Econ Chapter 5 HW

Which of the following both increase the money supply? - An increase in the discount rate and an increase in the interest rate on reserves - An increase in the discount rate and a decrease in the interest rate on reserves - A decrease in the discount rate and an increase in the interest rate on reserves - A decrease in the discount rate and a decrease in the interest rate on reserves

A decrease in the discount rate and a decrease in the interest rate on reserves

Which of the following does the Federal Reserve not do? - Conduct monetary policy - Act as a lender of last resort - Conduct fiscal policy - Serve as a bank regulator

Conduct fiscal policy

Which of the following increase when the Fed makes open market purchases? - Currency and reserves - Currency but not reserves - Reserves but not currency - Neither currency nor reserves

Currency and reserves

Which of the following is NOT an example of monetary policy? - The Federal Open Market Committee decides to sell bonds. - The Federal Open Market Committee decides to buy bonds. - The Federal Reserve reduces the reserve requirement. - The Federal Reserve facilitates bank transactions by clearing checks

The Federal Reserve facilitates bank transactions by clearing checks

When the Fed decreases the discount rate, banks will - borrow more from the Fed and lend more to the public. The money supply increases. - borrow more from the Fed and lend less to the public. The money supply decreases. - borrow less from the Fed and lend more to the public. The money supply increases. - borrow less from the Fed and lend less to the public. The money supply decreases.

borrow more from the Fed and lend more to the public. The money supply increases.

If the public decides to hold more currency and fewer deposits in banks, bank reserves - decrease and the money supply eventually decreases. - decrease but the money supply does not change. - increase and the money supply eventually increases. - increase but the money supply does not change.

decrease and the money supply eventually decreases.

If the Fed raised the reserve requirement, the demand for reserves would - increase, so the federal funds rate would fall. - increase, so the federal funds rate would rise. - decrease, so the federal funds rate would fall. - decrease, so the federal funds rate would rise.

increase, so the federal funds rate would rise.

Other things the same, if reserve requirements are increased, the reserve ratio - increases, the money multiplier increases, and the money supply increases. - increases, the money multiplier decreases, and the money supply decreases. - decreases, the money multiplier increases, and the money supply increases. - decreases, the money multiplier decreases, and the money supply increases.

increases, the money multiplier decreases, and the money supply decreases

If the Federal Reserve increases the interest rate on bank deposits at the Fed, banks will want to hold - fewer reserves, so the reserve ratio will fall. - fewer reserves, so the reserve ratio will rise. - more reserves, so the reserve ratio will fall. - more reserves, so the reserve ratio will rise.

more reserves, so the reserve ratio will rise.

A problem that the Fed faces when it attempts to control the money supply is that - the 100-percent-reserve banking system in the United States makes it difficult for the Fed to carry out its monetary policy. - the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools. - the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount. - the Fed does not control the amount of money that households choose to hold as deposits in banks.

the Fed does not control the amount of money that households choose to hold as deposits in banks.

The discount rate is - the interest rate the Fed charges banks. - one divided by the difference between one and the reserve ratio. - the interest rate banks receive on reserve deposits with the Fed. - the interest rate that banks charge on overnight loans to other banks.

the interest rate the Fed charges banks.

Which of the following will help to prevent bank runs? - A 0% reserve requirement - 100% reserve banking - Lack of government insurance of deposits - Fractional reserve banking

- 100% reserve banking

Which of the following is an example of barter? - A parent gives a teenager a $10 bill in exchange for her babysitting services. - A homeowner gives an exterminator a check for $50 in exchange for extermination services. - A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet. - A doctor performs surgery on a patient whose insurance pays 100% of the bill.

- A barber gives a plumber a haircut in exchange for the plumber fixing the barber's leaky faucet.

Suppose banks decide to hold more excess reserves relative to deposits. Other things the same, this action will cause the money supply to - fall. To reduce the impact of this the Fed could sell Treasury bonds. - fall. To reduce the impact of this the Fed could buy Treasury bonds. - rise. To reduce the impact of this the Fed could sell Treasury bonds. - rise. To reduce the impact of this the Fed could buy Treasury bonds.

- fall. To reduce the impact of this the Fed could buy Treasury bonds.

If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by - buying bonds. This buying would reduce reserves. - buying bonds. This buying would increase reserves. - selling bonds. This selling would reduce reserves. - selling bonds. This selling would increase reserves.

- selling bonds. This selling would reduce reserves.

When conducting an open-market sale, the Fed - buys government bonds, and in so doing increases the money supply. - buys government bonds, and in so doing decreases the money supply. - sells government bonds, and in so doing increases the money supply. - sells government bonds, and in so doing decreases the money supply.

- sells government bonds, and in so doing decreases the money supply.

Which of the following policies can the Fed follow to increase the money supply? - ​Reduce the interest rate on reserves ​- Increase reserve requirements for banks ​- Reduce the quantity of funds available through the Term Auction Facility ​- Sell government bonds

- ​Reduce the interest rate on reserves

David and Asher buy the same pair of sneakers, but each in the wrong size. David proposes a size swap with Asher. This is an example of ​- barter, since the sneakers in the correct size represent a medium of exchange. - ​barter, since the sneakers in the correct size have intrinsic value to both David and Asher. ​- money, since the sneakers in the correct size do not have any intrinsic value. - money, since the sneakers in the correct size represent a medium of exchange.

- ​barter, since the sneakers in the correct size have intrinsic value to both David and Asher.

Which of the following is correct? - The Federal Reserve has 14 regional banks. The Board of Governors has up to 12 members who serve 7-year terms. - The Federal Reserve has 14 regional banks. The Board of Governors has up to 7 members who serve 14-year terms. - The Federal Reserve has 12 regional banks. The Board of Governors has up to 12 members who serve 7-year terms. - The Federal Reserve has 12 regional banks. The Board of Governors has up to 7 members who serve 14-year terms.

The Federal Reserve has 12 regional banks. The Board of Governors has up to 7 members who serve 14-year terms.

When conducting an open-market purchase, the Fed - buys government bonds, and in so doing increases the money supply. - buys government bonds, and in so doing decreases the money supply. - sells government bonds, and in so doing increases the money supply. - sells government bonds, and in so doing decreases the money supply.

buys government bonds, and in so doing increases the money supply.