Mod 26, 27, 28, 29
if the required reserve ratio were .1, each commercial bank would be required to maintain reserves of ________________.
10%
there are _________ regional Federal Reserve banks
12
if the required reserve ratio were changed to 5%, the money multiplier would be:
20
the ____________ regional federal reserve bank is responsible for carrying out the Feds open market operations
New York
federal reserve bond sales leads to
a decrease in the money supply and an increase in nominal interest rate
the demand for money curve is
a downward sloping curve
commercial banks would prefer
a lower discount rate
the money demand curve represents the demand for money as ___________
a medium of exchange and an asset
the federal open market committee meets _______ times a year
8
which of the following can be lent out by a commercial bank
$1 million in excess reserves
suppose that the federal reserve ratio is 10% when the Fed buys $100,000 of bonds from the banking system. if the banking system does not want to hold any excess reserves, the maximum total change in the money supply can be
$1,000,000
suppose that the reserve ratio is 10% when the federal reserve sells $11,000 of US treasury bills/bonds to the banking system. if the banking system does not want to hold any excess reserves, _____________ will be ____________________ the money supply.
$110,000; subtracted from
the federal reserve bond purchases lead to
an increase in the money supply and a decrease in nominal interest rates
which of the following would be considered expansionary monetary policy or easy money policy? (check all that apply)
buying bonds, lowering the discount rate, lowering the required reserve ratio
which of the following is not a tool of the federal reserve
changes to the tax rate, changes in government spending, important quotas
reducing the discount rate makes it
cheaper for commercial banks to borrow from the Federal Reserve
if the federal reserve needed to stimulate the economy it could:
conduct an open-market bond purchase and lower the required reserve ratio
to slow the economy, the federal reserve would want to pursue _________ policy
contractionary or tight money
open market operations are
the buying and selling of government securities
the supply of money will shift to the left or the right when
the central bank decides to increase or decrease the supply of money
if the level of output in the economy increases, we see
the demand for money curve shift to the right
the interest rate the federal reserve charges commercial/private banks is known as:
the discount rate
the supply of money is determined by
the federal reserve
central banks typically act as _______ to private banks
the lender of last resort
the supply of money is determined by
the monetary policy of a nation's central bank
if the federal reserve increases the discount rate
the money supply is likely to decrease
suppose the federal reserve were to engage in open-market operations by buying $100 million of US Treasury bills. which of the following would be the end result of such action?
the money supply would increase by more than $100 million.
the quantity demanded of money will increase when
the nominal interest rate decreases
the price of holding cash, or rather the opportunity cost of holding cash is/are
the nominal interest rate that could be earned by holding financial assets instead
the required reserve ratio refers to
the percentage of a bank's total deposits that must be kept
T&F: bonds cannot be used to buy goods or services
true
bonds cannot be used to buy goods or servies
true
money held by the Federal Reserve is NOT part of the money supply
true
suppose that for every 1% point decline in the discount rate, commercial banks collectively borrow an additional $2 billion from the Federal Reserve. also assume that the required reserve ratio is 20%. if the fed raises the discount rate from 4% to 4.25%, bank reserve will:
decline by .05$ billion and the money supply will decline by $2.5 billion
during an open market bond purchase, a commercial bank's holdings of securities/bonds will
decrease
during an open market bond purchase, the federal reserves holdings of cash will
decrease
during an open market bond sale, a commercial bank's holdings of cash (held in deposit at the Fed) will _____.
decrease
during an open market bond sale, the federal reserves holdings of securities/government bonds will
decrease
decreasing the supply of money would:
decrease aggregate demand in the economy and be called contractionary monetary policy
Increases in the supply of money _______________________.
decrease the equilibrium nominal interest rate
if the federal reserve was working to raise or increase the nominal interest rate in the economy, the federal reserve would:
decrease the supply of money
a high discount rate tends to lead to:
decreased borrowing and less "interest sensitive consumption"
increases in the supply of money would be considered
expansionary monetary policy or easy money policy
to stimulate the economy, the Federal Reserve would want to pursue ______________ policy
expansionary or easy policy
the supply of money in the economy
in part determines the nominal interest rate in the economy
during an open market bond purchase, a commercial bank's holdings of cash (held in deposit at the Fed) will _______.
