Macro ch 14 part 2

अब Quizwiz के साथ अपने होमवर्क और परीक्षाओं को एस करें!

________ sell shares to investors and use the money to buy shortminus−term securities....

Money market mutual funds

Which of the following is an appropriate policy for the Fed to pursue if it wants to increase the money​ supply?

buy U.S. Treasury bills

To offset the effect of households and firms deciding to hold less of their money in checking account deposits and more in​ currency, the Federal Reserve could...

buy treasury securities

The primary tool the Federal Reserve uses to increase the money supply is ...

buying Treasury securities

For the purchasing power of money to​ increase, the price level has to fall....

true

Which of the following is not a consequence of the Fed changing the reserve​ requirement?

changes in the ratio are easily incorporated into banks' routine management

To increase the money​ supply, the Federal Reserve could...

conduct an open market purchase of Treasury securities

The purchase of Treasury securities by the Federal Reserve​ will, in​ general,...

increase the quantity of reserves held by banks

The quantity equation states that the...

money supply times the velocity of money equals the price level times real output

Which of the following is not a consequence of​ hyperinflation?...

money's function as a medium of exchange is enhanced

Argentine banks were hampered by the​ government's decision to tie the peso to the U.S. dollar at a rate of one to one. This policy of fixing the peso to the dollar...

prevented the central bank from acting as the lender of last resort during a banking panic

The quantity theory of money assumes that...

the velocity of money is constant

Open market operations refer to the purchase or sale of​ ________ to control the money supply...

U.S. treasury securities by the Federal Reserve

To decrease the money​ supply, the Federal Reserve could...

conduct an open market sale of Treasury securities

A fractional reserve banking system is one in which banks hold less than 100 percent of​ ________ as reserves...

deposits

One way investment banks differ from commercial banks is that investment banks...

do not take in deposits

A decrease in the discount rate​ ________ bank reserves and​ ________ the money supply if banks respond appropriately to the change in the rate....

increases; increases

Which of the following is not a function of the Federal Reserve System or the​ "Fed"?

insuring deposits in the banking system

Prior to the initiation of the​ BRRD, the European Union had essentially been bailing out troubled banks. In doing​ this, the EU​ was, in​ effect, acting as a...

lenders of last resort

Banks keep​ _________ of checking deposits as reserves because on a typical day withdrawals​ _________ deposits.

less than 100%; are about the same as

The three main monetary policy tools used by the Federal Reserve to manage the money supply are...

open market operations, discount policy, and reserve requirements.

The quantity theory of money seeks to explain the connection between money and...

prices

When a financial asset is first​ sold, the sale takes place in the​ ________ market, and subsequent sales take place in the​ ________ market....

primary; secondary

In​ 2008, the Fed and the Treasury began attempting to stabilize the commercial banking system through the Troubled Asset Relief Program​ (TARP) by ...

providing funds to banks in exchange for stocks

Which of the following is not one of the ways that the German government ended the hyperinflation of the​ 1920s?...

raising the required reserve ratio to the reduce bank loans

Suppose there is a bank panic. Which of the following would not be a consequence of this bank​ panic?

required reserves would increase

If the central bank can act as a lender of last resort during a banking​ panic, banks can...

satisfy customer withdrawal needs and eventually restore the public's faith in the banking system

The process of bundling loans together and buying and selling these bundles in a secondary financial market is called...

securitization

If the Federal Open Market Committee wants to decrease the money supply through open market operations it will...

sell U.S. Treasury Securities

To offset the effect of households and firms deciding to hold more of their money in checking account deposits and less in​ currency, the Federal Reserve could...

sell treasury securities

During the German hyperinflation of the​ 1920s, the large increases in the money supply were generated by the German government...

selling large quantities of government bonds to the central bank, the Reichsbank

Which of the following is not a major function of the Federal Reserve​ System?

setting income tax rates

Which of the following tools of monetary policy is used least​ often?

setting the required reserve ratio

In​ 2008, Timothy Geithner referred to investment​ banks, money market mutual​ funds, hedge​ funds, and other financial firms engaged in similar activities as the...

shadow banking system

The Federal Open Market Committee consists of...

the Board of Governors plus five of the federal reserve bank presidents

Which of the following is​ (are) responsible for managing the money supply in the United​ States?

the Federal Open Market Committee

The German Hyperinflation of the early 1920s was caused by...

