ECON 3703-X30 Ch. 11,14,18
according to the board of governors in aug 2008 reserves equaled $44 billion currency in circulation equaled $777 billion, and checking despots were $300 billion, what was the M1 money supply
$1077 billion
according to the board of governors in aug 2008, reserves equaled $44 billion, currency in circulation equaled $777 billion, and checking deposits were $300billion what was the monetary base
$821 billion
suppose a bank has $1000 in deposits and choose to hold $150 in reserves according to this information the banks reserves deposit ratio is
0.15
the fed increase the monetary base by 1. leading through the term auction facility 2. lending to banks through the discount window 3. increasing interest rates
1 and 2 only
the fed can increase the monetary base by 1. using an open market purchase 2. making a discount loan 3. making loans though its term auction facility
1,2, and 3
according to the board of governors in aug 2008, the money multiplier was 1.31, reserve was $44 billion currency in circulation equaled $777 billion, and checking despots were $300 billion
1077 billion
members of the boards of government of the federal reserve system serve _____ -year nonrenewable terms while the term of the fed chair is ___ years
14; 4
the federal reserve system was created in
1913
the federal reserve system was created in _____ and divided the U.S. into ____ federal reserve districts
1913;12
suppose you have the following information; the monetary base is 600 currency in circulation is 400 reserves are 200 deposits are 800 and the money supply is 1200 what is the money multplier
2
the term of the fed chair is ___ years
4
the board of governments of the federal reserve system is composed of ____ members and it is located in ____
7; Washington D.C.
according to the board of governors in aug 2008 reserves equaled $44 billion currency in circulation equaled $777 billion, and checking despots were $300 billion. the monetary base was ____ and the m1 money supply was ____
821 billion; 1077 billion
the reserve ratio on deposits is 10% borrowers withdraw cash ( c ) equal to 50% of deposits (c/D) and the banking system is not fully loaned up holding idle excess reserves (E) equal to 40% of deposit (E/D) where.
AM /AR= (1+C/D) / (C/D + R/D + E/D) where: AR = initial change in reserves or AB= change in monetary base M= money supply (M1) D+C AM= AD + AC = AD+ (C/D) * AD D= Deposits C= Currency R= Reserves B= Monetary Base = R+C AB= AR +AC C/D= Currency Ratio R/D= Reserve Ratio E= Excess reserves E/D= Excess Reserves Ratio
If B stands for the monetary base, C for currency in circulation, D for deposits, and R for reserves of the banking system, which of the following expression is correct
B= C + R
if m stands for money, C is currency, D is checking deposits, and R is reserves, we can write the monetary base, B as
C=R
the group that set the federal reserve system policy on buying and selling government securities (bill, notes, and bonds) is
Federal open Market Committee (FOMC)
if M stands for money supply, C for currency in circulation, D for checking deposits, and R is for reserves, which of the following expression is correct
M=C+D
which of the following best describes the cause effect chain of a restrictive monetary policy
a decrease in the money supply will raise the interest rate decrease investment and decrease AD and GDP
an open-market operation is
a purchase or sale of bonds by the central bank
at an interest rate (r) of 8% which of the following is correct
actual money balances exceed desired money balances causing interest rate to fall
using the nation in the text, we can derive the money supply by which of the following equations
all fo the answers are correct
when the fed conducts a contractionary open- market operation of $100 it A. reduced by 100 B. decreed a banks cash holdings by 100 C. reduced the monetary base by 100
all of the answers are correct
which of the following if any are correct
an increase in M tends to decrease interest rates while a decrease in money tends to increase interest rates
which of the following increases the money supply
an increase in deposits
which of the following decreases the money supply
an increase in reserves
the number in parentheses after the AD1,AD2 and AD3 labels indicate the levels of investment spending associated with each curve all figures are in billions if the MRL for the economy is .50
an increase in the money supply which increase investment spending by $50 will shift the AD curve rightward by $100 billion at each price level
which of the following if any are correct
an increase income tends to increase interest rates while an increase in money tends to decrease interest rates
the seven member of the board of governors of the federal reserve system are
appointed by the president with the confirmation of the senate
member of the board of governments of federal reserve are ____ and serve for ____ years
appointed by the president; 14
which of the following are correct
at 6% desired money balances will equal actual money balances
which of the following include liabilities of the fed
bank reserves
when an individual deposits currency into a bank
bank reserves increase
the basic policy making and regulatory body in the U.S. banking system is the
board of governors of the federal reserve
other things equal if the supply of money is reduced
bond prices will fall
under liquidity trap conditions individuals investors have a desire to be liquid ( at least beyond their transactions needs) A. when interest rates are abnormally low B. because they fear capital losses by investing in other financial assets like bonds C. because of fear of government default
both A and B
refer to the above market for money diagrams if the interest rate was at 8 percent people would
buy bonds which would cause bond prices to rise and the interest rate to fall
refer to the diagram below the shift of the aggregate demand curve from AD1 to AD2 might result from the fed
buying bonds in the open market
if the fed wishes to conduct an expansionary open-market operation it
buys bonds from a dealer
in the U.S. the money supply (m1) is comprised of
coins paper currency and checkable deposits
which of the following is the basic or primary economic policy function of the federal reserve banks
controlling the supply of money
MI is
currency + travelers checks + check deposits
the monetary base minus reserves equals
currency in circulation
which of the following is part of the monetary base
currency in circulation
without a banking system, the monetary base and money supply are equal to
currency in circulation
the monetary base will increase by $480 while reserve will increase by $600
currency in circulation will increase by $600
the number in parentheses after the AD1,AD2 and AD3 labels indicate the levels of investment spending associated with each curve respectively all number are in billions of dollars if the interest rate is 8% and the goal of the fed is full employment output of Qf it should
decrease the interest rate from 8 to 6
when the fed sells a government bond to a a member bank, reserves _____ and the monetary base ______
