macroeconomics

$300 million

A commercial bank has required reserves of $60 million and the reserve ratio is 20 percent. How much are the commercial bank's checkable-deposit liabilities

reduce inflationary pressures in the economy

A newspaper headline reads "Fed Raises Discount Rates for Third Time This Year." This headline indicates that the Federal Reserve is most likely trying to:

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

If severe demand-pull inflation was occurring in the economy, proper monetary policy involves:

Lower interest rates, higher investments, and an expanded GDP

If the Fed were to reduce the required reserve ratio, we would expect:

a bank grants a loan to a customer

Money is "created" when

federal funds rate

Overnight loans from one bank to another for reserve purposes entail an interest rate called the:

True

TRUE/FALSE: A change in the reserve ratio will affect both the amount of the banking system's excess reserves and the multiple by which the system can lend on the basis of excess reserves.

False

TRUE/FALSE: A restrictive monetary policy involves investment spending and shifts the economy's aggregate demand curve to the right.

False

TRUE/FALSE: The federal funds rate target is the most frequently used monetary policy tool.

reducing the discount rate

The Federal Reserve can increase aggregate demand by

increasing commercial bank reserves

The Federal Reserve could reduce the money supply by

varies inversely with the rate of interest

The asset demand for money:

unit of account, store of value, and medium of exchange

The functions of money are to serve as a :

Fed buys securities in the open market

The lending ability of commercial banks increases when the:

Term Auction Facility

The main tools that the Fed can use to alter the money supply are the required-reserve ratio and the following except

the money supply to increase

The purchase of government securities from the public by the Fed will cause

3.33

When the legal reserve ratio is 30 percent, the monetary multiplier is:

Decreases the interest rate and increases aggregate demand

An increase in the money supply usually

the money supply by potentially $280 million

Assuming that the Federal Reserve Banks sells $65 million in government securities to commercial banks and the reserve ratio is 25 percent, then the affect will be to reduce:

investment

Monetary policy is expected to have its greatest impact on:

they can be readily used in purchasing goods and paying debts

Checkable deposits are classified as money because

in doing so, one sacrifices interest income

It is costly to hold money because:

making it less expensive for commercial banks to borrow from central banks

Lowering the discount rate has the effect of

Sm3 and the interest rate will be 4 percent

Refer to the graph above, in which Dt is the transactions demanded for money, Dm is the total demand for money, and Sm is the supply of money. The market is initially in equilibrium at a 6 percent interest rate. If the money supply increases, then Sm2 will shift to:

The quickness with which it can be used

What is one of the advantages of monetary policy over fiscal policy?

Open market operations

Which of the following is a tool of monetary policy?