28) If the required reserve ratio is 10% and the Federal Reserve purchases $50 million intreasury bonds on the open market, how could the money supply be impacted?a) Increase by a maximum amount of $500 millionb) Increase by a maximum amount of $50 millionc) Decrease by a maximum amount of $500 milliond) Decrease by a maximum amount of $50 million29) What is the most likely outcome of expansionary monetary policy?a) A decrease in the quantity of money, higher interest rates, and increased aggregatedemand.b) An increase in the quantity of money, higher interest rates, and increased aggregatedemand.c) A decrease in the quantity of money, lower interest rates, and decreased aggregatedemand..d) An increase in the quantity of money, lower interest rates, and increased aggregatedemand.

Since you have posted two independent McQs, according to the guidelines, only the first McQ is…

28) If the required reserve ratio is 10% and the Federal Reserve purchases $50 million in treasury bonds on the open market, how could the money supply be impacted? a) Increase by a maximum amount of $500 million b) Increase by a maximum amount of $50 million c) Decrease by a maximum amount of $500 million d) Decrease by a maximum amount of $50 million

28) If the required reserve ratio is 10% and the Federal Reserve purchases $50 million in treasury bonds on the open market, how could the money supply be impacted? a) Increase by a maximum amount of $500 million b) Increase by a maximum amount of $50 million c) Decrease by a maximum amount of $500 million d) Decrease by a maximum amount of $50 million

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume the required reserve ratio is 10 percent. If the Federal Reserve buys $10 million in government securities from the public, then the money supply will immediately: Multiple Choice increase by $10 million, and the maximum money-lending potential of the commercial banking system will increase by $100 million. increase by $10 million, but the maximum money-lending potential of the commercial banking system will decrease by $10 million. decrease by $10 million, and the money-lending potential of the commercial banking system will decrease by $100 million increase by $10 million, and the maximum money-lending potential of the commercial banking system will increase by $10 million.
With an initial depost of $1000 and a reserve requirement of 4%, what is the total amount of money creation possible? With an initial depost of $1200 and a reserve requirement of 5%, what is the total amount of money creation possible?
The immediate impact of an increase in preference for checkable deposits is: a)Increase in the money supply b)Decrease in the money supply c)Increase in money demand d)Decrease in money demand
If Jason deposits $2,500 into his bank and the reserve ratio is 11%, what would be the amount of excess reserves that are immediately created? $30.25 $244.75 $275 $1,980.25 $2,225
1.C Suppose the Federal Reserve buys Treasury Bills and Treasury Bonds in the open market. Compared to a setting without such open market operations, which of the following answers are CORRECT? a) Banks short of reserves end up with the same amount of loans. b) Banks short of reserves end up with less deposits. c) Banks short of reserves end up with less equities. d) The federal funds rate is lower. e) The money supply is lower.
Assume economic growth is weak, reserves are abundant, and the inflation rate has been below the Fed's price stability goal for a significant period of time. Which of the following would best describe an appropriate policy action? a. Lower the target range for the federal funds rate and use open market operations to increase the level of reserves in the banking system. b. Raise the target range for the federal funds rate while simultaneously decreasing the interest on reserve balances rate, overnight reverse repo rate, and discount rate. c. Lower the target range for the federal funds rate and simultaneously decrease the interest on reserve balances rate, overnight reverse repo rate, and discount rate. d. Raise the target range for the federal funds rate and simultaneously increase the interest on reserve balances rate, overnight reverse repo rate, and discount rate.
To increase the money supply, the Federal Reserve could lower the required reserve ratio. conduct an open market sale of Treasury securities. raise the discount rate. raise income taxes.
Assume that banks lend out all their excess reserves and individuals deposit all their money. If the Required Reserve Ratio is .20, what does the Fed have to do to decrease the supply of money by $300 billion? Select one: a. Sell $60 billion worth of government bonds to commercial banks b. Sell $80 billion worth of government bonds to commercial banks c. Sell $200 billion worth of government bonds to commercial banks d. Buy $100 billion worth of government bonds from commercial banks e. Buy $60 billion worth of government bonds from commercial banks
The Federal Reserve conducts a $30 million open-market purchase of government bonds. If the required reserve ratio is 15 percent, the largest possible increase in the money supply that could result is million, and the smallest possible increase is million.
Which of the following is the most accurate description of events when monetary authorities increase the size of commercial banks' excess reserves? Select one: a. The money supply is decreased, which increases the interest rate, and causes investment spending, output, and employment to decrease b. The money supply is increased, which decreases the interest rate, and causes investment spending, output, and employment to increase c. A rise in interest rates increases the money supply, causing a decrease in investment spending, output, and employment d. A fall in interest rates decreases the money supply, causing an increase in investment spending, output, and employment
If the Federal Reserve purchases $100 million worth of government securities in open market operations, what is the maximum amount of change in the money supply if the reserve requirement is 8% and banks hold no excess reserves? Group of answer choices Decrease by $1.25 billion Increase by $1.25 billion Decrease by $1.15 billion Increase by $1.15 billion
If the reserve requirement is 25%, then a $500 increase in deposits means that the money supply has the potential to increase by $125. will increase by $2,000. will increase by $125. has the potential to increase by $2,000.