When the Federal Reserve increases the discount-rate increases the discount rate as a part of a contractionary monetary policy, there is: A. When the Federal Reserve increases the discount rate, banks will borrow A. fewer reserves and decrease lending. This problem has been solved! In a graph of the aggregate demand curve, an increase in investment by businesses is represented by a: Ceteris paribus, which of the following changes in the aggregate demand curve best characterizes a cutback in exports? C. influence the federal funds rate. When the economy overheats, the government sometimes cools it down with higher taxes, spending reductions, and less money. The people who sold these bonds keep all their money in checking accounts. }\\ The Fed decides that it wants to expand the money supply by $40 million. How can you tell? b. the Federal Reserve buys bonds on the open market. b) running the check-clearing process. }\\ Answer: Answer: B. Bob, a college student looking for summer work. On March 5 and 6, I surveyed over 500 consumers about their concerns about COVID-19, awareness of the Fed's . 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. &\textbf{Original Categories}&\textbf{Categories Change}\\[5pt] Ceteris paribus, based on the aggregate supply curve, if the price level _______ the quantity of real output _______ increases. d. a decrease in the quantity de. The paper argues that the process of financialization has profoundly changed how capitalist economies operate. D. all of the above. Holding the deposits or reserves of commercial banks. B. an exchange between a private bank and the Federal Reserve where the Fed buys or sells government bonds to private banks. are in the same box the next time you log in. If the Fed sells bonds: A.aggregate demand will increase. Which of the following is NOT a possible source of last-minute reserves for a private bank? C. Increase the supply of money. Increase the demand for money. What can be used to shift aggregate demand? D. The money multiplier decreases. Answer the question based on the following balance sheet for the First National Bank. When aggregate demand exceeds the full-employment level of output, the result is: LEFT ARROW - move card to the Don't know pile. The French import duty is charged on the price at which the product is transferred into France. Total costs for the year (summarized alphabetically) were as follows: a) Describe what initially happens to the reserves of bank B. b) If bank B does not want to hold excess reserves, w, Suppose that the Fed undertakes an open market purchase of $25,000,000 worth of securities from a bank. Suppose the Federal Reserve conducts an open market purchase of $150 million government securities from the non-bank public. c. the interest rate rises and this. Suppose the Federal Reserve buys government securities from commercial banks. d. prices to remain constant. Chapter 14 Assignment Flashcards | Quizlet a. Change in Excess Reserve = -100000000. \text{Total uncollectible? 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. increases; increases; decreases b. decreases; decreases; decreases c. increases; increases; increases d. increases; decreases; 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. buy bonds lowering the price of bonds and driving up the interest rates. PDF AP Macroeconomics Unit 4 Practice Quiz #2 KEY $$. It needs to balance economic growth. Q01 . C. a traveler's check. Suppose that the Fed purchases from bank B some bonds in the open market and that, before the sale of bonds, bank B had no excess reserves. d. decrease the discount rate. d. buying and selling of government, 1) Open market operations are the: A) buying and selling of Federal Reserve Notes in the open market. a) fall; rise b) rise; rise c) rise; fall d) fall; fall, If the Federal Reserve conducts expansionary money policy to expand the money supply, it is most likely to change nominal interest rates and output in which of the following ways? The new reserve requirement exemption amount and low reserve tranche will be effective for all depository institutions beginning January 1, 2022. Cause an excess demand for money and a decrease in the rate of interest. B) The lending capacity of the banking system decreases. Consider an expansionary open market operation. Suppose the Federal When the Fed buys bonds in open-market operations, it _____ the money supply. Banks must hold more funds used for loans in reserve. raise the discount rate. If the Fed sells $1 million of government bonds, what is the effect on the economy's reserves and money supply? 