**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

Here, it is given that the federal funds rate and discount rate is same as 7% and federal reserve…

D 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 not change; increase rise; increase 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, demand; right demand; left O supply; right O supply; left

D 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 not change; increase rise; increase 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, demand; right demand; left O supply; right O supply; left

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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4. The economy of Baruchville contains 2000 $1 bills. D.) If people hold all money as demand deposits and banks maintain a reserve ratio of 10%, what is the quantity of money? E.) If people hold equal amounts of currency and demand deposits and banks maintain a reserve ratio of 10%, what is the quantity of money?
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QUESTION 11 If the Federal Reserve purchases $250 million in US Treasury Securities, what will happen to overall bank deposits under the following assumptions: Banks convert 100% of excess reserves to loans, borrowers return 70% of cash to bank, and banks' reserve requirement is 10% O $437.5 million O $625 million O $833.33 million O $2500 million O $1750 million
QUESTION 19 Bank run refers to that O A. the central bank raises the reserve ratio of banks in the time of financial crisis. O B. the central bank runs to bail out banks. O C. many banks' depositors try to withdraw their funds because they fear a bank failure. OD. investment banks and hedge funds lend to each other on very short terms. QUESTION 20 Which of the following is true about the money creation by banks? O A. Money creation is the process of changes in the money supply through depositing and lending in a fractional-reserve banking system. O B. The amount of money as an asset increases, making the economy wealthier. O C. The central bank increases the monetary base. O D. Depositors withdraw funds from banks, holding them in cash.
Assume that the Federal Reserve (Fed) sets the federal funds rate target at 4% and conducts open market operations to hit the 4% target. Shift the appropriate curve to show the Fed meeting its target. Federal funds rate 10 9 8 7 6 5 3 2 1 0 10 20 Supply of reserves Federal funds rate (target) Federal funds rate (current) 30 40 50 60 Reserves at the Fed 70 80 The Federal Reserve 90 100 raised the discount rate. lowered the discount rate. O sold U.S. Treasury securities. bought U.S. Treasury securities. Demand for reserves
Suppose the Federal Reserve has set the money supply at $4 million. The table below shows the interest rate and total demand for money. Demand (in millions) Interest Rate 20% 15 10 5 0 $1 2 3 4 5 What is the equilibrium interest rate? Multiple Choice C O 10 percent 20 percent 5 percent O percent < # % & 8888886 $ @ 2 3 4 5 7
5. The Federal Reserve's organization There are Federal Reserve regional banks. Which of the following is a responsibility of the Federal Open Market Committee (FOMC)? Making decisions regarding monetary policy Buying and selling stocks Issuing mortgages to homeowners The Federal Reserve's primary tool for changing the money supply is . In order to increase the number of dollars in the U.S. economy (the money supply), the Federal Reserve will government bonds. O O
Suppose you read in the Wall Street Journal that the Fed was "increasing its target interest rate." It follows that the rate in question is the and one way in which Fed could achieve its new, higher target rate is by Select one: O a. Federal Funds Rate; conducting an open market sale O b. Federal Funds Rate; conducting an open market purchase O c. Prime Rate; conducting an open market sale d. Prime Rate; conducting an open market purchase
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 that the reserve requirement is 12.5% and that commercial banks are NOT holding excess reserves. If the Federal Reserve wishes to reduce the money supply by $200 billion, it should conduct an open-market purchase of $16 billion O open-market purchase of $25 billion open-market sale of $16 billion O None of these answers is correct. O open-market sale of $25 billion
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.