Quiz 20
A
A decrease in the money supply will: A) raises interest rates, reducing planned investment and GDP B) raises interes rates, increasing planned investment and lowering GDP C) reduce interest rates, increasing planned investment and GDP D) reduce interest rates, reducing planned investment and GDP
D
If the FED buys bonds from the public through its open market operations: A) both the price of bonds and the interest rate recieved by bond holders will increase B) both the price of bonds and the interest rate recieved by bond holders will decrease C) the price of bonds will decrease and the interest rate recieved by bond holders will increase D) the price of bonds will increase and the intrest rate recieved by bond holders will decrease
D
If the current interest rate is below the equilibrium rate: A) the money supply exceeds the quantity of money demanded B) the money supply will increase and the interest rate will rise C) the money supply will decrease and the interest rate will rise D) the interest rate will rise and the quantity of money demanded will decrease
C
If the intent of the Fed is to increase GDP, it should: A) raise the reserve requirement B) raise the discount rate C) purchase government securities in the open market D) ask banks to reduce their amount of loans outstanding
$800/4 = $200
Suppose that each dollar held for transactions purposes is spent an average of 4 times per year. If the economy's nominal GDP is $800 billion, how much money is demanded for transactions?
$225 billion, $425 billion, $385 billion
Suppose that each dollar held for transactions purposes is spent an average of 4 times per year. Suppose nominal GDP increases to $900 billion. How much money is demanded for transactions? What is the total amount of money demanded at an interest rate of 6%? At 8%?
$360 billion, $320 billion
Suppose that each dollar held for transactions purposes is spent an average of 4 times per year. What is the total amount of money demanded at an interest rate of 6%? At 8%?
A
Suppose the demand for money falls. In order to maintain interest rates at their previous level, the Fed might: A) sell government securities B) lower the reserve requirement C) lower the discount rate D) sell additional reserves throught the Term Auction Facility
B
Suppose the interest rate is currently 6% and the FED determines that investment of $40 is required to reach full employment GDP. To target this outcome, the FED might: A) sell bonds to the public B) lower discount rate C) raise the reserve requirement D) raise the interest rate the Fed pays member banjs on deposits (at th Fed)
D
Supposed banks are just met ting their reserve requirement of 25% and the Fed sells $30 billion in government securities to commercial banks. The effect of this sale is to: A) increase excess reserves by $30 billion B) reduce excess reserves by. $7.5 billion C) reduce the potential money supply by $90 billion D) reduce the potential money supply by $120 billion
D
Two primary assets of the Federal Reserve Banks are: A) securities and Federal Reserve Notes outstanding B) securities and Treasury deposits C) Federal Reserve Notes outstanding and reserves of commercial banks D) securities and loans to commercial banks
Curve to the right
What is the impact of an increase in nominal GDP on the total demand for money?
D
Which of the following will cause the aggregate demand curve to shift to the left? A) a reduction in interest rates B) an expansionary monetary policy C) a reduction in the reserve requirement D) Fed sales of bonds to the public