d. rate of interest increases.. Match the terms with definitions. \text{Bad Debt Expense}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? . copyright 2003-2023 Homework.Study.com. According to the monetarist view, the aggregate supply curve is: Vertical at the natural rate of unemployment. Suppose the banks in the Federal Reserve System have $100 million in transactions accounts and the reserve requirement is 0.10. Causes an increase in the federal funds rate, c. Increases reserve holdings of the commercial banks, d. Lowers the cost of borrowing from the Fed, e. Leads to an increase in the interbank, According to the Taylor rule, the Federal Reserve lowers the real interest rate as the output gap ____ or the inflation rate ______. a-Ceteris paribus, an increase in the interest rate would lead to a fall in investment due to an inward shift of the investment line. D. The value o, If the nominal interest rate were to increase, then: a. money demand decreases and the price level increases. d. lend more reserves to commercial banks. E.the Phillips curve will shift down. b) the federal reserve must raise interest rates and lower the required reserve ratio, If the Federal Reserve ("Fed") engages in the contractionary monetary policy then: A. the Fed is seeking to decrease the money supply and lower interest rates to lower inflation. If the Fed wishes to increase the money supply it can: The purchase and sale of government bonds by the Fed for the purpose of altering bank reserves is referred to as: If the Fed wants to increase bank reserves, it can: If the Fed wants to reduce bank reserves, it can: Raise the discount rate or sell bonds on the open market. Determine whether each of the following, Open market operations are the a. buying and selling of Federal Reserve Notes in the open market. Which of the following is consistent with what Keynes believed? Inflation rate _____. FROM THE STUDY SET Changing the reserve requirement is expensive for banks. A change in the reserve requirement affects: The money multiplier and excess reserves. d. the demand for money. A decrease in the reserve ratio will: a. Assume that banks use all funds except required, 13. C. increase by $50 million. \text{Percent uncollectible}&\text{8\\\%}&\text{17\\\%}&\text{31\\\%}\\ b. increase the supply of bonds, thus driving down the interest ra, If the Fed begins to buy treasury bills to counter a recession, we would expect to see an increase in the a. demand for money. \text{Total per category}&\text{?}&\text{?}&\text{? }\\ The Federal Reserve expands the money supply by 5 percent. When aggregate demand exceeds the full-employment level of output, the result is: LEFT ARROW - move card to the Don't know pile. c. the money supply and the price level would increase. Ceteris paribus, if the Fed reduces the reserve requirement,thenMultiple Choicetotal reserves increase.the lending capacity of the banking system increases.total deposits decrease.the money multiplier decreases. 41. **Instructions** \text{Direct labor} \ldots & 800,000\\ In response, people will a. sell bonds, thus driving up the interest rate. The current account deficit will increase. &\textbf{past due}&\textbf{past due}&\textbf{past due}\\[5pt] c. means by which the Fed acts as the government's banker. c) decreases, so the money supply increases. We develop a model of price formation in a dealership market where monitoring of the information flow requires costly effort. b. d. The money supply should increase when _ a. Answer: Answer: B. b. the interest rate increases c. the Federal Reserve purchases bonds. a. increases, rises b. increases, falls c. decreases, falls d. decreases, does not change e. . Interest rates b. d. raise the treasury bill rate. C. increase by $290 million. a) decrease, downward b) decrease, upward c) inc. B. decrease the discount rate. Suppose Alan receives a check for $300 from a bank in Dallas, He deposits the check in his account at his Baltimore ban of the following is Alan's Baltimore bank likely to collect the $300 from? The financial sector has grown relative to the real economy and become more fragile. The reserve requirement, the discount rate, and the sale and purchase of Treasury bonds. This type of market is called: As the economy falls from the peak to the trough of the business cycle: Cyclical unemployment should increase and real GDP should decline. Over the 30-year life of the. If price is greater than marginal cost, a competitive firm should increase output because additional units of output will: Add to the firm's profits (or reduce losses). Suppose the Federal Reserve Bank buys Treasury securities. c. buys bonds from ban, The Federal Reserve's sale or purchase of government bonds is referred to as: a. open market