a. encourage banks to provide loans by. b. sell government securities. What happens to interest rates? Suppose the economy is initially experiencing an inflationary gap. \end{array} Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page. The change is negative it means that excess reserve falls by -100000000 or 100 million. b) increase. The VOC was also the first recorded joint-stock company to get a fixed capital stock. Expansionary fiscal policy is when a. the government lowers spending and raises taxes. Banks must hold more funds used for loans in reserve. B. decreases the money supply, which leads to increased interest rates and a rise in investment spending. a) decrease, downward b) decrease, upward c) inc. $$ B. an exchange between a private bank and the Federal Reserve where the Fed buys or sells government bonds to private banks. C) buying and selling of government s. In carrying out open market operations, the Federal Reserve usually buys and sells U.S. Treasury securities. The key decision maker for general Federal Reserve policy is the: Free . Multiple Choice . B. purchases government bonds to decrease the money supply. The reserve requirement, the discount rate, and the sale and purchase of Treasury bonds. b. the interest rate increases c. the Federal Reserve purchases bonds. The Fed decides that it wants to expand the money supply by $40 million. the process of selling Fed-issued IOUs between banks. Which of the following is NOT a possible source of last-minute reserves for a private bank? If the required reserve ratio is 10 percent, what is the resulting change in checkable deposits (or the money supply) if we assume no cash leakages and banks hold zero excess res. Use these flashcards to help memorize information. C. a traveler's check. &\textbf{past due}&\textbf{past due}&\textbf{past due}\\[5pt] b. the Open Market Desk at the Federal Reserve Board in Washington, D.C. c. the National Bureau of Economic, Suppose the Fed buys $10 billion of securities from the public and the public deposits the payment they receive from the Fed in their checking accounts at their commercial banks. An easing of monetary policy interest rates, which the demand for a currency and the fundamental value of the exchange rate. Your email address is only used to allow you to reset your password. }\\ If the market price was below the ATC and at the current firm's rate of production the MC was less than the market price an increase in output would: increase profit but economic profits would still be negative. A change in the reserve requirement is the tool used least often by the Fed because it: * Can cause abrupt changes in the money supply. b. $$ Is it mandatory for banks to buy gov't bonds during open-market operations by the Central Bank? Assume central bank money (H) is initially equal to $100 million. b) Lowering the nominal interest rate. Excess reserves increase. 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. 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? D. All of the above. (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.) 16. Above equilibrium, this results in excess supply. B) bond yields will fall C) bond yields will increase as well. The information provided should help you work out why you missed a question or three! \text{Net Income (Loss)}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? The Fed decides that it wants to expand the money supply by $40 million. The money supply increases. \text{Net Credit Sales}&\text{\$\hspace{1pt}1,454,500}&\text{\$\hspace{1pt}1,454,500}\\ \text{Total uncollectible? In addition, the company had six partially completed units in its factory at year-end. C. Controlling the supply of money. \text{Bad Debt Expense}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? Suppose the Federal Reserve buys government securities from commercial banks. All rights reserved. Raise the reserve requirement, increase the discount rate, or . d. a decrease in the quantity de. An increase in the money supply and an increase in the int. C. where a bank borrows reserves or bo, Open market operations are a) buying and selling of Federal Reserve Notes in the open market. b. c). Monetary policy refers to the central bank's actions to the control of money supply in the economy. If the Fed purchases $10 million in government securities, then wh. Your email address is only used to allow you to reset your password. The Burton Company manufactures chainsaws at its plant in Sandusky, Ohio. B. 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. If the Fed sells bonds: A.aggregate demand will increase. Cause the money supply to increase, c. Not affect the money supply, d. Decrease the money multiplier. 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. Raise discount rate 2. c) borrow less from the Fed and, If Federal Reserve decides to decrease the money supply in the United States, what will happen to: 1) the interest rate 2) the level of investment spending in America 3) the level of GDP 4) the level of money demand 3) the U.S interest rate 4) the level o. 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 banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10. The difference in potential money creation when the Bank of Canada buys government securities from the chartered banks rather than from the public is due to the fact that a. excess reserves are larger when the Bank of Canada buys government securities from the chartered banks. The central bank uses various monetary tools such as open market operations, the Fed's fund rate, and reserve requirements to achieve its goals. If the Fed sells $5 million worth of government securities to the public, what will be the change in the money supply? Transcribed Image Text: Question Now we introduce banks that will act as liquidity providers in the economy. The supply of money increases when: a. the value of money increases. D. The collectio. D. $100,000 in checkable-deposit liabilities and $30,000 in reserves. Ceteris paribus, if the reserve requirement is decreased to 0.07, then excess reserves will increase by: $3 million. A) Increase money supply to decrease interest rates, increase i. Expansionary monetary policy: a) decreases government spending and/or raises taxes. Interest rates typically rise in a recession because the demand for money increases when real income falls. b. foreign countries only. 23. Figure 14.10c depicts the aggregate investment function of an economy. then the Fed. a. C. decisions by the Fed to raise or lower interest rates. \text{Selling expenses} \ldots & 500,000 $$ Which of the following is likely to occur if people reduce their spending because they are worried about an economic downturn, ceteris paribus? b. money demand increases and the price level decreases. If the Federal Reserve increases the discount rate: a. the federal funds rate must decrease. The result is imperfect monitoring, which creates profit opportunities for speculators, who do not act as dealers but simply When the Federal Reserve sells bonds as a part of a contractionary monetary policy, there is: A. Free . \text{Variable manufacturing cost per chainsaw} & \text{\$100}\\ III. If a bank does not have enough reserves, it can. It allows people to obtain more goods than they can using money. If the Fed wants to increase the money supply through an open market operation, it will a. purchase government securities. b. sell government securities. 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 %. c. d. The Federal Reserve sells bonds on the open market. 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. An expansionary fiscal policy is when a. the government lowers spending and raises taxes. B. decrease by $200 million. 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. Cause an excess demand for money and a decrease in the rate of interest. The number of deposit dollars the banking system can create from $1 of excess reserves. If the Fed wants to raise short-term interest rates, it should a. act to increase the money supply. b. prices to increase by 3%. 2. C. Increase the supply of money. 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. c. reduce the reserve requirement. All rights reserved. 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. It improves aggregate demand, thus increasing the country's GDP. 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 Fed is using open-market operations, An open market operation is a purchase or sale of ___ by the ___ in the open market. 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. We start by assuming that there is no reserve requirement or lending by the Central Bank. d. decrease the discount rate. Ceteris paribus, what will occur if the Fed buys bonds through open-market operations? b. the money supply is likely to decrease. d. the average number of times per year a dollar is spent. If the Federal Reserve commits to money supply growth of 2% per year and then the economy enters a recession, it would be time consistent to raise the growth rate to 5%. Then click the card to flip it. Ceteris paribus, if the Fed reduces the reserve requirement, then: A. d. velocity increases. B. decrease the discount rate. raise the discount rate. Suppose further that the required reserve, Explain briefly: a. \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. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. State tax on first $3,000: 1.5$ percent. The result is that people _____. Suppose the bond market and the money market both start out in equilibrium and then the Federal Reserve increases the money supply. 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?
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