Question 1

What is the name and make-up of the policymaking group that has the authority to conduct open market operations? Describe how the use of open market operations helps to increase or decrease the money supply.

Accepted Answer

The answer of What is the name and make-up of...

Question 2

Suppose that the federal funds rate and the discount rate are equal initially at 3%.If the discount rate is then lowered to 2.5%,to whom will a bank be more likely to go for a loan: the Federal Reserve or another bank? Explain your answer in detail,and be sure to mention the impact that this situation would have on the money supply..

Accepted Answer

The answer of Suppose that the federal funds rate and...

Question 3

Explain the difference between the discount rate and the federal funds rate.If the Fed wants to lower one of these rates,which one can the Fed change by issuing an order? Describe in detail how the Fed helps to lower the other rate.

Accepted Answer

The answer of Explain the difference between the discount rate...

Question 4

Suppose that the Fed undertakes an open market purchase of $25 million worth of securities from a bank.If the required reserve ratio is 9%,what is the resulting change in checkable deposits (or the money supply),assuming that there are no cash leakages and that banks hold zero excess reserves?

Accepted Answer

The resulting change in checkable deposits can be calculated using the money multiplier formula, which is 1/required reserve ratio. With a 9% reserve ratio, the multiplier is 1/0.09 = 11.11. Multiplying this by the $25 million initial injection gives a potential increase in the money supply of $25 million * 11.11 = $277.8 million.

Question 5

Under a free banking arrangement,when people increase the demand for money a process would begin which would end with a(n)_________________ in the supply of money,______________ government intervention.

Accepted Answer

Under a free banking system, when the demand for money increases, banks would naturally respond by increasing the supply of money, doing so without the need for government intervention. This process is facilitated by the banks' own interests in remaining competitive and profitable.

Question 6

If reserves increase by $12 billion,what is the difference in the resulting change in checkable deposits when the required reserve ratio is 10 percent compared to when it is 8 percent?

Accepted Answer

If reserves increase by $12 billion, the change in checkable deposits can be calculated using the money multiplier formula:

Change in Checkable Deposits = (Change in Reserves) / (Required Reserve Ratio)

When the required reserve ratio is 10 percent:

Change in Checkable Deposits = $12 billion / (10% or 0.1) = $120 billion

When the required reserve ratio is 8 percent:

Change in Checkable Deposits = $12 billion / (8% or 0.08) = $150 billion

The difference between $150 billion and $120 billion is $30 billion, which is the answer B.

Question 7

The corridor is the ________________ section of the ______________________ curve of reserves in the federal funds market.

Accepted Answer

The corridor is the vertical section of the supply curve of reserves in the federal funds market.

Question 8

Summarize the history of how the Federal Reserve came to have twelve districts.

Accepted Answer

The answer of Summarize the history of how the Federal...

Question 9

List and describe the three major monetary policy tools the Federal Reserve can use to increase the money supply.Be specific in your response regarding which direction the tool would need to change in order for the money supply to grow.

Accepted Answer

The answer of List and describe the three major monetary...

Question 10

Which of the following is false?

Accepted Answer

The statement that the government would largely control the actions of banks under free banking is false. Free banking advocates for minimal or no government intervention in the banking industry. Banks would be allowed to operate freely in the marketplace, with customers and shareholders providing the financial incentives to operate responsibly. Therefore, C is the false statement among the given options. Option A and B are true statements since the core principle of free banking is to allow private banks to operate without any special regulations from the government, and the banks would be allowed to issue their own currency. Option D is also true as free banking advocates for market forces to determine the money supply rather than government intervention.

Question 11

The demand for reserves curve in the federal funds market is

Accepted Answer

The demand for reserves curve in the federal funds market is downward sloping because as the federal funds rate decreases, banks are more willing to borrow reserves, increasing the quantity of reserves demanded. Conversely, as the federal funds rate increases, the cost of borrowing reserves becomes higher, and banks are less willing to borrow, decreasing the quantity of reserves demanded.

Question 12

In its current execution of monetary policy,the Fed does not usually have a specific _____________ target,but rather it tries to target a specific ________________.