operations b. credit rationing c. quantitative easing d. monetarism, If the Fed wants to increase the money supply through an open market operation, it will a. purchase government securities. \text{Net Income (Loss)}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? The U.S. Treasury c. The U.S. Mint d. The federal government And involves: a. Quantitative easing b. A, Suppose that the Fed engages in an open-market purchase of $4,000 in securities from Bank A. Lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public. B. decisions by the Fed to increase or decrease the money multiplier. Facility location decisions are significant for an organization because:? How can you tell? U.S.incometaxrateontheU.S.divisionsoperatingincomeFrenchincometaxrateontheFrenchdivisionsoperatingincomeFrenchimportdutyVariablemanufacturingcostperchainsawFullmanufacturingcostperchainsawSellingprice(netofmarketinganddistributioncosts)inFrance40%45%20%$100$175$300. (ii) instructs the New York Fed to sell government securities in the foreign exchange market. Consider an expansionary open market operation. b. it will be easier to obtain loans at commercial banks. A. }\\ A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases, If the Federal Reserve was concerned about the "crowding-out" effect, they could engage in: A. expansionary monetary policy by lowering the discount rate. U.S.incometaxrateontheU.S.divisionsoperatingincome40%FrenchincometaxrateontheFrenchdivisionsoperatingincome45%Frenchimportduty20%Variablemanufacturingcostperchainsaw$100Fullmanufacturingcostperchainsaw$175Sellingprice(netofmarketinganddistributioncosts)inFrance$300\begin{matrix} The reserve ratio is 20%. Let's say the Fed had raised interest rates by 1% before the family got a loan, and the interest rate offered by banks for a $300,000 home mortgage loan rose to 4.5%. c. has an expansionary effect on the money supply. The total change in deposits (with no drains) would be$12,857 million = (1/0.07) $900 million If the Fed wishes to stimulate the economy, it could I. buy U.S. government securities.II. Ceteris paribus, if the Fed raises the reserve requirement, then: e The lending capacity of the banking system decreases. Determine the December 31, 2012, balances in Wave Waters shareholders equity accounts and total shareholders equity on this date. If the Fed sells bonds: A.aggregate demand will increase. b) increase causing an increase in investment spending shifting aggregate deman, An expansionary monetary policy ____ the money supply, causing the real interest rate to ____ and planned investment to ____. a. The supply of money increases when: a. the value of money increases. It involves the direct exchange of one good or service for another. Although it may feel like you're playing a game, your brain is still making more connections with the information to help you out. d. The Federal Reserve sells bonds on the open marke, If the Fed purchases government securities on the open market, the quantity of money and the nominal interest rate. See Answer b. \end{array} In the short run, the quantity of money demanded [{Blank}] and the nominal interest rate [{Blank}]. Increase the demand for money. (Income taxes are not included in the computation of the cost-based transfer prices.) Biagio Bossone. Makers, but perfectly competitive firms are price takers. b. Raise the reserve requirement, increase the discount rate, or . Which of the following is NOT a possible source of last-minute reserves for a private bank? The people who sold these bonds keep all their money in checking accounts. \end{array} The Fed has most likely reduced the, If the Fed wishes to increase the money supply it can, If the Fed wishes to decrease the money supply it can, The rate of interest banks charge each other for lending reserves is the, A change in the reserve requirement is the tool used least often by the Fed because it, can cause abrupt changes in the money supply, consists of seven members appointed by the President of the United States, who together act as the key decision-making entity for monetary policy, Bank reserves in excess of required reserves, Ceteris paribus, if the Fed raises the discount rate, then, the incentive to borrow reserves decreases. Acting as fiscal agents for the Federal government. The sale of bonds to the Fed by banks B. B. decrease by $200 million. Fiscal policy should be used to shift the aggregate demand curve. B. influence the discount rate. 2. Toby Vail. What effect will this open market operation have on demand deposits and M1? D. In open market operations, the Fed exchanges cash (money) for non-cash (bonds). \end{array} Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. A sale of treasury bills by the federal reserve _____ interest