Unit 4 MacroEconomics
Assume the required reserve ratio is .2. If a bank initially has no Excess Reserves and $100,000 cash is deposited in the bank, the maximum amount by which this bank may increase its loans is...
$80,000
Which of the following is an asset for the Crisler Bank? 1. Demand Deposits 2. Certificates of deposits issued to Crisler's customers. 3. Vault Cash 4. Money that Crisler Bank has deposited with the Federal Reserve.
2, 3, and 4 only
If on receiving a checking deposit of $500 a bank's excess reserves increased by $400, the require reserve must be:
20%
Open market operations refer to which activities?
Buying and selling of government securities by the Federal Reserve
The Federal Reserve can increase the money supply by...
Buying bonds on the open market(securities)
Suppose business are fearful that there will be a recession on the near future. What best describes the impact of this belief on demand for loanable funds and interest rate?
Demand for loanable funds will decrease and interest rate will decrease.
The Federal Reserve can change the US money supply by changing
Discount Rate
Know the characteristics of money.
Durability Portability Divisibility Uniformity Limited Supply(scarce) Acceptability
What is included in M1?
High liquidity, currency in circulation, checkable bank deposits(checking accounts), traveler's check.
If the Federal Reserve raises the discount rate, how are the interest rates and real GDP affected?
Interest rate increases and real GDP decreases
What will most likely occur in an economy if more money is demanded than is supplied?
Interest rates will increase.
If the Fed institutes a policy to reduce inflation, what is likely to increase?
Intrest rates
If required reserves is 10% and that bank receives a new demand deposit of $300. What will most likely occur in the bank's balance sheet?
Liabilities increase by $300 and required reserves increase by $30.
When an economy is at full employment, an expansionary monetary policy will lead to (increased or decreased interest rates, prices, investment)?
Lower interest rates and more investment
An open market purchase of bonds by the Fed will most likely change the money supply, the interest rate, and the unemployment rate in which ways?
Money supply will increase, interest rate will decrease, and unemployment rates will decrease.
Banks may not be able to create the maximum amount of money from a new deposit as a result of...?
People's desires to hold cash rather than re-deposit it in the bank.
If you use money as a store value, you would be...?
Putting money in a savings account.
If the supply for loanable funds increases, what will happen to real interest rates and investment?
Real interest rates will decrease and investment will increase.
The Federal Reserve 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(shift to the left) along a short run Phillips curve.
"The price for a ticket to the Major League World Series is $500." This statement best illustrates as a...?
Unit of Account
Fractional reserve banking means that banks are required to...?
hold only a small portion of deposits to cover potential withdrawals and then loans the rest of the money amount.