During the year, the company started and completed 45 motor homes at a cost of $\$ 55,000$ per unit. Hence C is the correct option. When you've placed seven or more cards in the Don't know box, click "retry" to try those cards again. A, Suppose that the Fed engages in an open-market purchase of $4,000 in securities from Bank A. b) increases, so the money supply decreases. 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. 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. Which transfer prices should the Burton Company select to minimize the total of company import duties and income taxes? 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. View Answer. c) decreases, so the money supply increases. 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. (ii) instructs the New York Fed to sell government securities in the foreign exchange market. Your email address is only used to allow you to reset your password. D) there is no effect on bond yields. Fiscal policy should be used to shift the aggregate demand curve. Answer: Answer: B. are the minimum amount of reserves a bank is required to hold. 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. If the Fed sells $1 million of government bonds, what is the effect on the economy's reserves and money supply? 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 If the Fed conducts an open-market sale, bank reserves _ and the money supply is likely to _. c. state and local government agencies only. Officials indicated an aggressive path ahead, with rate rises coming at each of the . 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. Previous question Next question The result is imperfect monitoring, which creates profit opportunities for speculators, who do not act as dealers but simply a. 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 aggregate demand curve should shift rightward. b. 2. d. sells U.S. Treasury bills to the federal government. b. the interest rate rises and this stimulates consumption spending. 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. By raising or lowering the _______, the Fed changes the cost of money for banks, which impacts the incentive to borrow reserves. Ceteris paribus, based on the real balances effect, if the price level falls: According to the foreign trade effect, when the U.S. price level decreases, U.S. consumers are likely to buy: Which of the following is an example of the foreign trade effect, assuming the U.S. price level decreases? Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10. e. increase inflation. To see how well you know the information, try the Quiz or Test activity. Answer: Answer: B. If the Fed wants to increase the money supply through an open market operation, it will a. purchase government securities. \end{array} B. The use of money and credit controls to change macroeconomic activity is known as: Free . U.S.incometaxrateontheU.S.divisionsoperatingincomeFrenchincometaxrateontheFrenchdivisionsoperatingincomeFrenchimportdutyVariablemanufacturingcostperchainsawFullmanufacturingcostperchainsawSellingprice(netofmarketinganddistributioncosts)inFrance40%45%20%$100$175$300. Suppose the Federal Reserve buys 100 mortgage-backed securities in the open market. Annual gross pay of $18,200. B. \begin{array}{l r} The current account deficit will increase. Martin takes $150 out of his checking account and hides it in his house as cash. to send you a reset link. Each bond is worth $1000 (so the Fed has bought $3000 worth of bonds). Cause the money supply to increase, c. Not affect the money supply, d. Decrease the money multiplier. 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. D. The value o, If the nominal interest rate were to increase, then: a. money demand decreases and the price level increases. The Fed decides that it wants to expand the money supply by $40 million. The aggregate supply curve is positively sloped because as the price level increases: Profit margins increase in the short run. We develop a model of price formation in a dealership market where monitoring of the information flow requires costly effort. If the price of computers falls during a period when the average price level remains constant, which of the following has occurred? The central bank uses various monetary tools such as open market operations, the Fed's fund rate, and reserve requirements to achieve its goals. d. the average number of times per year a dollar is spent. 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 ______. The fixed monthly cost is $21,000, and the variable cost. If the Federal Reserve System buys government securities from commercial banks and the public: a. the money supply will contract. Which of the following lends reserves to private banks? Suppose that banks are able to issue private IOU's, such that individuals deposit goods with the bank and the bank can promise a return on the deposit. The Fed lowers the federal funds rate. What is Wave Waters debt ratio on this date? If the number of dollars you receive every year is the same, but prices are rising, then your nominal income: Stays the same but your real income falls. e. raise the reserve requirement. b. money demand increases and the price level decreases. Assume that the currency-deposit ratio is 0.5. D. In open market operations, the Fed exchanges cash (money) for non-cash (bonds). Government bond operations. c) borrow reserves from other banks. 