Unit Four
Assume the required reserve ration is .2
$80,000
If on receiving a check of $500 a bank's excess reserves increased by $400, the required reserve must be...
20%
Which of the following is an asset for the Pascucci bank?
II, III, and IV only
The federal funds rate is the interest rate that...
banks charge one another for short term loans
the fed can increase the money supply by...
buying bonds on the open market
The fed can change the US money supply by changing ...
discount rate
10%
increase by $300 & increase by $30
If the fed reserve raises the discount rate, how are interest rates and rGDP affected
increase/decrease
an open market purchase of bonds...
increase/decrease/decrease
Banks may not be able to create the maximum amount of money from a new deposit as a result of...
individuals holding a larger portion of their assets as cash
If the Fed institutes a policy to reduce inflation, which of the following is most likely to increase?
interest rates
Which of the following most likely occur in an economy if more money is demanded that is supplied?
interest rates will increase
Fractional reserve banking means that banks are required to...
keep part of their demand deposits as reserves
When an economy is at full employment, an expansionary monetary policy will lead to...
lower interest rates and more investment
If you use money as a store value, you would be...
putting money into a savings account
Which of the following is NOT part of M1...
savings deposits
To eliminate an inflationary gap, the fed might
sell bonds on the open market
When consumers hold money rather than bonds because they expect the interest rate to increase in the future, they are holding money for what purposes?
speculation
Open market operations refer to which of the following activities?
the buying and selling of government securities by the fed
Which of the following is true for the money market graph?
there is an inverse relationship between the nominal interest rate and the quantity of money demanded
if the fed conducts an open market purchase of bonds, we can expect which of the following to occur in the short run?
there will be a movement to the left
"The price for a ticket to the Super Bowl is $500." This statement best illustrates money used as...
unit of account