Mod 26, 27, 28, 29

if the required reserve ratio were .1, each commercial bank would be required to maintain reserves of ________________.

10%

there are _________ regional Federal Reserve banks

12

if the required reserve ratio were changed to 5%, the money multiplier would be:

20

the ____________ regional federal reserve bank is responsible for carrying out the Feds open market operations

New York

federal reserve bond sales leads to

a decrease in the money supply and an increase in nominal interest rate

the demand for money curve is

a downward sloping curve

commercial banks would prefer

a lower discount rate

the money demand curve represents the demand for money as ___________

a medium of exchange and an asset

the federal open market committee meets _______ times a year

8

which of the following can be lent out by a commercial bank

$1 million in excess reserves

suppose that the federal reserve ratio is 10% when the Fed buys $100,000 of bonds from the banking system. if the banking system does not want to hold any excess reserves, the maximum total change in the money supply can be

$1,000,000

suppose that the reserve ratio is 10% when the federal reserve sells $11,000 of US treasury bills/bonds to the banking system. if the banking system does not want to hold any excess reserves, _____________ will be ____________________ the money supply.

$110,000; subtracted from

the federal reserve bond purchases lead to

an increase in the money supply and a decrease in nominal interest rates

which of the following would be considered expansionary monetary policy or easy money policy? (check all that apply)

buying bonds, lowering the discount rate, lowering the required reserve ratio

which of the following is not a tool of the federal reserve

changes to the tax rate, changes in government spending, important quotas

reducing the discount rate makes it

cheaper for commercial banks to borrow from the Federal Reserve

if the federal reserve needed to stimulate the economy it could:

conduct an open-market bond purchase and lower the required reserve ratio

to slow the economy, the federal reserve would want to pursue _________ policy

contractionary or tight money

open market operations are

the buying and selling of government securities

the supply of money will shift to the left or the right when

the central bank decides to increase or decrease the supply of money

if the level of output in the economy increases, we see

the demand for money curve shift to the right

the interest rate the federal reserve charges commercial/private banks is known as:

the discount rate

the supply of money is determined by

the federal reserve

central banks typically act as _______ to private banks

the lender of last resort

the supply of money is determined by

the monetary policy of a nation's central bank

if the federal reserve increases the discount rate

the money supply is likely to decrease

suppose the federal reserve were to engage in open-market operations by buying $100 million of US Treasury bills. which of the following would be the end result of such action?

the money supply would increase by more than $100 million.

the quantity demanded of money will increase when

the nominal interest rate decreases

the price of holding cash, or rather the opportunity cost of holding cash is/are

the nominal interest rate that could be earned by holding financial assets instead

the required reserve ratio refers to

the percentage of a bank's total deposits that must be kept

T&F: bonds cannot be used to buy goods or services

true

bonds cannot be used to buy goods or servies

true

money held by the Federal Reserve is NOT part of the money supply

true

suppose that for every 1% point decline in the discount rate, commercial banks collectively borrow an additional $2 billion from the Federal Reserve. also assume that the required reserve ratio is 20%. if the fed raises the discount rate from 4% to 4.25%, bank reserve will:

decline by .05$ billion and the money supply will decline by $2.5 billion

during an open market bond purchase, a commercial bank's holdings of securities/bonds will

decrease

during an open market bond purchase, the federal reserves holdings of cash will

decrease

during an open market bond sale, a commercial bank's holdings of cash (held in deposit at the Fed) will _____.

decrease

during an open market bond sale, the federal reserves holdings of securities/government bonds will

decrease

decreasing the supply of money would:

decrease aggregate demand in the economy and be called contractionary monetary policy

Increases in the supply of money _______________________.

decrease the equilibrium nominal interest rate

if the federal reserve was working to raise or increase the nominal interest rate in the economy, the federal reserve would:

decrease the supply of money

a high discount rate tends to lead to:

decreased borrowing and less "interest sensitive consumption"

increases in the supply of money would be considered

expansionary monetary policy or easy money policy

to stimulate the economy, the Federal Reserve would want to pursue ______________ policy

expansionary or easy policy

the supply of money in the economy

in part determines the nominal interest rate in the economy

during an open market bond purchase, a commercial bank's holdings of cash (held in deposit at the Fed) will _______.