decrease, decrease
when the fed sells U.S treasury bonds for a value of $1 million, the monetary base
decreases by $1 million
the reserves of a commercial bank consist of
deposits at the federal reserve bank and vault cash
if the fed purchases $1200 in government securities from banks than
deposits will increase by $1200
___ and ___ are assets in the federal reserves balance sheet
discount loans; government bonds
paper money in the U.S. is issued by the
federal reserve banks
a $20 bill is a
federal reserve note
the paper money used in the U.S. is
federal reserve notes
in the U.S. economy the money supply is controlled by the
federal reserve system
during the great depression the money multiplier
fell form 3.8 to 2.4
which of the following are assets of the fed
government bonds
in the equation M =mB is _____ 1 and is called the ____
greater than; money multiplier
which of the following best describes the cause effect chain of an expansionary monetary policy
in increase in the money supply will lower the interest rate increase investment and increase AD and GDP
quantecon is a country in which the 'so -called' early versions of the quantity theory of money operates the country has a constant technology population and capital stock in year one Ralfs GDP was $240 the price level was 2.0 and the velocity of circulation of money was 8. if in year 2 the money supply is 25% higher than in year 1 then
in year 2 the price level will be 2.50 and the level of real GDP will be $240
the number in parentheses after the AD1,AD2 and AD3 labels indicate the levels of investment spending associated with each curve respectively all number are in billions of dollars if the interest rate is 4% and the fed desires to undo demand- pull inflation it should
increase the interest rate from 4 to 6%
when the fed buys U.S. treasury base _____; this is called a(n) ___ open market operation
increases; expansionary
when a bank makes new loans, the money supply _____ and the monetary base _____
increases; is unchanged
the federal reserve system
is basically an independent agency
the federal open market committee
is basically responsible for conducting open market operations
currency in circulation and in bank reserves and federal reserve
liabilities
under normal circumstances an expansion of the money supply
lowers the interest rate and increases aggregate demand
the number in parentheses after the AD1, AD2 and AD3 labels indicate the levels of investment spending associated with each curve respectively all numbers are in billions of dollars if the interest rate is 6% and the goal of the fed if full employment output of Qf it should
maintain the interest rate at 6%
under liquidity trap conditions
monetary expansion is rendered less effective
which of the following increases the money supply A. a decrease in the monetary base B. an increase in the currency deposit ratio C. an increase in the reserve deposit ratio
none of the answers are correct
the instrument the fe use most often to change monetary base is
open market operations
each regional federal reserve bank is
owned by commercial banks in the district
during the financial crisis that began in 2007 the fed started
purchasing bonds issued by Fannie mae
if I the market of money the quantity of money demanded exceeds the money supply the interest rate will
raise causing households and businesses to hold less money
if in the market for money the quantity of money demanded exceeds the money supply the interest rate will
raise, causing households and businesses to desire to hold less money
suppose the fed lends $500 to a commercial bank as a result of this transaction, ____ and _____
reserves increase by 500; the monetary base increase by 500
when the fed buys 100 worth of bonds from a member bank
reserves increased by $100
refer to the above market for money diagrams if the federal reserve increased the stock of money the
s curves would shift rightward and the equilibrium interest rate would fall
refer to the above market diagrams if the interest rate was at 3 precent people would
sell bonds which would cause bond prices to fall and the interest rate to raise
If the federal reserve authorities were attempting to reduce demand -pul inflation, the proper policies would be to
sell government securities raise reserves requirement and raise the discount rate
congress established the federal reserve system primarily to ____
serve as a lender of last resort
at the equilibrium interest rate (r) which of the following are correct
the actual and desired money balances equal 100
refer to the diagram below which of the following would explain why an easy money policy might shift the aggregate demand curve from AD1 to AD2 rather than AD3
the domestic interest rate falls the dollar depreciates and net exports rise
what would happen to interest rates (r)
the equilibrium interest rate would raise from 6% to 8%
refer to the above market for money diagram other things equal if there is an increase in nominal GDP
the interest rate will rise
currency in circulation plus reserve equals
the monetary base
suppose you find $1000 buried in your backyard that was not in circulation; if you decide to keep it there
the monetary base and M1 are unchanged
suppose that while out trying your new money finder, you find $1000 buried in the back; you deposit the money and the bank holds it in reserve. what happens
the monetary base and money supply rise
if the fed purchases $1200 in government securities from banks then
the monetary base will increase by $1200 and reserves will increase by $600
every time a commercial bank makes a loan
the money supply increases
if the fed purchases $1200 in government securities from banks then
the money supply will increase by $1800
quantecon is a country in which the 'so -called' early versions of the quantity theory of money operates the country has a constant technology population and capital stock in year one Ralfs GDP was $240 the price level was 2.0 and the velocity of circulation of money was 8. in year !
the quantity of money is 60 and the value of nominal GDP is $480
according to the text which of the following is the newest tool used by the fed for increasing the monetary base
the term Auction facility loan
at the new equilibrium interest rate (r) which of the following would be correct
the transaction demand for money would have increased at each rate level
which of the following combination of interest rates would be considered money market rates?
the treasury bill rate and the federal funds rate
which of the following is true about the U.S. federal servers system
there are 12 regional federal reserve banks
which of the following statements best describes the twelve federal reserve banks
they are privately owned but publicly controlled central banks whose basic is to control the money supply and interest rates in promoting the general economic welfare
to say that the federal reserve banks are quasi- public banks means that
they are probably owned but managed in the public interest
the federal reserve system is divided into _____ districts
twelve
