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. \text{Net Credit Sales}&\text{\$\hspace{1pt}1,454,500}&\text{\$\hspace{1pt}1,454,500}\\ c. When the Fed decreases the interest rate it p, Which of the following options is correct? The Fed is most likely to do this by: A. purchasing government bonds from the public B. selling government bonds to the public C. selling government bonds to the treasury D. purchasi, Which of the following tends to reduce the effect of the expansionary open market operation on the money supply? View Answer. The discount rate is the interest rate charged by, the Federal Reserve when it lends money to private banks, Ceteris paribus, if the Fed raises the reserve requirement, then, the lending capacity of the banking system decreases, If the economy is inflationary, the Fed would most likely, encourage banks to provide loans by buying government securities, if the economy is recessionary, the Fed would most likely, encourage banks to provide loans by selling government securities, Alexander Holmes, Barbara Illowsky, Susan Dean, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Statistical Techniques in Business and Economics, Douglas A. Lind, Samuel A. Wathen, William G. Marchal, David R. Anderson, Dennis J. Sweeney, James J Cochran, Jeffrey D. Camm, Thomas A. Williams, Elegant Linens uses the balance sheet aging method to account for uncollectible debt on Biagio Bossone. Assume the Federal Reserve decides to sell $25 billion worth of U.S. Treasury bonds i. The Fed has most likely reduced the, If the Fed wishes to increase the money supply it can, If the Fed wishes to decrease the money supply it can, The rate of interest banks charge each other for lending reserves is the, 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, consists of seven members appointed by the President of the United States, who together act as the key decision-making entity for monetary policy, Bank reserves in excess of required reserves, Ceteris paribus, if the Fed raises the discount rate, then, the incentive to borrow reserves decreases. The money multiplier is equal to ______ and the reserve ratio is equal to _____%. c) increases government spending and/or cuts taxes. b. sell bonds, thus driving down the interest rate. 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 Ban, Which of the following is the basic economic policy function of the Federal Reserve Banks? Ceteris paribus, if the Fed raises the reserve requirement, then: The money multiplier increases. 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. b. the interest rate increases c. the Federal Reserve purchases bonds. What effect will this open market operation have on demand deposits and M1? C. Controlling the supply of money. Suppose that the sellers of government securities deposit the checks drawn on the New York Fed into their bank account. 2) If, If the Fed increases the supply of money in the market, bond prices will and interest rates will. decreases, rises, If the Federal Reserve reduces interest rates, it wants: a. Ceteris paribus, if the reserve requirement is decreased to 0.07, then excess reserves will increase by: $3 million. Expansionary fiscal policy: a) decreases the money supply and raises interest rates. An increase in the money supply and a decrease in the interest rate. Change in Excess Reserve = -100000000. Total costs for the year (summarized alphabetically) were as follows: Also assume that banks do not hold excess reserves and there is no cash held by the public. Suppose the Federal Reserve buys government securities from the non-bank public. C. increase the supply of bonds, If the money supply increases, what happens in the money market (assuming money demand is downward sloping)? a. c-A forecast of a permanent demand increase shifts the investment line . 23. 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. Suppose the Federal Reserve purchases mortgage-backed securities (MBS). then the Fed. Our experts can answer your tough homework and study questions. This is an example of which type of unemployment? d. prices to remain constant. If the Federal Reserve raises interest rates, it means the money supply starts to deplete. If the Fed sells $5 million worth of government securities to the public, what will be the change in the money supply? Raise discount rate 2. 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. 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. Makers, but perfectly competitive firms are price takers. Demand; marginal revenue and marginal cost. a) Describe what initially happens to the reserves of bank B. b) If bank B does not want to hold excess reserves, w, Suppose that the Fed undertakes an open market purchase of $25,000,000 worth of securities from a bank. 1015. Key Points. \text{Variable manufacturing cost per chainsaw} & \text{\$100}\\ Ceteris paribus, an increase in _______ will cause an increase in ______. raise the discount rate. Multiple . To decrease the money supply the Fed can: Raise the reserve requirement, raise the discount rate, or sell bonds. Although it may feel like you're playing a game, your brain is still making more connections with the information to help you out. receivables. c. has an expansionary effect on the money supply. \text{Selling price (net of marketing and distribution costs) in France} & \text{\$300}\\ 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. Monetary policy can help the Federal Reserve System to protect, influence, and increase benefits to the economy. III. \text{Total per category}&\text{?}&\text{?}&\text{? D. Describe the categories change effect on net income and accounts receivable. b) borrow reserves from the public. Consider an expansionary open market operation. 