chap 36 questions

Based on the given table, at equilibrium in the given market for money, the total amount of money demanded is

$460

In a reverse repo transaction,

the Fed borrows money from financial institutions.

When a commercial bank borrows from a Federal Reserve Bank,

the commercial bank's lending ability is increased

other things equal, if there is an increase in nominal GDP

the interest rates will rise

Which of the following will increase commercial bank reserves?

the purchase of government bonds in the open market by the Federal Reserve Banks

Open-market operations refer to

the purchase or sale of government securities, as well as collateralized money loans, by the fed

Money Supply Money Demand Interest Rate Investment (at Interest Rate Shown) $ 400 $ 600 2% $ 700 $ 400 500 3 600 $ 400 400 4 500 $ 400 300 5 300 $ 400 200 6 200 Answer the question based on the information in the table. The equlibirum interest rate in this economy is

4 percent

Answer the question based on the table, in which columns (1) and (2) indicate the transactions demand ( Dt) for money and columns (1) and (3) show the asset demand ( Da) for money. (1) Interest Rate (2) Dt (3) Da 12% $ 100 $ 0 10 100 20 8 100 40 6 100 60 4 100 80 2 100 100 If the money supply is $160, the equilibrium interest rate will be

6 percent

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 spending, and decrease aggregate demand and GDP.

Which of the following best describes the cause-effect chain of an expansionary monetary policy?

An increase in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP.

Monetary policy is expected to have its greatest impact on

Ig

Refer to the given market-for-money diagrams. If the Federal Reserve increased the stock of money, the

S curve would shift rightward and the equlibrium interest rate would fall

Assuming government wishes to either increase or decrease the level of aggregate demand, which of the following pairs are not consistent policy measures?

a tax increase and an increase in the money supply

If severe demand-pull inflation was occurring in the economy, proper government policies would involve a government

budget surplus, the sale of securities in the open market, a higher discount rate, and higher reserve requirements.

If the economy were encountering a severe recession, proper monetary and fiscal policies would call for

buying government securities, reducing the reserve ratio, reducing the discount rate, reducing interest paid on reserves held at Fed banks, and a budgetary deficit.

One of the strengths of monetary policy relative to fiscal policy is that monetary policy

can be implemented more quickly

Refer to the diagrams. The numbers 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 8 percent and the goal of the Fed is full-employment output of Qf, it should

decrease the interest rate form 8 percent to 6 percent

Assume the economy is operating at less than full employment. An expansionary monetary policy will cause interest rates to ________, which will ___________ investment spending.

decrease; increase

An increase in the legal reserve ratio

decreases the money supply by decreasing excess reserves and decreasing the monetary multiplier.

Projecting that it might temporarily fall short of legally required reserves in the coming days, the Bank of Beano decides to borrow money from the Federal Reserve Bank in its district. The interest rate on the loan is called the

discount rate

The interest rate that banks charge one another on overnight loans is called the

federal funds rate

Big Bucks Bank currently holds $20 million in excess reserves. If the Fed increases the rate of interest it pays on excess reserves held at the Fed, we would expect Big Bucks Bank to

hold more of those excess reserves in its reserve account at the Fed, reducing the amount it is willing to lend.

Refer to the diagrams. The numbers 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 4 percent and the Fed desires to reduce or eliminate demand-pull inflation, it should

increase the interest rate from 4 percent to 6 percent

Refer to the diagrams. The numbers 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 percent and the goal of the Fed is full-employment output of Qf, it should

maintain the interest rate at 6 percent.

The transactions demand for money is most closely related to money functioning as a

medium of exchange

Refer to the diagrams. The numbers in parentheses after the AD1, AD2, and AD3 labels indicate the levels of investment spending associated with each curve. All figures are in billions. Which of the following would shift the money supply curve from MS1 to MS3?

puchases of US securties by the Fed in the open market

When the Fed loans money in exchange for government bonds being posted as collateral, this is known as a

repo

Which of the following Fed actions will decrease the money supply?

reverse repos

If the Federal Reserve authorities were attempting to reduce demand-pull inflation, the proper policies would be to

sell government securities, raise reserve requirements, raise the discount rate, and increase the interest paid on reserves held at the Fed banks.

The asset demand for money is most closely related to money functioning as a

store of value