Accepted Answer

The Federal Reserve typically targets the federal funds rate rather than a specific money supply target. This approach allows for more direct control over short-term interest rates, influencing economic activity and inflation.

Question 13

Use the simple deposit multiplier to help show why the money supply increases when the Fed lowers the required reserve ratio (r).

Accepted Answer

The answer of Use the simple deposit multiplier to help...

Question 14

Suppose that the Fed undertakes an open market sale,selling $1 million worth of securities to a bank.If the required reserve ratio is 8%,checkable deposits (or the money supply),would _______________ by ________________ million,assuming that there are no cash leakages and that banks hold zero excess reserves.

Accepted Answer

When the Fed sells $1 million worth of securities to a bank and the required reserve ratio is 8%, the bank's reserves will decrease by $1 million x 0.08 = $80,000. As the bank's reserves decrease, its ability to create checkable deposits, or lend out money, also decreases. Assuming no cash leakages and zero excess reserves, the money supply will decline by the amount that the bank's reserves decreased, which is $80,000 / 0.08 = $1,000,000. Therefore, the correct answer is C, a decline in the money supply by $12.5 million.

Question 15

If the Fed _____________________,the money supply will ultimately __________.

Accepted Answer

Raising the discount rate relative to the federal funds rate makes borrowing from the Federal Reserve more expensive for banks, leading to a decrease in the money supply. Conversely, lowering the discount rate relative to the federal funds rate makes borrowing from the Federal Reserve cheaper for banks, leading to an increase in the money supply.

Question 16

List and describe five of the eight major functions or responsibilities of the Fed.

Accepted Answer

The answer of List and describe five of the eight...

Question 17

The supply curve of reserves has two kinks in it: one at the _________________ and the other at the ____________________ rate.

Accepted Answer

The first kink in the supply curve of reserves occurs at the interest rate that the Fed pays on reserves because banks are willing to hold reserves up to that point. The second kink occurs at the discount rate, which is the interest rate at which banks can borrow reserves directly from the Fed. Beyond that point, banks are less willing to borrow reserves at higher rates. The federal funds rate is the rate at which banks lend reserves to each other overnight; it does not directly affect the supply curve of reserves. The prime rate is the rate that banks charge their most creditworthy customers for loans and is also not directly related to the supply curve of reserves.

Question 18

Explain the major differences between the Federal Reserve and the U.S.Treasury.

Accepted Answer

The answer of Explain the major differences between the Federal...

Question 19

Suppose that the Fed undertakes an open market sale,selling $3 million worth of securities to a bank.If the required reserve ratio is 11%,checkable deposits (or the money supply),would _______________ by ________________ million,assuming that there are no cash leakages and that banks hold zero excess reserves.

Accepted Answer

When the Fed undertakes an open market sale of $3 million worth of securities to a bank, the bank's reserves decrease by $3 million. Assuming a reserve requirement ratio of 11%, this means that the bank's checkable deposits (or the money supply) will decrease by a multiple of 1/0.11, which is $27. Therefore, the correct answer is option C, as the money supply will decline by $27 million.

Question 20

The federal funds rate and the quantity demanded of reserves have a(n)____________ relationship.This is because as the federal funds rate moves down,it becomes _______________ for banks to hold reserves,encouraging banks to hold ____________ in reserves to guard against checkable deposit withdrawals.

Accepted Answer

The federal funds rate and the quantity demanded of reserves have an inverse relationship because as the federal funds rate moves down, it becomes cheaper for banks to hold reserves, encouraging banks to hold more in reserves to guard against checkable deposit withdrawals.

Quiz 13: Factor Markets: With Emphasis on the Labor Market

What is the name and make-up of the policymaking group that has the authority to conduct open market operations? Describe how the use of open market operations helps to increase or decrease the money supply.

Explain the difference between the discount rate and the federal funds rate.If the Fed wants to lower one of these rates,which one can the Fed change by issuing an order? Describe in detail how the Fed helps to lower the other rate.

Suppose that the Fed undertakes an open market purchase of $25 million worth of securities from a bank.If the required reserve ratio is 9%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

Under a free banking arrangement,when people increase the demand for money a process would begin which would end with a(n) ___ in the supply of money, government intervention.