the German government raising funds for expenditures by selling bonds to the central banks

The velocity of money is defined as ...

the avg number of times each dollar is used to purchase goods and services

Which of the following describes the degree of control that the Fed has over the money​ supply?

the fed has substantial control over the money supply

Hyperinflation can be caused by...

the government selling bonds to the central banks

According to the quantity theory of money the inflation rate equals...

the growth rate of the money supply minus the growth rate of real output

The quantity theory of money implies that the price level will be stable​ (no inflation or​ deflation) when the growth rate of the money supply equals...

the growth rate of the price level

The discount rate is...

the interest rate the fed charges to banks for loans from the feds

According to the quantity theory of​ money, inflation is caused by...

the money supply growing faster than real GDP

The seven members of the Board of Governors of the Federal Reserve are appointed by...

the president

The quantity theory of money was derived from the quantity equation by asserting that...

the velocity of money was fixed

An increase in the purchasing power of money need not lead to an increase in the purchasing power of income because the falling price level would likely mean falling wages and salaries....

true

Hyperinflations occur because governments want to deficit spend and they pay for the extra purchases by printing money....

true

If the rate of growth in real GDP exceeds the rate of growth in the money​ supply, the quantity theory of money predicts a price deflation....

true

The Fed can change the money supply more quickly by using open market operations as compared to discount policy...

true

The quantity equation becomes the basis for a theory when we assume that velocity of money is constant....

true

f the Fed wishes to decrease the supply of money and​ credit, it may sell government​ securities, raise the discount​ rate, or lower required reserve ratios....

true

As was demonstrated in​ 2007, firms in the shadow banking system ...

were very vulnerable to banks runs

Suppose a bank has​ $100,000 in checking account deposits with no excess reserves and the required reserve ratio is 5 percent. If the Federal Reserve lowers the required reserve ratio to 3​ percent, then the bank will now have excess reserves of...

$2,000

Using the quantity​ equation, if the velocity of money grows at 5​ percent, the money supply grows at 10​ percent, and real GDP grows at 4​ percent, then the inflation rate will be...

11%

According to the quantity theory of​ money, if the money supply grows at 20 percent and real GDP grows at 5​ percent, then the inflation rate will be...

15%

According to the quantity theory of​ money, if the money supply grows at​ 6%, real GDP grows at​ 2%, and the velocity of money is​ constant, then the inflation rate will be...

4%

The real power within the Federal Reserve lies with the...

Board of Governors

The Federal Open Market Committee consists of the seven members of the​ ________, the president of the Federal Reserve Bank of New​ York, and​ ________.

Federal Reserve's Board of Governors; four presidents from the other 11 federal reserve banks

The quantity equation states that ...

M x V=P x Y

Open market operations refer to the buying and selling of​ ________ by the​ ________ to control the money supply...

Treasury securities; Federal Reserve

An open market purchase of Treasury securities by the Federal Reserve causes the reserves of banks to rise....

True

A central bank can help stop a bank panic by...

acting as a lender of last resort

The sale of Treasury securities by the Federal Reserve​ will, in​ general,...

decrease the quantity of reserves held by banks

An increase in the discount rate​ ________ bank reserves and​ ________ the money supply if banks respond appropriately to the change in the rate...

decrease; decreases

A decrease in the reserve requirement​ ________ bank reserves and​ ________ the money supply....

increases; increases

Money market mutual funds sell shares to investors and use the money to buy...

short-term securities

In response to the destructive bank panics of the Great​ Depression, future bank panics are designed to be prevented by...

the establishment of the Federal Deposit Insurance Corporation

Suppose a bank has​ $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent. If the Federal Reserve reduces the required reserve ratio to 8​ percent, then the bank can make a maximum loan of...

$2mil

Suppose a bank has​ $100 million in checking account deposits with no excess reserves and the required reserve ratio is 20 percent. If the Federal Reserve reduces the required reserve ratio to 15​ percent, then the bank will now have excess reserves of...

$5 mil

Suppose a bank has​ $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent. If the Federal Reserve reduces the required reserve ratio to 4​ percent, then the bank can make a maximum loan of...

$6 mil

Suppose a bank has​ $100,000 in checking account deposits with no excess reserves and the required reserve ratio is 10 percent. If the Federal Reserve raises the required reserve ratio to 12​ percent, then the bank will now have excess reserves of...

