Macro #3

If a commercial bank has no excess reserves and the reserve requirement is 10 percent, what is the value of new loans this single bank can issue if a new customer deposits $10,000?

$9,000

When a central bank sells securities in the open market, which of the following set of events is most likely to follow?

A decrease in the money supply, an increase in interest rates, and a decrease in aggregate demand

The required reserve ratio is 0.2 and the federal reserve sells 1 million in securities. If there are no leakages and banks do not hold excess reserves, then which of the following is the change in the money supply?

A decrease of 5 million

Assume that the reserve ratio is 20% but banks voluntarily keep some excess reserves. A 1 million increase in new reserves will result in

An increase in the money supply of less than 5 million

If the public's desire to hold money as currency increases, what will the impact be on the banking system?

Banks would be less able to expand credit

An increase in the money supply is most likely to have which of the following short-run effects on real interest rates and real output?

Decrease interest rates and increase real output

Which of the following would be included as a liability on a commercial banks balance sheet?

Demand deposits

If investors feel that business conditions will deteriorate in the future, the demand for loans and real interest rate in the loanable funds market will change in which of the following ways in the short run?

Demand for Loans = decrease Real Interest Rate = decrease

A major advantage of automatic stabilizers in fiscal policy is that they

go into effect without passage of new legislation

Under which of the following conditions would a restrictive monetary policy be most appropriate?

high inflation

When the federal reserve buys government securities on the open market, which of the following will decrease in the short run?

interest rates

Under a fractional-reserve banking system, banks are required to

keep part of their demand deposits as reserves

The demand for money increases when national income increases because

spending on goods and services increases

If on receiving a checking deposit of $300 a bank's excess reserves increased by $225, the required reserve ratio must be?

15%

If the nominal interest rate is 6% and the expected inflation rate is 4% the real interest rate is

2%

If a banking system's reserves are 100 billion, demand deposits are 500 billion and the system is fully loaned up, then the reserve requirement must be

20 percent

Assume that the reserve requirement is 25%. If banks have excess reserves of 10000 which of the following is the maximum amount of additional money that can be created by the banking system through the lending process?

40000

If the reserve requirement is 20 percent, the existence of $100 worth of excess reserves in the banking system can lead to a maximum expansion of the money supply equal to

500

In the country of Agronomía, banks charge 10% interest on all loans. If he general price level has been increasing at the rate of 4 percent per year the real rate of interest in Agronomía is...

6%

If the federal reserve lowers the reserve requirement, which of the following would most likely occur?

Businesses will purchase more factories and equipment

To counteract a recession, the Federal Reserve should

Buy securities on the open market and lower the reserve requirement

Under which of the following conditions would consumer spending most likely increase?

Consumer's wealth is increased by changes in the stock market.

The purchase of securities on the open market by the federal reserve will

Increase the supply of money

Which of the following actions by the federal reserve reduces the ability of the banking system to create money?

Increasing the reserve requirement

Which of the following is most likely to occur when the federal reserve buys government bonds on the open market?

Interest rates will decrease

Which of the following will most likely occur in an economy if more money is demanded than supplied?

Interest rates will increase

If the federal reserve lowers the reserve requirement, which of the following is most likely to happen to interest rates and gross national product?

Interest rates= decrease Gross national product= increase

The major difference between real and nominal GDP is that real GDP...

Is adjusted for price-level changes using a price index

Which of the following is true of the quantity of money demanded?

It falls when interest rates rise, because the opportunity cost of holding money increases.

If the federal reserve pursues a contractionary monetary policy, output and the price level will change in which of the following ways in the short run?

Output= decrease Price level= decrease

The money-creating ability of the banking system will be less than the maximum amount indicated by the multiplier when

People hold a portion of their money in the form of currency

The federal Reserve can cause an increase in interest rates in attempt to

Reduce inflation

When consumers hold money rather than bonds because they expect the interest rate to increase in the future, they are holding money for which of the following purposes?

Speculation

The federal reserve can increase the money supply by...

buying government bonds on the open market

Expansionary fiscal policy will be most effective when

the aggregate supply curve is horizontal