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. All persons over age 16 who are either working for pay or actively seeking paid employment refers to: Who is an example of a part of the labor force? Suppose the bond market and the money market both start out in equilibrium and then the Federal Reserve increases the money supply. c. reduce the reserve requirement. C.banks' reserves will be reduced. d. Conduct open market sales. b. a decrease in the demand for money. a) 0.25 b) 0, Suppose the reserve requirement for checking deposits is 10 percent and banks do not hold any excess reserves. a. decrease b. increase c. not change, If the economy experiences an expansionary gap and the Fed sells US government securities in the open market, then ______. Which of the following is likely to cause a leftward shift in the aggregate supply curve, ceteris paribus? The Federal Reserve Bank b. B. decrease by $200 million. b) borrow more from the Fed and lend less to the public. Ceteris paribus, if the Fed raises the reserve requirement, then: The money multiplier increases. B) bond yields will fall C) bond yields will increase as well. Acting as fiscal agents for the Federal government. Lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public. A. When the Federal Reserve sells bonds as a part of a contractionary monetary policy, there is: A. D) there is no effect on bond yields. Ceteris paribus, if the Fed raises the reserve requirement, then Most studied answer the lending capacity of the banking system decreases. Chapter 14 Macro - Subjecto.com D. The value o, If the nominal interest rate were to increase, then: a. money demand decreases and the price level increases. (Income taxes are not included in the computation of the cost-based transfer prices.) Within the Federal Reserve, the organizational body that is responsible for conducting open market operations (i.e., the buying and selling of government securities) is the (a) FOMC (b) Board of Governors (c) Board of Directors (d) Federal Reserve Ban, Which of the following is the basic economic policy function of the Federal Reserve Banks? b. If the Fed is using open-market operations, An open market operation is a purchase or sale of ___ by the ___ in the open market. 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. The Board of Governors has___ members, and they are appointed for ___year terms. Cost of finished goods manufactured. 2) If, If the Fed increases the supply of money in the market, bond prices will and interest rates will. b. the same thing as the long-term growth rate of the money supply. Multiple Choice . III. Suppose during the same period average prices in the economy rose by 150 percent.The paintings owner, relative to those who do not own paintings, experienced a: Lower real wealth as a result of the wealth effect. International Financial Advisor. b. lowers inflation but raises unemploym, Assume the demand for money curve is stationary and the Fed increases the money supply. Ceteris paribus, if the reserve requirement is decreased to 0.05, then excess reserves will . d) All of the above. Sell government securities 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 the incentive to borrow funds increases Explain your reasoning. Could the Federal Reserve continue to carry out open market operations? 41. $$ Also assume that banks do not hold excess reserves and there is no cash held by the public. An expansionary fiscal policy is when a. the government lowers spending and raises taxes. a. decrease, downward b. decrease, upward c. increase, downw, When the Federal Reserve engages in a restrictive monetary policy, the price of marketable government bonds will ___, assuming all other factors influencing the bond market remain the same. If the Federal Reserve increases the money supply, ceteris paribus, the: a. rate of interest is unaffected. a. contractionary; buying b. expansionary; buying c. expansionary; selling d. contractionary; selling, Suppose the Federal Reserve conducts an open market purchase of $10 million worth of securities from a bank. \end{array} D. In open market operations, the Fed exchanges cash (money) for non-cash (bonds). The various quantities of output that all market participants are willing and able to buy at alternative price levels in a given time period is: Ceteris paribus, based on the aggregate demand curve, if the price level _______ the quantity of real output _______ increases. If the Fed decides to engage in an open market operation to increase the money supply, what will it do? If there is a recession, the Fed would most likely a. encourage banks to provide loans by. b) decreases the money supply and raises interest rates. c. buys or sells existing U.S. Treasury bills. Cause the money supply to increase, c. Not affect the money supply, d. Decrease the money multiplier. C. The nominal interest rate does not change. Road Warrior Corporation began operations early in the current year, building luxury motor homes. C. contractionary monetary policy by, An open market sale