Ceteris paribus, if the Fed was targeting the quantity of money supplied and money demand increased, the Fed would likely If the Fed was instead targeting interest rates and money demand increased, the Fed would likely O increase the money supply: decrease the money supply decrease the money supply: do nothing O increase the money supply; do nothing do nothing: increase the money supply do nothing: decrease the money supply

Ceteris paribus, if the Fed was targeting the quantity of money supplied and money demand increased, the Fed would likely If the Fed was instead targeting interest rates and money demand increased, the Fed would likely O increase the money supply: decrease the money supply decrease the money supply: do nothing O increase the money supply; do nothing do nothing: increase the money supply do nothing: decrease the money supply

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that the reserve requirement for checkingdeposits is 10 percent and that banks do not hold anyexcess reserves.a. If the Fed sells $1 million of government bonds,what is the effect on the economy’s reserves andmoney supply?b. Now suppose that the Fed lowers the reserverequirement to 5 percent but that banks chooseto hold another 5 percent of deposits as excessreserves. Why might banks do so? What is theoverall change in the money multiplier and themoney supply as a result of these actions?
In 2019, The Fed was liquidating their balance sheet (meaning they were selling off the bonds and securities purchased in The Great Recession 2007-2009). That means they are trying to do what in regards to the supply of money. O Increase O Decrease O Create a money stream to increase supply of money O Increase their Capital Gains
The following graph shows the money market in equilibrium at an interest rate of 6% and a quantity of money equal to $45 billion. Show the impact of the increase in government purchases on the interest rate by shifting one or both of the curves on the following graph.
The economy recently experienced an increase in the number of tourist arrivals, increasing income throughout the island. Select one: O a. money supply increase, money demand increase, interest rate decrease O b. money supply unchanged, money demand increase, interest rate increase Oc. money supply unchanged, money demand decrease and interest rate decrease O d. money supply increase, money demand unchanged, interest rate decrease O e. money supply decrease, money demand unchanged, interest rate increase
Explain what will happen to the money multiplier process if there is an increase in the reserve requirement? O A. An increase in the reserve requirement means that banks will be less likely to have your money when you demand it, but it would increase the money multiplier OB. An increase in the reserve requirement means that banks will be more likely to have your money when you demand it, increasing the money multiplier OC. Since a greater portion of each deposit is being lent out, the multiplier will increase. This means more loans lent and more economic growth. OD. Since a smaller portion of each deposit is being lent out, the multiplier will decrease. This means fewer loans lent and less economic growth.
The economy grows (GDP increases) but the central bank moves to keep interest rates constant. Select one: O a. money demand decreases, money supply is unchanged and interest rates decrease O b. money demand increases, money supply is unchanged and interest rates increase 1O c. money demand decreases, money supply increases and interest rates remain unchanged O d. money demand increases, money supply decreases and interest rates remain unchanged money demand increases, money supply is unchanged and interest rates is unchanged O e.
Which of the following about saving deposits a-under M2 supply, they they are bank accounts that you cannot white a check from directly. generally moneyl to be kept asided. you can easily withdraw money cash from these aacounts at an automatic teller machine or back d- included in M1 money supply these are the monies held in checking accounts. they are called demand deposits or chekable deposits because the bank must give the deposit holder his money on demand when a check is written or a debit card is used c- included in M1 money supply therefore, very lliquid these are coins and bills that vcirvulate in an economy that are NOT held by the US treasury Federal reserve bank, or in any bank vaults so the cash you havae in your wallet pocket right now d- under M2 money sypplly funds that you invest in where the deposits of many investors are pooled together and invested in a safe way such as short term goverment bods.
Which of the following would lead to a decrease in the equilibrium interest rate? O a. Decrease the money demand O b. Decrease the money supply Ос. Increase in money demand O d. Increase the money supply O e. Directly lower the interest rate and change neither the money demand nor the money supply
Trevor goes to the ATM machine and withdraws $500 in cash. How will this affect the monetary base? Select one: O a. The monetary base will decline as bank reserves fall. O b. The monetary base will increase with the increase in currency in circulation. O c. The monetary base will increase by less than the size of the withdrawal as the increase in the currency in circulation will not be completely offset by a decrease in bank reserves. O d. The monetary base will remain unchanged with the increase in the currency in circulation being exactly offset by a decrease in bank reserves.
5:08 Suppose there is a decrease in money supply, as a result interest rates will Multiple Choice O C 2 @ rise and the quantity of money will remain constant. fall and the quantity of money will increase. fall and the quantity of money will decrease. rise and the quantity of money will decrease. a # $ % 3 4 5 6 7 8
11. People view cell phone and its charger as complements to one another. If the price of cell phone increases, economists would expect: O The demand for charger will not change. O The demand for charger to increase. O The quantity of cell phone demanded to increase O The demand for charger to decrease. 12. Which one is not the role of the Fed? O The Fed also acts as a bank to the American citizens with net wealth is larger than 10 million dollar. O The Fed also acts as a bank to other banks by clearing checks, making electronic payments, and providing the currency that American's need and use every day. O The Fed also helps to supervise and regulate the nation's banks and works to promote a stable financial system for consumers, communities, and businesses The Fed implements monetary policies that promote maximum employment and m stable prices.
a. (i).Draw a graph showing equilibrium in the money market. Carefully label all curves andaxes and explainwhy the curves have the slopesthey do.(ii). Using the graph you prepared in a(i), illustrateand explain what happens when the Central Bankdecreases the money supply.(iii).When the Central Bankdecreases the money supply, theequilibrium level ofincome changes. Illustrate andexplain how