positive net exports . If a bank is short of cash at the end of the day, it borrows from another bank with extra money. d. decrease bank's excess reserves to decrease the money … ** Every transaction involves a swap between a seller and a buyer. Refer to Figure 34-5. Suppose the banking system currently has $300 billion in reserves, the reserve requirement is 5 percent, and excess reserves are $30 billion. When the Federal Reserve acts to tighten money and credit in the economy, then the aggregate: Demand curve will shift to the left If the money supply of a … The bank makes loans and creates new deposits, which are new money is true, because the bank now has excess reserves. a. an increase in P of 5 percent. an increase in government expenditures, but not a change in the price level. An open market purchase of securities will 8 . 2. Quantity Theory of Money Financial intermediation is the process of: C) transferring funds from savers to borrowers. If the Federal Reserve wishes to increase the money supply, it should: The most frequently used tool of monetary policy is: To increase the monetary base, the Fed can: To increase the money multiplier, the Fed can: If the Federal Reserve increases the interest rate paid on reserves, banks will tend to hold _____ excess reserves, which will _____ the money multiplier. C) obtains the money for the purchase from the U.S. Treasury. If the monetary base fell and the currency-deposit ratio rose but the reserve-deposit ratio remained the same, then: A) the money supply would fall, but not by as much as it would have fallen if the reserve-deposit ratio had risen. Suppose the reserve requirement is 20% and there are no cash holdings or excess reserves. Two ways for banks to borrow reserves from the Federal Reserve are through: A) the discount window and the Term Auction Facility. Refer to figure 30-1. an )decreases; decreases c.)does not change; does not change d.)increases; decreases In the short run, if the Fed wants to raise the federal funds rate, it a. Macro Notes 4: Goods and Money Markets. Its reserves amount to. a federal budget deficit . The simple quantity theory of money predicts that an increase in M of 5 percent will . To make a trade in a barter economy requires: Money that has no value other than as money is called ______ money. The quantitative easing policy conducted by the Federal Reserve between 2007 and 2011 resulted in a large increase in the monetary base that was partially offset by: A) a significant increase in the reserve-deposit ratio. Which of the following will help to prevent bank runs? 1. In a country on a gold standard, the quantity of money is determined by the: The quantity of money in the United States is essentially controlled by the: The central bank in the United States is the: In the United States, monetary policy is controlled by: To increase the money supply, the Federal Reserve: To reduce the money supply, the Federal Reserve: B) Federal Reserve purchases and sales of government bonds. When the Fed wants to expand the money supply through open market operations, it: a. sells government securities to banks. If the price of burritos rises, to maintain the real value of her money holdings she needs to hold more dollars, If the reserve requirement is 7 percent, a bank desires to hold no excess reserves, and it receives a new deposit of $200, it. Which of the following would cause stagflation? The banks reserves increase by $1 million and its deposits do not change, so it has excess reserves of $1 million. as the price level increases, the interest rate rises, so spending falls, When the Federal Reserve decreases the federal funds target rate, the lower rate is achieved through, purchases of government bonds, which reduces interest rates and causes people to hold more money, Refer to Figure 33-6. )instructs … C. a rise in the unemployment rate. C) the money supply decreases. lead to. What is the level of loans? B. demand for money through changes in reserve requirements. The decrease in the money supply is mirrored by an equal decrease in the nominal output, otherwise known as Gross Domestic Product (GDP). The Fed expands the money supply through a couple of methods. Contractionary monetary policy decreases the money supply in an economy. B) increases the bank's reserves at the Fed. Clara holds $120. The quantity of money that people plan to hold depends on all of the following factors except 7 . D. sell government securities worth 400. a. The Fed can cause money to disappear into thin air. Answer to The Fed decreases the quantity of money to counteract a . b. purchases government securities from member banks. d . The commercial bank's reserves … Chair of the Federal Reserve. The Federal Reserve was created to help reduce the injuries inflicted during the slumps and was given some powerful tools to affect the supply of money. That's where the fed funds rate comes in. 21 terms. c . Changes the Fed makes to the money supply. )does not change; decreases b. If the Federal Reserve wishes for the federal funds rate to be at their target level, then the appropriate action for the Federal Reserve to take is a _____ open market _____, everything else held constant. The difference between banks and other financial intermediaries is that only banks have the legal authority to: D) create assets that are part of the money supply. )tells large commercial banks to raise their interest rates. Refer to Figure 34-1. The loan increases the money supply, In the special case of the 100-percent-reserve banking, the money multiplier is, Refer to Figure 30-1. 74. B) The average price of goods and services in an economy is called the aggregate price level. O True False Question 18 The purpose of the reserve requirement is to provide liquidity for commercial banks. When a pizza maker lists the price of a pizza as $10, this is an example of using money as a: Money's liquidity refers to the ease with which: D) money can be converted into goods and services. Open-market operations change the ______; changes in interest rate paid on reserves change the ______; and changes in the discount rate change the ______. Suppose the fed makes an open marker purchase of $1 million of securities from a bank. C. sell government securities worth 250. b. decrease required reserves, decrease the discount rate, and/or buy u.s. government securities on the open market. D) The aggregate price level is measured as the rate of change in the inflation rate.
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