AP unit 4 test

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?

9000

Expansionary monetary policy can affect the economy through which of the following chains of events

Decreasing the administered interest rates

Under which of the following circumstances would increasing the money supply be most affective in increasing real gross domestic product

High, less than full, high

An increase in government spending with no change in taxes leads to

Higher interest rate

The federal funds rate is the interest rate that

banks charge one another for short-term loans

Assume that the economy is in equilibrium. If aggregate demand increases, nominal interest rates and bond prices will most likely change in which of the following ways?

increase, decrease

Commercial banks can create money by

Lending excess reserves to customers

Assume that the reserve requirement is 20 percent. If a bank initially has no excess reserves and $10,000 cash is deposited in the bank, the maximum amount by which this bank may increase its loans is

$8,000

During a mild recession, if policymakers want to reduce unemployment by increasing investment, which of the following policies would be most appropriate?

A decrease in administered interest rates

Assuming a banking system with limited reserves, which of the following set of events is most likely

A decrease in money supply, increase in interest rates

Which of of the following most undermines the ability of a nations currency to store value

A decrease in the purchasing power of the currency

The required reserve ratio is 0.2 and the central bank sells 1 million

A decrease of 5 million

An inflationary gap can be eliminated by all of the following except

An increase in the money supply

Assume a country's banking system has limited reserves. To counteract

Buy securities on teh open market and raise discount rate

A central bank can increase the money supply by

Buying government bonds on the open market

Which of the following constitutes the largest component of the us money supply m1

Checkable deposits

If the federal reserve pursues a contractionary monetary policy

Decrease decrease

Assuming a banking system with limited reserves , which of the following actions by the central bank

Increasing reserve requirement

Assuming a banking system with limited reserves, when the central bank buys government securities on the open market

Interest rates

If the federal reserve institutes a policy to reduce inflation

Interest rates

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

Speculation

The demand for money increases when national income increases because

Spending on goods and services increases

The purchase of bonds by a central bank will have the greatest effect on real gross domestic product if which of the following situations exist in the economy

The banking system has limited reserves, the required reserve ratio is low , and the interest rate has..

Open market operations refer to which of the following

The buying and selling of government securities by the central bank

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?

decrease; decrease