If reserves increase by $12 billion,what is the difference in the resulting change in checkable deposits when the required reserve ratio is 10 percent compared to when it is 8 percent?

The corridor is the section of the ______ curve of reserves in the federal funds market.

Summarize the history of how the Federal Reserve came to have twelve districts.

List and describe the three major monetary policy tools the Federal Reserve can use to increase the money supply.Be specific in your response regarding which direction the tool would need to change in order for the money supply to grow.

Which of the following is false?

The demand for reserves curve in the federal funds market is

In its current execution of monetary policy,the Fed does not usually have a specific _ target,but rather it tries to target a specific ____.

Use the simple deposit multiplier to help show why the money supply increases when the Fed lowers the required reserve ratio (r).

Suppose that the Fed undertakes an open market sale,selling $1 million worth of securities to a bank.If the required reserve ratio is 8%,checkable deposits (or the money supply) ,would _ by __ million,assuming that there are no cash leakages and that banks hold zero excess reserves.

If the Fed ___________,the money supply will ultimately .

List and describe five of the eight major functions or responsibilities of the Fed.

The supply curve of reserves has two kinks in it: one at the _ and the other at the ____ rate.

Explain the major differences between the Federal Reserve and the U.S.Treasury.

Suppose that the Fed undertakes an open market sale,selling $3 million worth of securities to a bank.If the required reserve ratio is 11%,checkable deposits (or the money supply) ,would _ by __ million,assuming that there are no cash leakages and that banks hold zero excess reserves.

The federal funds rate and the quantity demanded of reserves have a(n) ____ relationship.This is because as the federal funds rate moves down,it becomes _ for banks to hold reserves,encouraging banks to hold ______ in reserves to guard against checkable deposit withdrawals.

Quiz 13: Factor Markets: With Emphasis on the Labor Market

What is the name and make-up of the policymaking group that has the authority to conduct open market operations? Describe how the use of open market operations helps to increase or decrease the money supply.

Explain the difference between the discount rate and the federal funds rate.If the Fed wants to lower one of these rates,which one can the Fed change by issuing an order? Describe in detail how the Fed helps to lower the other rate.

Suppose that the Fed undertakes an open market purchase of $25 million worth of securities from a bank.If the required reserve ratio is 9%,what is the resulting change in checkable deposits (or the money supply) ,assuming that there are no cash leakages and that banks hold zero excess reserves?

Under a free banking arrangement,when people increase the demand for money a process would begin which would end with a(n) _________________ in the supply of money,______________ government intervention.

If reserves increase by $12 billion,what is the difference in the resulting change in checkable deposits when the required reserve ratio is 10 percent compared to when it is 8 percent?

The corridor is the ________________ section of the ______________________ curve of reserves in the federal funds market.

Summarize the history of how the Federal Reserve came to have twelve districts.

List and describe the three major monetary policy tools the Federal Reserve can use to increase the money supply.Be specific in your response regarding which direction the tool would need to change in order for the money supply to grow.

Which of the following is false?

The demand for reserves curve in the federal funds market is

In its current execution of monetary policy,the Fed does not usually have a specific _____________ target,but rather it tries to target a specific ________________.

Use the simple deposit multiplier to help show why the money supply increases when the Fed lowers the required reserve ratio (r).

If the Fed _____________________,the money supply will ultimately __________.

List and describe five of the eight major functions or responsibilities of the Fed.

The supply curve of reserves has two kinks in it: one at the _________________ and the other at the ____________________ rate.

Explain the major differences between the Federal Reserve and the U.S.Treasury.

Under a free banking arrangement,when people increase the demand for money a process would begin which would end with a(n) ___ in the supply of money, government intervention.

The corridor is the section of the ______ curve of reserves in the federal funds market.

In its current execution of monetary policy,the Fed does not usually have a specific _ target,but rather it tries to target a specific ____.

If the Fed ___________,the money supply will ultimately .

The supply curve of reserves has two kinks in it: one at the _ and the other at the ____ rate.