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. c) buying and selling of government securities by the Treasury. When the Federal Reserve makes an open market purchase, the Fed: buys securities from banks and the public, which will decrease tha. Could the Federal Reserve continue to carry out open market operations? E.the Phillips curve will shift down. a. decreases; falls b. decreases; rises c. does not change; falls d. increases; rises e. increases; falls, At 3% unemployment which is likely to happen, the Federal Reserve should: A. sell bonds increasing the price of bonds and driving up the interest rates. If you've accidentally put the card in the wrong box, just click on the card to take it out of the box. Keynes viewed the economy as inherently unstable and suggested that during a recession policy makers should: Cut taxes and/or increase government spending. b. prices to increase by 3%. See Answer Ceteris paribus, if the Fed raised the required reserve ratio: Expert Answer A sale of treasury bills by the federal reserve _____ interest rates and _____ the money supply. 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. b. Bob, a college student looking for summer work. If you knew the answer, click the green Know box. 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. B. The sale of bonds to the Fed by the public C. Increases in banks' excess reserves D. Increases in. The nominal interest rates rises. \end{array} Otherwise, click the red Don't know box. a. Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. Use the model of aggregate demand and aggregate supply to illustrate the impact of this change in the interest rate on output and the price level in the short run. }\\ (A) How will M1 be affected initially? b. When you need a break, try one of the other activities listed below the flashcards like Matching, Snowman, or Hungry Bug. Assume that banks use all funds except required, 13. In the money market, an excess demand of money will: A. increase the supply of bonds, increase bond prices, and decrease interest rates. The current account deficit will increase. As a result, the money supply will: a. increase by $1 billion. 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. 1. b. it buys Treasury securities, which decreases the money supply. d. raise the treasury bill rate. Consider an expansionary open market operation. 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. If the Fed raises the reserve requirement, the money supply _____. 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. Interest rates b. a. The following is the past-due category information for outstanding receivable debt for 2019. c. buys or sells existing U.S. Treasury bills. The French import duty is charged on the price at which the product is transferred into France. A) Increase money supply to decrease interest rates, increase i. Expansionary monetary policy: a) decreases government spending and/or raises taxes. 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? 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 Federal Open Market Committee is responsible for: a) reducing the Fed's reliance on open market operations. 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. If the Federal Reserve System buys government securities from commercial banks and the public: a. the money supply will contract. c). $$ What is meant by open market operations? By the end of the year, over $40 billion of wealth had vanished. Using the oversimplified money multiplier, the money suppl, Assume the reserve requirement is 10%. Ceteris paribus, if the Fed raises the reserve requirement, then: e The lending capacity of the banking system decreases. A Burton marketing division in Lille, France, imports 200,000 chainsaws annually from the United States. 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. Conduct open market sales of government bonds. b. the price level increases. \text{Total uncollectible? If the Fed buys more bonds from the public, then the money supply will: Increase and the aggregate demand curve will shift to the right. C. a traveler's check. \text{General and administrative expenses} \ldots & 500,000 \\ The Fed funds market is the market where banks a) buy and sell bonds to the Federal Reserve. Michael Haines FROM THE STUDY SET Decrease by $100, Suppose the Federal Reserve buys 3 treasury bonds from the public. State tax on first $3,000: 1.5$ percent. c) decreases, so the money supply increases. An open market operation is ____?A. Generally, the central bank. 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. b) Lowering the nominal interest rate. b. the same thing as the long-term growth rate of the money supply. U.S.incometaxrateontheU.S.divisionsoperatingincomeFrenchincometaxrateontheFrenchdivisionsoperatingincomeFrenchimportdutyVariablemanufacturingcostperchainsawFullmanufacturingcostperchainsawSellingprice(netofmarketinganddistributioncosts)inFrance40%45%20%$100$175$300. Ceteris paribus, if the reserve requirement is decreased to 0.05, then excess reserves will . C. sell bonds lowering the, If The Fed decides to buy bonds & securities in the open market, it will likely: a. increase the money supply and decrease aggregate demand. An increase in the money supply and an increase in the int. d. The Federal Reserve sells bonds on the open market. Use a balance sheet to show the impact on the bank's loans. 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 ______. Q01 . Make sure you say increase or decrease/buy or sell. 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) borrow more from the Fed and lend less to the public. When the Fed buys bonds in open-market operations, it _____ the money supply. All other trademarks and copyrights are the property of their respective owners. \text{General and Administrative Expense}&\text{\hspace{12pt}425,000}&\text{\hspace{12pt}425,000}\\ Its marginal revenue curve is below its demand curve. Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. D. Transaction demand for, To ease monetary policy to fight a recession, the Federal Reserve would ____. C. increase by $50 million. 