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? \text{Variable manufacturing cost per chainsaw} & \text{\$100}\\ An easing of monetary policy interest rates, which the demand for a currency and the fundamental value of the exchange rate. &\textbf{past due}&\textbf{past due}&\textbf{past due}\\[5pt] d. raise the treasury bill rate. Our experts can answer your tough homework and study questions. b. it buys Treasury securities, which decreases the money supply. If the federal reserve increases the discount rate, the money supply will: a) decrease. c) not change. The difference between price and average total cost multiplied by the quantity sold. c) overseeing the buying and selling of government securities in the open 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? B. \text{Selling price (net of marketing and distribution costs) in France} & \text{\$300}\\ B. the Fed is concerned about high unemployment rates. b) means by which the Fed acts as the government's banker. Assume the Federal Reserve decides to sell $25 billion worth of U.S. Treasury bonds i. If the Fed sells $1 million of government bonds, what is the effect on the economy s reserves and money supply? 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. Interest rates typically rise in a recession because the demand for money increases when real income falls. . B. purchases government bonds to decrease the money supply. B.bond prices will fall, and interest rates will fall. 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. \end{array} a. 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 ______. D.bond prices will rise, and interest rates will fall. A lower amount of money in the economy makes it more expensive to borrow for banks and consumers.. Money is functioning as a standard of value if you: Compare the prices of running shoes online to those in a sporting goods store. The immediate result of this transaction is that M1: If Edgar takes $100 out of his savings account and deposits it into his checking account, the immediate result of this transaction is that M1: What does not occur when a bank makes a loan? 41. B. an exchange between a private bank and the Federal Reserve where the Fed buys or sells government bonds to private banks. Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. Determine the December 31, 2012, balances in Wave Waters shareholders equity accounts and total shareholders equity on this date. d. rate of interest increases.. \text{U.S. income tax rate on the U.S. division's operating income} & \text{40\\\%}\\ The sale of bonds to the Fed by banks B. Suppose the Federal Reserve decided to sell $35 billion worth of government securities in the open market. Holding the deposits or reserves of commercial banks. 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. B. federal bond operations. 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. Here are the answers with discussion for yesterday's quiz. 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%. b. the Federal Reserve buys bonds on the open market. Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page. 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. Michael Haines 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. Make sure to remember your password. The use of money and credit controls to change macroeconomic activity is known as: Monetary policy. The company has marketing divisions throughout the world. Suppose the banks in the Federal Reserve System have $100 million in transactions accounts and the reserve requirement is 0.10. The Federal Reserve conducts open market operations when it wants to [{Blank}]? \text{General and Administrative Expense}&\text{\hspace{12pt}425,000}&\text{\hspace{12pt}425,000}\\ Find the taxable wages. A. decreases; decreases B. decreases; increases C. increases; decreases D. increases. Money is functioning as a store of value if you: Put it in a savings account so you can buy a new car next summer. The Great Depression was caused by a steep decline in the money supply when the stock market crashed in 1929. 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. When the Fed decreases the interest rate it p; $$ \text{Expenses:}\\ Suppose the Federal Reserve buys government securities from the non-bank public. It creates money, it creates a transactions-account balance for the borrower, and the money supply increases. Get access to this video and our entire Q&A library, Monetary Policy & The Federal Reserve System. Conduct open market purchases. 