increase
during an open market bond purchase, the federal reserves holdings of securities/government bonds will
increase
during an open market bond sale, a commercial bank's holdings of securities/government bonds will
increase
during an open market bond sale, the federal reserves holds of cash will
increase
expansionary monetary policy attempts to:
increase aggregate demand
if the Federal Reserve wants to discourage banks from borrowing directly from the Fed and thus decrease the monetary base, the federal reserve would likely
increase the discount rate
decreases in the supply of money
increase the equilibrium nominal interest rate
if the federal reserve wanted to restrict the amount of money banks could lend out, the federal reserve would:
increase the required reserve ratio
if the federal reserve was trying to lower or decrease the nominal interest rate in the economy, the Federal Reserve would:
increase the supply of money
to ______ the money supply, the Fed could _______
increase; lower the discount rate
commercial bank borrowing from the federal reserve:
increases the excess reserves of commercial banks and their ability to offer credit
commercial banks are more likely to borrow from the Federal Reserve when the Discount Rate is
lower
the vertical axis of the money market graph is labeled as
nominal interest rate
deposits that are required to be held at the Federal Reserve bank are:
not available to be lent out by commercial banks
the buying and selling of bonds/securities by the Federal Reserve is known as:
open market operations
the most frequently used tool of monetary policy is
open market operations
which of the following actions would increase the nominal interest rate
open market operations bond sale
the most commonly used tool of the Federal Reserve is/are:
open-market operations
the primary tool of the Federal Reserve is:
open-market operations
the three main tools used to control the supply of money are:
open-market operations, changes to the required reserve ratio, changes to the discount rate
if the federal government wanted to increase the supply of money in the economy it will
purchase government bonds/securities from households and commercial banks
contractionary monetary policy would consist of
raising the discount rate
open market sales
reduce the amount of money in the economy
a newspaper headline reads: "Federal Reserve cuts discount rate for the third time this year." this headline indicates that the federal reserve is most likely trying to
reduce the cost of credit and stimulate the economy
the federal reserve can put the brakes on the economy by
reducing the economy's supply of funds
the three main monetary policy tools are:
reserve requirements, the discount rate, and open market operations
central banks usually keep the interest rate they charge ______ what banks charge each other
above
suppose the required reserve ratio is 20%. if the federal reserve wanted to increase the supply of money by $500 million, it could:
buy $125 million of US securities from households and buy 100 million of US securities from banks
T&F: changes to the required reserve ratio occur often
false
T&F: government bonds play only a small role in monetary policy
false
T&F: money held by the federal reserve is part of the money supply
false
T&F: open market sales are expansionary
false
in today's economy, the discount window is largely an insignificant monetary policy tool
false
increasing the required reserve ratio means banks can increase their loans
false
the supply of money is determined or related to the interest rate
false
when a commercial bank borrows reserves from another commercial bank it is charged the
federal funds rate
when a commercial bank borrows reserves from another commericial bank, it is charged the:
federal funds rate
when the federal reserve sells bonds, this means:
households and banks receive bonds and the federal reserve receives money
when the federal reserve purchases bonds, this means:
households and banks receive money and the federal reserve receives bonds
most of the money in an economy is held
in banks
when the nominal interest rate increases, people would prefer to hold
interest bearing financial assets
the demand for money is __________ related to the nominal interest rate that investors could earn by using that money to buy other assets
inversely
decreases in the supply of money are seen as
leftward shifts of the perfectly vertical money supply curve
one of the fed's goals is to
limit inflation during periods of healthy economic growth
federal funds are
loans between banks
If the Federal Reserve wanted to make it possible for banks to lend out more money, the federal reserve would
lower the required reserve ratio
expansionary monetary policy would consist of
lowering the discount rate
aggregate demand will increase when the federal reserve
makes more money available
lowering the discount rate has the effect of:
making it less expensive for commercial banks to borrow from the central bank
a model showing the total supply of and demand for money in a nation
money market
which of the following could be considered contractionary monetary policy or tight money?
selling bonds, raising the required reserve ratio, raising the discount rate
the amount of interest a central bank charges private banks for short-term loans is known as:
the Discount rate
the interest private banks charge each other for short-term/overnight loans is known as:
the Federal Funds rate
monetary policy is conducted by
the Federal Reserve
the discount rate is the interest rate a commercial bank pays when it borrows money from _____________.
the Federal Reserve