by the Fed A. increases the money supply, which leads to increased interest rates and a fall in investment spending. Decrease the discount rate. What happens if the Federal Reserve lowers the reserve - Investopedia The Fed sells Treasury bills in the open market b. eachus, which of the following will occur if the Fed buys bonds through open-market operations? b. it buys Treasury securities, which decreases the money supply. While those goals were articulated in 1977, 2 the approach and tools used to implement those objectives have changed over time. Our experts can answer your tough homework and study questions. All other trademarks and copyrights are the property of their respective owners. \text{Direct materials used} \ldots & \$ 750,000\\ Ceteris paribus if the fed was targeting the quantity - Course Hero 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 ______. 1. Ceteris paribus, if the Fed raises the reserve requirement, then: e The lending capacity of the banking system decreases. The money supply decreases. B. decreases the money supply, which leads to increased interest rates and a rise in investment spending. 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. a. increase the nominal interest rate and increase output b. decrease the n. To reduce interest rates, the Fed buys $500 of T-bills which increases the money supply by $2000. Of these, 43 were sold for $\$ 105,000$ each and two remain in finished goods inventory. $$ If the Fed buys more bonds from the public, then the money supply will: Increase and the aggregate demand curve will shift to the right. In addition, the company had six partially completed units in its factory at year-end. Suppose the Federal Reserve wishes to use monetary policy to close an expansionary gap. Fiscal policy should be used to shift the aggregate demand curve. Conduct open market purchases. Explain. Then, ceteris paribus, bank reserves _____ (increase, decrease, or do not change), currency in circulation _____ (increases, decreases, or does not change), and thus the monetary base will _____ (decrease or increase). Make sure you say increase or decrease/buy or sell. U.S.incometaxrateontheU.S.divisionsoperatingincome40%FrenchincometaxrateontheFrenchdivisionsoperatingincome45%Frenchimportduty20%Variablemanufacturingcostperchainsaw$100Fullmanufacturingcostperchainsaw$175Sellingprice(netofmarketinganddistributioncosts)inFrance$300\begin{matrix} Question 47 Ceteris Paribus, If The Fed Raises The Discount Rate, Then Price charged is always less than marginal revenue. Some terms may not be used. 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. b) increase. If the Fed raises the reserve requirement, the money supply _____. The Federal Reserve has a few main goals with respect to the economy: to promote maximum employment, keep prices stable and ensure moderate long-term interest rates. c. the government increases spending and lowers taxes. When you need a break, try one of the other activities listed below the flashcards like Matching, Snowman, or Hungry Bug. What fiscal policy tools are used to shift the aggregate demand curve? Assume the required reserve ratio is 10 percent and the FOMC orders an open market sale of $50 million in government securities to banks. 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? d. raise the treasury bill rate. Money is functioning as a store of value if you: Put it in a savings account so you can buy a new car next summer. Name the three tools of monetary policy that the Federal Reserve System can do to combat inflation. \text{U.S. income tax rate on the U.S. division's operating income} & \text{40\\\%}\\ A perfectly competitive firm currently sells 30,000 cartons of eggs at $1.25 each. b. the interest rate increases c. the Federal Reserve purchases bonds. If market interest rates rise, the selling price of existing bonds in the market will, ceteris paribus, . C. excess reserves at commercial banks will increase. The discount rate is the interest rate charged by, the Federal Reserve when it lends money to private banks, Ceteris paribus, if the Fed raises the reserve requirement, then, the lending capacity of the banking system decreases, If the economy is inflationary, the Fed would most likely, encourage banks to provide loans by buying government securities, if the economy is recessionary, the Fed would most likely, encourage banks to provide loans by selling government securities, Alexander Holmes, Barbara Illowsky, Susan Dean, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Statistical Techniques in Business and Economics, Douglas A. Lind, Samuel A. Wathen, William G. Marchal, David R. Anderson, Dennis J. Sweeney, James J Cochran, Jeffrey D. Camm, Thomas A. Williams, Elegant Linens uses the balance sheet aging method to account for uncollectible debt on