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? A change in government spending, a change in taxes, and monetary policy. Which of the following indicates the appropriate change in the U.S. economy? \text{Total uncollectible? \text{Direct materials used} \ldots & \$ 750,000\\ Transcribed Image Text: Question Now we introduce banks that will act as liquidity providers in the economy. a. An increase in the reserve ratio: a. increases the money multiplier. In response, people will a. sell bonds, thus driving up the interest rate. C. contractionary monetary policy by, An open market sale by the Fed A. increases the money supply, which leads to increased interest rates and a fall in investment spending. D. The collectio. a. mortgages; Bank of America b. government securities; New York Fed c. government securities; Federal Reserve Bank of Florida d. Mortgages; Federal Reserve. &\textbf{0-60 days}&\textbf{61-120 days}&\textbf{Over 120 days}\\ The Federal Reserve carries out open-market operations, purchasing $1 million worth of bonds from banks. E. discount rate operations. Changing the reserve requirement is expensive for banks. See Answer Ceteris paribus, if the Fed raised the required reserve ratio: Expert Answer If a market basket of goods cost $100 in the base year and $110 in a later year, then average prices have increased by: Keynes and classical economists disagree about whether: Government intervention should be used to correct business cycles. \end{matrix} In order to decrease the money supply, the Fed can. c). C. increase by $50 million. b. When the Fed buys bonds in open-market operations, it _____ the money supply. d. the demand for money. The price level to decrease c. Unemployment to decrease d. Investment to decrease. eachus, which of the following will occur if the Fed buys bonds through open-market operations? Increase government spending. A. 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. $140,000 in checkable-deposit liabilities and $46,000 in reserves. . Assume a fixed demand for money curve and the Fed decreases the money supply. b. sell bonds, thus driving down the interest rate. Now suppose the Fed conducts an open market purchase of government bonds equal to $1, Fiscal policy is conducted by: a. d. commercial bank, Assume all money is held in the form of currency. Banks must hold more funds used for loans in reserve. 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. A sale of treasury bills by the federal reserve _____ interest rates and _____ the money supply. b. Price falls to the level of minimum average total cost. d. a decrease in the quantity de. Increase the reserve requirement. Increase the demand for money. See Answer A perfectly competitive firm currently sells 30,000 cartons of eggs at $1.25 each. If the banking system has a required reserve ratio of 20 percent, then the money multiplier is: It is more likely to occur if people lose faith in a nation's currency. copyright 2003-2023 Homework.Study.com. If market interest rates rise, the selling price of existing bonds in the market will, ceteris paribus, . Also assume that banks do not hold excess reserves and there is no cash held by the public. To decrease the money supply the Fed can: Raise the reserve requirement, raise the discount rate, or sell bonds. \text{Total uncollectible? Ceteris paribus, if the Fed reduces the reserve requirement,thenMultiple Choicetotal reserves increase.the lending capacity of the banking system increases.total deposits decrease.the money multiplier decreases. c. Fed sells bonds. a. Decrease by $100, Suppose the Federal Reserve buys 3 treasury bonds from the public. 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? c. has an expansionary effect on the money supply. When the Fed conducts open market operations, the Fed buys and sells government securities to: a. the private sector. &\textbf{past due}&\textbf{past due}&\textbf{past due}\\[5pt] When the Federal Reserve increases the discount-rate increases the discount rate as a part of a contractionary monetary policy, there is: A. Is this part of expansionary or contractionary fiscal or monetary policy? Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. Open market operations. Makers, but perfectly competitive firms are price takers. 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. U.S. goods are less expensive for Americans so they buy fewer imports and more domestic goods. The Federal Reserve's monetary policy is one of the ways in which the U.S. government tries to regulate the nation's economy by controlling the money supply. B. decisions by the Fed to increase or decrease the money multiplier. $$ Suppose a bank has $50,000 in transactions accounts and a minimum reserve requirement of 10 percent. The marginal revenue of the 11th item is: A monopolist sets price at a point on the _______ curve, corresponding to the rate of output determined by the intersection of ______. Required reserves decrease. Our experts can answer your tough homework and study questions. The purchase and sale of government bonds by the Fed for the purpose of altering bank reserves is referred to as: Members of the Federal Reserve Board of Governors are appointed for one fourteen-year term so that they: Make their decisions based on economic, rather than political, considerations. a. monetary base b. Bob, a college student looking for summer work. Working Paper No. B. decrease by $2.9 million. B ) bond yields will fall 2) A negative output gap indicates that A) nominal GDP is below real GDP. 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 _______. 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. The answer is b. rate of interest decreases. 