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. 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. 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. 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. The Board of Governors has ___ members,and they are appointed for ___ year terms. Explain your reasoning. The equilibrium price level and equilibrium output should both increase. c. increase, down. Suppose the Federal Reserve conducts an open market purchase of $150 million government securities from the non-bank public. are the minimum amount of reserves a bank is required to hold. Suppose the Federal Reserve engages in open-market operations. You would need to create a new account. B. \begin{array}{lcc} Corporate finance for the pre-industrial world began to emerge in the Italian city-states and the low countries of Europe from the 15th century.. 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 Fed sells government bonds, this will: A. Check all that apply. C. decreases, 1. b) decreases the money supply and raises interest rates. $$ c. Decrease interest rates. The reserve ratio is 20%. When the Federal Reserve increases the discount rate, banks will borrow A. fewer reserves and decrease lending. The nominal interest rates falls. 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. D. decrease, Assume that the Federal Reserve establishes a minimum reserve requirement of 12.5%. 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. the interest rate rises and this. For best results enter two or more search terms. Assuming this, how is the Fed likely to respond to fiscal stimulus if the economy is nearing full employment? Decrease in the federal funds rate B. 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. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases, If the Federal Reserve was concerned about the "crowding-out" effect, they could engage in: A. expansionary monetary policy by lowering the discount rate. d. the average number of times per year a dollar is spent. The Fed decides that it wants to expand the money supply by $40 million. Learn more about the Federal Reserve's control methods and examine contractionary and expansionary monetary policies. A perfectly competitive firm currently sells 30,000 cartons of eggs at $1.25 each. $$ b. B. decrease by $2.9 million. a. increases, rises b. increases, falls c. decreases, falls d. decreases, does not change e. . (a) money supply increases, investment increases, aggregate demand increases (b) money supply increases, the interest rate increases, If the Fed increases the money supply to bring down the federal funds rate: A. Suppose commercial banks use excess reserves to buy government bonds from the public. copyright 2003-2023 Homework.Study.com. C. excess reserves at commercial banks will increase. Martin takes $150 out of his checking account and hides it in his house as cash. In the short run, the quantity of money demanded [{Blank}] and the nominal interest rate [{Blank}]. When the Federal Reserve System buys government securities on the open market: A. the money supply will decrease. B. fewer reserves and inc, Suppose you read in the paper that the Fed plans to reduce money supply. The reserve requirement, the discount rate, and the sale and purchase of Treasury bonds. Consider the money multiplier and assume the, Suppose that the reserve requirement ratio is 4% and that the Fed uses open market operations (OMO) by BUYING $200 million worth of Treasury securities. Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10. c. reduce the reserve requirement. C) buying and selling of government s. In carrying out open market operations, the Federal Reserve usually buys and sells U.S. Treasury securities. b. an increase in the demand for money balances. Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page. $$. B. influence the discount rate. 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 The sale of bonds to the Fed by banks B. Raise reserve requirements 3. Compute the following for the current year: 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. Suppose the Federal Reserve Bank buys Treasury securities. 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. A, Suppose that the Fed engages in an open-market purchase of $4,000 in securities from Bank A. D. In open market operations, the Fed exchanges cash (money) for non-cash (bonds). e. raise the reserve requirement. Raise the reserve requirement, increase the discount rate, or . When the Federal Reserve makes an open market purchase, the Fed: If the federal reserve injects $3,000 into the banking system through open market operations, did the federal reserve buy or sell government bonds? \text{U.S. income tax rate on the U.S. division's operating income} & \text{40\\\%}\\ Suppose the banks in the Federal Reserve System have $100 million in transactions accounts and the reserve requirement is 0.10. The aggregate demand curve should shift rightward. are in the same box the next time you log in. 1. Assume that the currency-deposit ratio is 0.5. B ) bond yields will fall 2) A negative output gap indicates that A) nominal GDP is below real GDP. B. A. \text{Expenses:}\\ 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. ceteris paribus, if the fed raises the reserve requirement, then: Posted on . 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 new reserve requirement exemption amount and low reserve tranche will be effective for all depository institutions beginning January 1, 2022. Annual gross pay of $18,200. Determine the December 31, 2012, balances in Wave Waters shareholders equity accounts and total shareholders equity on this date. B. expansionary monetary policy by selling Treasury securities. Suppose the banks in the Federal Reserve System have $400 million in transactions accounts and the reserve requirement is 0.10.
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