rates and _____ the money supply. Instead of paying her for this service,the neighbor washes the professor's car. Ceteris paribus, an increase in _______ will cause an increase in ______. Consider an open market purchase by the Fed of $16 billion of Treasury bonds. The text describes the theoretical developments of the assignment rules regarding fiscal and monetary policies and the respective roles in macroeconomics stabilisation. d. an increase in the supply of bonds and a fal, When there is an excess supply of money: A. the Fed will decrease the money supply. (A) How will M1 be affected initially? __ Money paid to stockholders from earnings of a corporation. b. the interest rate rises and this stimulates consumption spending. If they have it, does that mean it exists already ? c. the government increases spending and lowers taxes. If the Fed raises the reserve requirement, the money supply _____. Cause a reduction in the dem. b. buys or sells foreign currency. The lending capacity of the banking system decreases. The following information is available: Suppose the United States and French tax authorities only allow transfer prices that are between the full manufacturing cost per unit of $175 and a market price of$250, based on comparable imports into France. Money demand c. Investment spending d. Aggregate demand e. The equilibrium level of national income, When the expected inflation rate falls, the real cost of borrowing ______ and bond supply ______, everything else held constant. Suppose the Federal Reserve decided to sell $35 billion worth of government securities in the open market. \text{Selling price (net of marketing and distribution costs) in France} & \text{\$300}\\ If total reserves for a bank are $10,000, excess reserves are zero, and demand deposits are $100,000, then the money multiplier must be: If total reserves for a bank are $150,000, excess reserves are zero, and demand deposits are $1,000,000, then the money multiplier must be: Suppose the entire banking system has $10 million in excess reserves and a required reserve ratio of 5 percent. a. Now suppose the Fed conducts an open market purchase of government bonds equal to $1, Fiscal policy is conducted by: a. Conduct open market purchases. the process of selling Fed-issued IOUs between banks. If the firm wants to sell one more carton of eggs, the firm: A flat or horizontal demand curve for a firm indicates that: If a perfectly competitive firm wanted to maximize its total revenues, it would produce: As much output as it is capable of producing. Cause an excess demand for money and a decrease in the rate of interest. You would need to create a new account. \text{Selling expenses} \ldots & 500,000 The Dutch East India Company (also known by the abbreviation "VOC" in Dutch) was the first publicly listed company ever to pay regular dividends. The Federal Reserve can decrease the money supply by: A. buying gold reserves on the open market B. buying foreign currency in the exchange market C. buying government bonds on the open market D. selling bonds on the open market E. selling financial capit. Annual gross pay of $18,200. &\textbf{0-60 days}&\textbf{61-120 days}&\textbf{Over 120 days}\\ C. Increase the supply of money. A perfectly competitive firm is a price taker because: It has no control over the market price of its product. Compute the following for the current year: Which of the following is likely to occur if people reduce their spending because they are worried about an economic downturn, ceteris paribus? It improves aggregate demand, thus increasing the country's GDP. \text{Cost of Goods Sold}&\underline{\text{\hspace{19pt}85,250}}&\underline{\text{\hspace{19pt}85,250}}\\ Banks must hold more funds used for loans in reserve. c) an open market sale. D.bond prices will rise, and interest rates will fall. Calculate after-tax operating income earned by United States and French divisions from transferring 200,000 chainsaws (a) at full manufacturing cost per unit and (b) a market price of comparable imports. D. Transaction demand for, To ease monetary policy to fight a recession, the Federal Reserve would ____. A. decrease, downward B. decrease, upward C. increase, downward D. increase, If inflation begins to rise rapidly, which step is the Federal Reserve likely to take? a. The change in total revenue that results from a one-unit increase in quantity sold is: For a monopolist, after the first unit of output, marginal revenue is always: Suppose a monopoly firm produces software and can sell 10 items per month at a price of $50 each. Also assume the Federal Reserve conducts an Open Market Operations purchase of U.S. Treasury securities in the amoun, Assume that the Federal Reserve establishes a minimum reserve requirement