increase

during an open market bond purchase, the federal reserves holdings of securities/government bonds will

increase

during an open market bond sale, a commercial bank's holdings of securities/government bonds will

increase

during an open market bond sale, the federal reserves holds of cash will

increase

expansionary monetary policy attempts to:

increase aggregate demand

if the Federal Reserve wants to discourage banks from borrowing directly from the Fed and thus decrease the monetary base, the federal reserve would likely

increase the discount rate

decreases in the supply of money

increase the equilibrium nominal interest rate

if the federal reserve wanted to restrict the amount of money banks could lend out, the federal reserve would:

increase the required reserve ratio

if the federal reserve was trying to lower or decrease the nominal interest rate in the economy, the Federal Reserve would:

increase the supply of money

to ______ the money supply, the Fed could _______

increase; lower the discount rate

commercial bank borrowing from the federal reserve:

increases the excess reserves of commercial banks and their ability to offer credit

commercial banks are more likely to borrow from the Federal Reserve when the Discount Rate is

lower

the vertical axis of the money market graph is labeled as

nominal interest rate

deposits that are required to be held at the Federal Reserve bank are:

not available to be lent out by commercial banks

the buying and selling of bonds/securities by the Federal Reserve is known as:

open market operations

the most frequently used tool of monetary policy is

open market operations

which of the following actions would increase the nominal interest rate

open market operations bond sale

the most commonly used tool of the Federal Reserve is/are:

open-market operations

the primary tool of the Federal Reserve is:

open-market operations

the three main tools used to control the supply of money are:

open-market operations, changes to the required reserve ratio, changes to the discount rate

if the federal government wanted to increase the supply of money in the economy it will

purchase government bonds/securities from households and commercial banks

contractionary monetary policy would consist of

raising the discount rate

open market sales

reduce the amount of money in the economy

a newspaper headline reads: "Federal Reserve cuts discount rate for the third time this year." this headline indicates that the federal reserve is most likely trying to

reduce the cost of credit and stimulate the economy

the federal reserve can put the brakes on the economy by

reducing the economy's supply of funds

the three main monetary policy tools are:

reserve requirements, the discount rate, and open market operations

central banks usually keep the interest rate they charge ______ what banks charge each other

above

suppose the required reserve ratio is 20%. if the federal reserve wanted to increase the supply of money by $500 million, it could:

buy $125 million of US securities from households and buy 100 million of US securities from banks

T&F: changes to the required reserve ratio occur often

false

T&F: government bonds play only a small role in monetary policy

false

T&F: money held by the federal reserve is part of the money supply

false

T&F: open market sales are expansionary

false

in today's economy, the discount window is largely an insignificant monetary policy tool

false

increasing the required reserve ratio means banks can increase their loans

false

the supply of money is determined or related to the interest rate

false

when a commercial bank borrows reserves from another commercial bank it is charged the

federal funds rate

when a commercial bank borrows reserves from another commericial bank, it is charged the:

federal funds rate

when the federal reserve sells bonds, this means:

households and banks receive bonds and the federal reserve receives money

when the federal reserve purchases bonds, this means:

households and banks receive money and the federal reserve receives bonds

most of the money in an economy is held

in banks

when the nominal interest rate increases, people would prefer to hold

interest bearing financial assets

the demand for money is __________ related to the nominal interest rate that investors could earn by using that money to buy other assets

inversely

decreases in the supply of money are seen as

leftward shifts of the perfectly vertical money supply curve

one of the fed's goals is to

limit inflation during periods of healthy economic growth

federal funds are

loans between banks

If the Federal Reserve wanted to make it possible for banks to lend out more money, the federal reserve would

lower the required reserve ratio

expansionary monetary policy would consist of

lowering the discount rate

aggregate demand will increase when the federal reserve

makes more money available

lowering the discount rate has the effect of:

making it less expensive for commercial banks to borrow from the central bank

a model showing the total supply of and demand for money in a nation

money market

which of the following could be considered contractionary monetary policy or tight money?

selling bonds, raising the required reserve ratio, raising the discount rate

the amount of interest a central bank charges private banks for short-term loans is known as:

the Discount rate

the interest private banks charge each other for short-term/overnight loans is known as:

the Federal Funds rate

monetary policy is conducted by

the Federal Reserve

the discount rate is the interest rate a commercial bank pays when it borrows money from _____________.

the Federal Reserve