WK 5 - PRACTICE:MONETARY POLICY PART II
The money multiplier equals:
1/reserve requirement.
Which of the following does the Fed carefully monitor?
Bank reserves
If the Fed finds that a bank fails to maintain a required level of reserves, what can happen to the bank?
Banking inspectors will make an unwelcome appearance. Reason: This is a consequence of repeatedly not maintain the required level of reserves.
_______ reserves are equal to total reserves minus required reserves.
Excess
Which of the following describes a market in which the demand for and supply of money determine an interest rate or opportunity cost of holding money balances?
Money market
_______ reserves are the fraction or portion of checkable deposits that a bank must keep on hand.
Required
Select all that apply Which of the following are also names for the interest rate? The price of money Easy money The marginal interest rate The nominal interest rate
The price of money The nominal interest rate
A money market is:
a market in which the demand for and supply of money determine an interest rate or opportunity cost of holding money balances.
When economists talk about "interest rates" or even "the interest rate," they mean:
all interest rates, since interest rates all tend to move in the same direction.
The federal funds market is the market for borrowing and lending reserves between _______. (Enter one word for the blank.)
banks
The federal funds market is the market for borrowing and lending reserves between ________.
banks
The federal funds rate is the interest rate that banks pay when borrowing reserves from other ________.
banks
The federal funds rate is determined by the supply and demand for _______ reserves.
borrowed
The actions taken by a country's central bank to contract the money supply and raise interest rates is called a(n) _______ monetary policy.
contractionary
The actions taken by a country's central bank to expand the money supply and lower interest rates is called _______ monetary policy.
expansionary
The actions taken by a country's central bank to expand the money supply and lower interest rates is called:
expansionary monetary policy.
A formal market for overnight loans of federal reserves is the:
federal funds market.
One of the key interest rates in the economy is called the:
federal funds rate.
The interest rate that helps determine the interest rates charged on other loans is called the:
federal funds rate.
The payment made to agents that lend or save money expressed as an annual percentage of the monetary amount lent or saved is called the ____ rate.
interest
The payment made to agents that lend or save money expressed as an annual percentage of the monetary amount lent or saved is called the _______ rate.
interest
The negative relationship between the quantity of new physical capital demanded by firms and the prevailing interest rate describes _______ demand.
investment
The negative relationship between the quantity of new physical capital demanded by firms and the prevailing interest rate describes:
investment demand.
The _______ market is a market in which the demand for and supply of money determine an interest rate or opportunity cost of holding money balances.
money
A reserve _______ specifies the fraction of checkable deposits that a bank must keep in hand.
requirement
The _______ specifies the fraction of checkable deposits that a bank must keep in hand.
reserve requirement ratio
The federal funds market is the market for borrowing and lending _______ between banks.
reserves
The federal funds rate is determined by the supply of and demand for borrowed _______.
reserves
The money multiplier is the amount by which a $1 change in _______ will change the money supply. (Enter one word in the blank.)
reserves
Investment demand can be described as:
the negative relationship between the quantity of new physical capital demanded by firms and the prevailing interest rate.
Select all that apply The actions taken by a country's central bank to contract the money supply and raise interest rates is called: expansionary monetary policy. expansionary fiscal policy. tight money. contractionary monetary policy. contractionary fiscal policy. easy money.
tight money. contractionary monetary policy.