of 12 %. b. buys bonds from banks, which increases bank reserves. }\\ Ceteris paribus, if the Fed reduces the reserve requirement, then, the lending capacity of the banking system increases, Ceteris paribus, if the Fed reduces the discount rate, then. When the Fed buys government Securities in the open market (a) bank reserves increase (b) bank reserves decline (c) money supply increases but bank reserves remain unchanged (d) money supply declines but bank reserves remain unchanged. b) increases the money supply and lowers interest rates. Suppose the Federal Reserve wishes to use monetary policy to close an expansionary gap. International Financial Advisor. C) Excess reserves increase. \begin{array}{c} Figure 14.10c depicts the aggregate investment function of an economy. \text{Manufacturing overhead} \ldots & 1,200,000 \\ Open market operations When the Fed sells government securities, it: a. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public. $$ Then required reserves are: If excess reserves are $50,000, demand deposits are $1,000,000, and the minimum reserve requirement is 5 percent, then total reserves are: Suppose a bank has $1,500,000 in deposits, a minimum reserve requirement of 20 percent, and total reserves of $350,000. b) decreases the money supply and raises interest rates. The aggregate supply curve is positively sloped because as the price level increases: Profit margins increase in the short run. Officials indicated an aggressive path ahead, with rate rises coming at each of the . c. first purchase, then sell, government secur, If the Fed wants to decrease the money supply by $5,000, the Fed will use open market operations to _____ worth of U.S. government bonds. d) decreases, so the money supply decreases. Suppose the Federal Reserve buys 100 mortgage-backed securities in the open market. During the year, the company started and completed 45 motor homes at a cost of $\$ 55,000$ per unit. A lower amount of money in the economy makes it more expensive to borrow for banks and consumers.. The central bank uses various monetary tools such as open market operations, the Fed's fund rate, and reserve requirements to achieve its goals. The sale of bonds to the Fed by the public C. Increases in banks' excess reserves D. Increases in. When the Federal Reserve Bank buys US Treasury bonds on the open market, then _______. Fill in either rise/fall or increase/decrease. a) 0.25 b) 0, Suppose the reserve requirement for checking deposits is 10 percent and banks do not hold any excess reserves. d. equilibrium interest rate rises e. demand for money curve shifts leftward, If the Federal Reserve increases the rate of money growth and maintains it at the new higher rate, eventually expected inflation will [{Blank}] and the short-run Phillips curve will shift [{Blank}]. Buy Treasury bonds, bills, or notes on the bond market. b. A. \text{U.S. income tax rate on the U.S. division's operating income} & \text{40\\\%}\\ Total costs for the year (summarized alphabetically) were as follows: Answer: Answer: B. c) overseeing the buying and selling of government securities in the open market. a. increases, increase, increase b. increases, increase, decrease c. decreases, increase, decrease d. increases, decrease, increa, If the Federal Reserve increases the discount rate, how are interest rates and real GDP affected? The immediate result of this transaction is that M1: If Edgar takes $100 out of his savings account and deposits it into his checking account, the immediate result of this transaction is that M1: What does not occur when a bank makes a loan? As a result, the money supply will: a. increase by $1 billion. a. increase, increase, sell b. increase, increase, buy c. decrease, decrease, buy d. decrease, If the Fed is following policies to reduce inflation, it is most likely to be: a. lowering interest rates b. raising the money supply c. lowering the money supply d. both lowering interest rates and, When the interest rate falls in the money market, the quantity of money demanded ______ and the quantity of money supplied _______. b. decrease the money supply and decrease aggregate demand. c. engage in open market sales of government securities. If the Fed decides to engage in an open market operation to increase the money supply, what will it do? One HEADLINE article in the text has the title "Fed cuts key interest rate half-point to 1 percent." The change is negative it means that excess reserve falls by -100000000 or 100 million. Which of the following lends reserves to private banks? c. They wil, If the Federal Reserve buys bonds on the open market then the money supply will a. increase causing a decrease in investment spending shifting aggregate demand to the right. b. the money supply is likely to decrease. They will increase. III. B) Total reserves increase D) The money multiplier decreases. c. Increase the required reserve, Suppose the Federal Reserve s trading desk buys $500,000 in T-bills from a securities dealer who then deposits the Fed's check-in Best National Bank. This causes excess reserves to, the money supply to, and the money multiplier to. Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. d. lower reserve requirements. \text{Gross Margin}&\text{\hspace{5pt}1,369,250}&\text{\hspace{5pt}1,369,250}\\ Suppose that the sellers of government securities redeem these checks drawn on the New York Fed for currency. On October 24, 1929, the stock market crashed. are in the same box the next time you log in. B. an exchange between a private bank and the Federal Reserve where the Fed buys or sells government bonds to private banks. Monetary policy can help the Federal Reserve System to protect, influence, and increase benefits to the economy. Which action would the federal reserve rate take to expand the money supply and lower the equilibrium interest rate? B. In order to decrease the money supply, the Fed can. to send you a reset link. What cannot be used to shift aggregate demand? B. buy bonds lowering the price of bonds and driving up the interest rates. In the market for reserves, if the federal funds rate is above the interest rate paid on excess reserves, an open market sale ________ the ________ of reserves, causing the federal funds rate to increase, everything else held constant. Excess reserves increase. b. sell government securities. All rights reserved. C. where a bank borrows reserves or bo, Open market operations are a) buying and selling of Federal Reserve Notes in the open market. c. real income increases. Raises the cost of borrowing from the Fed, discouraging banks from ma, If the Federal Reserve System buys government securities from commercial banks and the public: A. commercial bank reserves will decline B. commercial bank reserves will be unaffected C. it will be easier to obtain loans at commercial banks D. the money su, Suppose that the Fed purchases from bank A some bonds in the open market and that, before the sale of bonds, bank A had no excess reserves. a. Your email address is only used to allow you to reset your password. Ceteris paribus, if the Fed raises the reserve requirement, then: The lending capacity of the banking system decreases. The marginal revenue of the 11th item is: A monopolist sets price at a point on the _______ curve, corresponding to the rate of output determined by the intersection of ______. \text{General and administrative expenses} \ldots & 500,000 \\ B) means by which the Fed acts as the government's banker. A perfectly competitive firm currently sells 30,000 cartons of eggs at $1.25 each. c. buys or sells existing U.S. Treasury bills. The use of money and credit controls to change macroeconomic activity is known as: Monetary policy. D) Required reserves decrease. The equilibrium price level and equilibrium output should both increase. It is considered to be less efficient for an economy than the use of money. An increase in the money supply and a decrease in the interest rate. The Federal Reserve's monetary policy is one of the ways in which the U.S. government tries to regulate the nation's economy by controlling the money supply. In order to increase sales by one item per month, the monopolist must lower the price of its software by $1 to $49. Accordingly, the Board is amending Regulation D to set the low reserve tranche for net transaction accounts for 2022 at $640.6 million, an increase of $457.7 million from 2021. d. the money supply and the pric, When the Fed increases the quantity of money, the: a. equilibrium interest rate falls b. demand for money curve shifts right c. supply of money curve shifts leftward. See our The VOC was also the first recorded joint-stock company to get a fixed capital stock. B. taxes. D. $100,000 in checkable-deposit liabilities and $30,000 in reserves. Increase the reserve requirement. 1015. C. the price level in the economy will rise, thus i. When the Federal Reserve increases the money supply, ceteris paribus, the money supply curve will shift to the right, as illustrated in the graph, then the interest rate in equilibrium will decreases. a) decreases, decreases b) decreases, increases c) increases, decr, An increase in the interest rate will cause: an increase in the demand for money an increase in the supply of money a decrease in the demand for money a decrease in the quantity demanded of money, When the Federal Reserve increases the money supply and expands aggregate demand, it moves the economy along the Phillips curve to a point with (blank) inflation and (blank) unemployment.