What cannot be used to shift aggregate demand? b) Lowering the nominal interest rate. &\textbf{0-30 days}&\textbf{31-90 days}&\textbf{Over 90 days}\\ c. d. the average number of times per year a dollar is spent. If market interest rates rise, the selling price of existing bonds in the market will, ceteris paribus, . 26. Money is functioning as a standard of value if you: Compare the prices of running shoes online to those in a sporting goods store. Federal Reserve purchases of government bonds ______________ total reserves and _________________ the money supply. c. reduce the reserve requirement. The Board of Governors has ___ members,and they are appointed for ___ year terms. 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. A lower amount of money in the economy makes it more expensive to borrow for banks and consumers.. A change in the reserve requirement affects: The money multiplier and excess reserves. Answer: Answer: B. Hence C is the correct option. It allows people to obtain more goods than they can using money. Decrease the price it asks for the bonds. Increase government spending. It is considered to be less efficient for an economy than the use of money. Money supply to decrease b. }\\ The bank now sells $5,000 in securities to the Federal Reserve Bank in its, When the Federal Reserve purchases Treasury securities in the openmarket, A. the public starts buying houses and firms invest in anticipation of banks increasing their reserves. The number of deposit dollars the banking system can create from $1 of excess reserves. \text{Gross Margin}&\text{\hspace{5pt}1,369,250}&\text{\hspace{5pt}1,369,250}\\ 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. b. the interest rate increases c. the Federal Reserve purchases bonds. The Federal Reserve (the Fed), the central bank of the United States, has a Congressional mandate to promote maximum employment and price stability. When aggregate demand equals aggregate supply at the average price level. Issuanceofstock.Cashdividends.Balance,December31,2012.$3ParCommonStock$375120AdditionalPaid-inCapital$2,225240RetainedEarnings$4,200990(69)AccumulatedOtherComprehensiveIncome$123TotalShareholdersEquity$6,812. Terms of Service. To decrease the money supply, the Fed can, raise the reserve requirement, raise the discount rate, or sell bonds. Banks must hold more funds used for loans in reserve. Excess reserves increase. The total change in deposits (with no drains) would be$12,857 million = (1/0.07) $900 million If the Fed wishes to stimulate the economy, it could I. buy U.S. government securities.II. If the Fed wishes to increase the money supply it can: The purchase and sale of government bonds by the Fed for the purpose of altering bank reserves is referred to as: If the Fed wants to increase bank reserves, it can: If the Fed wants to reduce bank reserves, it can: Raise the discount rate or sell bonds on the open market. 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 ______. C. a traveler's check. 2) If, If the Fed increases the supply of money in the market, bond prices will and interest rates will. a. monetary base b. 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. What are some basic monetary policy tools used by the Fed? During the last recession (2008-09. 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 lending capacity of the banking system decreases. c. engage in open market sales of government securities. b. rate of interest decreases. 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 ______. 3 . $$ $$ Professor Williams tutors her next-door neighbor's son in economics. $$ A combination of flexible rules and limited discretion. Officials indicated an aggressive path ahead, with rate rises coming at each of the . a) Given the required reserve ratio, RR/D=0.10, the excess reserves to deposits ratio, ER/D=0.06, the currency to deposits ratio, Assume that any money lent by a bank is always deposited back in the banking system as a checkable deposit and that the required reserve ratio is 15%. c. the interest rate rises and this. a. Suppose government spending increases. b. Total reserves increase.B. 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. Total costs for the year (summarized alphabetically) were as follows: Decrease the discount rate. 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. International Financial Advisor. 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. 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). B. the Fed is concerned about high unemployment rates. B) bond yields will fall C) bond yields will increase as well. a. Suppose the Federal Reserve Bank buys Treasury securities. 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. \text{Total per category}&\text{?}&\text{?}&\text{? 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. Suppose the Federal Reserve engages in open-market operations. c. the government increases spending and lowers taxes. b. the interest rate rises and this stimulates consumption spending. Would the effect on aggregate demand be larger if the Federal Reserve held the money supply constant in response or if the Fed were committed to maintaining a fixed interest rate? Toby Vail. b) increases the money supply and lowers interest rates. eachus, which of the following will occur if the Fed buys bonds through open-market operations? C. the price level in the economy will rise, thus i. If the Fed decides to engage in an open market operation to increase the money supply, what will it do? \text{Total uncollectible? Expansionary fiscal policy is when a. the government lowers spending and raises taxes. are the minimum amount of reserves a bank is required to hold. Buy Treasury bonds, bills, or notes on the bond market. D. In open market operations, the Fed exchanges cash (money) for non-cash (bonds). Savings accounts and certificates of deposit are called. Fill in either rise/fall or increase/decrease. a. decrease, downward b. decrease, upward c. increase, downw, When the Federal Reserve engages in a restrictive monetary policy, the price of marketable government bonds will ___, assuming all other factors influencing the bond market remain the same. 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. D. conduct open market sales. FROM THE STUDY SET C.banks' reserves will be reduced. B. decrease by $2.9 million. Name the three tools of monetary policy that the Federal Reserve System can do to combat unemployment/recession. a. increase the supply of bonds, thus driving up the interest rate. If there is a recession, the Fed would most likely a. encourage banks to provide loans by. If there is an adverse 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 b. lowers inflation but raises unemployme, A sale of bonds by the Fed generates a. a decrease in the demand for money balances. Increase the demand for money. Changing the reserve requirement is expensive for banks. c. means by which the Fed acts as the government's banker. 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. 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. Also assume that banks do not hold excess reserves and there is no cash held by the public. to send you a reset link. c) overseeing the buying and selling of government securities in the open market. Privacy Policy and C) Total deposits decrease. c. buy bonds, thus driving up the interest rate. \text{Cost of Goods Sold}&\underline{\text{\hspace{19pt}85,250}}&\underline{\text{\hspace{19pt}85,250}}\\ &\textbf{past due}&\textbf{past due}&\textbf{past due}\\[5pt] CBDC Next-Level: A New Architecture for Financial "Super-Stability" by. Wave Waters total liabilities on December 31, 2012, are $7,800. The answer is b. rate of interest decreases. It needs to balance economic growth. This causes excess reserves to, the money supply to, and the money multiplier to. 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. The money supply increases. 1. The VOC was also the first recorded joint-stock company to get a fixed capital stock. Martin takes $150 out of his checking account and hides it in his house as cash.