-$2,000

Suppose a bank has​ $100 million in checking account deposits with no excess reserves and the required reserve ratio is 10 percent. If the Federal Reserve raises the required reserve ratio to 15​ percent, then the bank will now have excess reserves of...

-$5 mil

Hyperinflation is caused by...

a hight rate of growth in the money supply

In the United​ States, each bank panic in the late nineteenth and early twentieth centuries was accompanied by...

a recession

A financial asset is considered​ ________ if it can be bought or sold in a financial market....

a security

A central bank like the Federal Reserve in the United States can help banks survive a bank run by...

acting as a lender of last resort

If people speculate that a run on one bank will cause a run on all banks in the financial​ system, and this speculation proves​ accurate, then the financial system would experience what is known as a ...

bank panic

In​ 1913, Congress established the Federal Reserve system with the intention of putting an end to...

bank panics

Which of the following is not a tool the Fed uses to manage the money​ supply?

expending and contracting deposits insurance

An increase in the purchasing power of money would​ not, on​ average, result in an increase in the purchasing power of​ people's income because a​ ________ price level would likely mean​ ________ wages and salaries....

falling; falling

A series of bank runs in a country should have no effect on M1 as money simply moves from checking deposits to currency....

false

Banks hold​ 100% of their checking deposits as vault cash to ensure that bank runs do not occur...

false

If the Fed wishes to decrease the supply of money and​ credit, it may sell government​ securities, raise the discount​ rate, or lower required reserve ratios....

false

The Fed has complete control over the money supply....

false

In​ 1980, one Zimbabwean dollar was worth 1.47 U.S. dollars. By the end of​ 2008, the exchange rate was one U.S. dollar to 2 billion Zimbabwean dollars. When an economy experiences rapid increases in the price level such as what occurred in​ Zimbabwe, the economy is said to experience ...

hyperinflation

In​ 2008, Zimbabwe ran out of locally produced Coca Cola and local Coke bottlers were not able to import the concentrated syrup needed to make Coke from the United States because they could not obtain U.S. dollars. A small amount of Coke was imported from South​ Africa, but a single bottle sold for around 15 billion Zimbabwean dollars. Zimbabwe was experiencing rapid increases in the price​ level, which is known as...

hyperinflation

There is a strong link between changes in the money supply and inflation...

in the long run, but not in the short run

If a bank receives a​ $1 million discount loan from the Federal​ Reserve, then the​ bank's reserves will...

increase by $1 mil

The purchase of​ $1 million of Treasury securities by the Federal​ Reserve, if there is no change in the quantity of​ currency, will cause reserves at banks to...

increase by $1 mil

If a bank receives a​ $20 million discount loan from the Federal​ Reserve, then the​ bank's reserves will...

increase by $20 mil

If the Fed lowers the reserve​ requirement, then this ...

increase excess reserves, encourage banks to make more loans, and increase the money supply

If the Fed buys U.S. Treasury​ securities, then this...

increase reserves, encourage banks to make more loans, and increase the money supply

Lowering the discount rate will...

increase reserves, encourage banks to make more loans, and increase the money supply

In​ 2015, the European Union initiated the BRRD​ program, where the burden of bailing out troubled banks is being placed on bank​ creditors, shareholders, and possibly depositors. If this program were to confiscate funds from bank deposits to assist troubled​ banks, the possibility of a bank​ run, a situation in which​ ________, would likely increase....

many depositors simultaneously decide to withdraw money from a bank

The quantity theory of money predicts​ that, in the long​ run, inflation results from the...

money supply growing at a faster rate than real GDP

According to the quantity theory of​ money, deflation will occur if the...

money supply grows at a slower rate than real GDP

Bank panics have largely disappeared in the United States because...

of deposits insurance

The main tool the Federal Reserve uses to conduct monetary policy is ...

open market operations

Which policy tool allows the Federal Reserve the greatest control over monetary​ policy?

open market operations


संबंधित स्टडी सेट्स

Med Serg 1 Prep U Chapters 12, 13, & 19!

View Set

Fundamentals Exam #2 Practice questions

View Set

Chapter 34: Origin of Vertebrates

View Set

Oral and topical medication administration

View Set

History of the English Language Terms

View Set

Anatomy: Chapter 26: Urinary System

View Set