As a result of the Fed's sale of $3,000 worth of government securities to First Main Street Bank, the bank becomes reserve deficient. Suppose that Yvette, a First Main Street Bank's customer, re-pays back the $3,000 loan she took out a few months ago. Which of the following most accurately describes First Main Street Bank's actions? O The bank keeps the $450 as reserves. O The bank creates a $3,000 loan. O The bank keeps the $3,000 as reserves. O The bank creates a $42,000 loan. The money supply in the economy is S

As a result of the Fed's sale of $3,000 worth of government securities to First Main Street Bank, the bank becomes reserve deficient. Suppose that Yvette, a First Main Street Bank's customer, re-pays back the $3,000 loan she took out a few months ago. Which of the following most accurately describes First Main Street Bank's actions? O The bank keeps the $450 as reserves. O The bank creates a $3,000 loan. O The bank keeps the $3,000 as reserves. O The bank creates a $42,000 loan. The money supply in the economy is S

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which of the following is NOT true about discount rate and statutory reserve requirement? Both are monetary policy instruments. O an increase in either one of them will reduce the money supply. a reduce in either one of them will increase the amount of loans by the commercial banks. a change in discount rate is more effective in affecting the money supply than a change in statutory reserve requirement
Which quotation is irrelevant to the claim in paragraph 1 that "people have confidence that the money will hold its value because their government backs it"? "The Mint was charged with producing the nation's specie in copper, silver, and gold. O For the first 50 years or so, U.S. currency consisted almost entirely of coins." (paragraph 13) "Demand notes could be redeemed for silver or gold coins on demand and were legal tender guaranteed by the federal government." (paragraph 14) O "Most nations today back their own currencies as legal tender." (paragraph 15) O "Paper notes often consist of higher values than coins." (paragraph 15)
QUESTION 1 If the reserve ratio is 5% then the money multiplier is? O 20; This means that for every dollar deposited into a bank account, the money supply decreases by $20. O 20. This means that for every dollar deposited into a bank account, the money supply increases by $20. O 2. This means that for every dollar deposited into a bank account, the money supply decreases by $2. O 20. This means that for every dollar deposited into a bank account, the money supply increases by $2.
If r = 15%; Currency in circulation= 500 billion $; Checkable deposits = 1000 billion $; and excess reserves= 10 billion $; then the money multiplier is equal to..... O A. 0.70 O B. 0.80 O C. 0.90 O D. none of the above
Question 3 In the market for reserves, suppose that the federal funds rate and discount rate are both at 7%. If the Federal Reserve Bank sells securities in the open market, then the equilibrium rate for reserves will and the amount of borrowed reserves will O not change; decrease O not change; increase O rise; increase O rise; decrease Question 4 When the Federal Reserve Bank lowers the reserve requirements for commercial banks in the economy, this causes the curve for reserves to decrease and so the curve shifts to the ----- O demand; right O demand: left O supply; right O supply; left
If a bank gets $90 in new reserves from the Fed and the required-reserve ratio is 0.1, then the maximum amount by which total deposits in the economy can increase is O $900 O $90 O $9 O $80
Suppose a bank has $200 million in checking account deposits with no excess reserves and the required reserve ratio 20%. If the Fed reduces the required reserve ratio 10%, and the bank keeps same reserves as before the change, it will now have excess reserves of O0 Million 10 million 20 million 30 million
Interest Rate 4% 3 2. O2 percent 0 percent 4 percent a 3 percent MS b d Refer to Figure 15-1. At which interest rate is there an excess money supply? Money Demand Quantity of Money
By using open market operations, the Federal Reserve O a. adjusts the supply AND demand of reserves to keep the federal funds interest rate equal to its target. O b. adjusts the supply of reserves to keep the federal funds interest rate equal to its target. Oc controls banks' demand for reserves, thereby keeping the federal funds rate equal to its target. O d. adjusts the demand of reserves to keep bank rates in line with the federal funds rate target. O e. None of these answers is correct.
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Using the simply multiple deposit multiplier model, the Federal Reserve Bank desires to increase the size of checkable deposits by $50,500. If the required reserve ratio is 5%, then the Fed needs to purchase worth of securities in the open market. O $2,445 O $2,650 O $2,525 O $2,500
Suppose the required reserve ratio is 10% and a bank receives a $10 million deposit into a checking account. By how much will deposits change in the banking system? (assume that the banking system currently has no excess reserves) Select one: $100 million. O $90 million. $10 million. O $110 million. Clear my choice