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. 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 _______ . Should the Fed increase or decrease the money supply? a. You'll get a detailed solution from a subject matter expert that helps you learn core concepts. d. The Federal Reserve sells bonds on the open marke, If the Fed purchases government securities on the open market, the quantity of money and the nominal interest rate. B) The lending capacity of the banking system decreases. Ceteris paribus, if the Fed reduces the reserve requirement, then: A. Terms of Service. The U.S. Treasury c. The U.S. Mint d. The federal government And involves: a. Quantitative easing b. Note The higher the reserve requirement, the less profit a bank makes with its money. \begin{array}{lcc} A) increases; supply. 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 A stock person who is laid off by a department store because retail sales across the country have decreased is _______ unemployed. Which of the following is likely to occur if OPEC increases the amount of oil it supplies and domestic energy prices fall, ceteris paribus? Suppose that the sellers of government securities deposit the checks drawn on the New York Fed into their bank account. The result is that people a. increase the supply of bonds, thus driving up the interest rate. The change is negative it means that excess reserve falls by -100000000 or 100 million. If the Federal Reserve increases the money supply, ceteris paribus, the: a. rate of interest is unaffected. 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. The Federal Reserve has a few main goals with respect to the economy: to promote maximum employment, keep prices stable and ensure moderate long-term interest rates. Which of the following is NOT a possible source of last-minute reserves for a private bank? c) Increasing the money supply. If the population of a country is 1,000,000 people, its labor force consists of 600,000, and 60,000 people are unemployed, the unemployment rate is: If the population of a country is 220 million people, its labor force consists of 115 million, and 99 million people are employed, the unemployment rate is: When construction workers seek work because the ground is covered in snow and ice, the unemployment rate goes up. a. 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. c. the government increases spending and lowers taxes. C. excess reserves at commercial banks will increase. D. $100,000 in checkable-deposit liabilities and $30,000 in reserves. Therefore the correct option is b: If the Federal Reserve increases the money supply, ceteris paribus, the rate of interest decreases. 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? Name the three tools of monetary policy that the Federal Reserve System can do to combat unemployment/recession. The number of deposit dollars the banking system can create from $1 of excess reserves. \text{French import duty} & \text{20\\\%}\\ Which of the following functions does the Fed perform? a) increases; decreases, b) decreases; increases, c) decreases; decreases, d) increases; increases. If the Federal Reserve wants to decrease the money supply, it should: a. Suppose the Federal Reserve conducts an open market purchase of $150 million government securities from the non-bank public. c. it borrows money, Consider how the following scenario would affect the money supply and, as a result, interest rates in the economy. d) means by which the Fed supplies the, Suppose the Fed wishes to use monetary policy to close an expansionary gap. \text{Selling expenses} \ldots & 500,000 a. increase the supply of money by buying bonds b. increase the supply of money by selling bonds c. increase the demand for money by buying bonds d. increase the demand for mo, An increase in the money supply will cause interest rates to: a. rise b. fall c. remain unchanged. Perform open market purchases of securities. }\\ }\\ The Baltimore banks regional federal reserve bank. 1. Use a balance sheet to show the impact on the bank's loans. The result is that people _____. C. increase the supply of bonds, If the money supply increases, what happens in the money market (assuming money demand is downward sloping)? 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. 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. \text{Total per category}&\text{?}&\text{?}&\text{? Was there a profit or a loss for the year ended December 31, 2012? Any import duty paid to the French authorities is a deductible expense for calculating French income taxes. The result will be a in the money market and a in the bond market, which will push bond prices and interest rates will unti, Starting from a monetary equilibrium condition, an increase in the money supply A. increases the bond price and increases the interest rate. If you forget it there is no way for StudyStack The information provided should help you work out why you missed a question or three! A. decrease, downward B. decrease, upward C. increase, downward D. increase, If inflation begins to rise rapidly, which step is the Federal Reserve likely to take? B. expansionary monetary policy by selling Treasury securities.
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