Answered: Other things being equal, when the Fed…

Other things being equal, when the Fed sells bonds, the money supply curve shifts to the causing interest rate to right; increase O left; decrease right; decrease O left; increase

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Other things being equal, when the Fed sells bonds, the money supply curve shifts to the
causing interest rate to
right; increase
left; decrease
right; decrease
left; increase

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Suppose that the Fed Reserve conducts sterilized foreign exchange intervention of purchasing $500 million of foreign assets. As a result, O O O O O monetary base increases by $500 million. the Fed's domestic asset holdings increase by $500 million. total liabilities on the Fed's balance sheet will be unaffected. total money supply increases by $500 million. total assets on the Fed's balance sheet increase by $500 million.
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Which of the following statements is true? Select one OA Ahigher level of income causes the demand for money at each interest rate to increase and the demand curve to shift to the left As the interest rate on bonds increases, the opportunity cost of holding money decreases. Oc the market for money is in equilbrium, then the bond market is in disequilibrum OD. A one-ime increase in the money supply will cause prices to rise and the interest rate will rise consequenity
If the central bank purchases securities worth $ 500 million from banks, it will result in an increase by the same amount of reserves, but monetary base O True False
If the unemployment rate is falling from 4 to 3%, while the inflation rate is increasing from 2% to 4%, the Fed will most likely: decrease the inflation rate by setting a price ceiling. increase the money supply. O increase the target range for the federal funds rate. not change much. decrease the target range for the federal funds rate.
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
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
Breifly describe how the Fed creates bank reserves and more monetary transactions in the economy than the actual volume of currency issued by the federak reserve banks. Assume that the reserve requirment by the Fed on bank deposits is 1/10. Also assume that the bank under consideration have zero excess reserve (all ER is lent out). With fixed currency in circulation, what specific monetary policy tool can the Fed use to increase checking account deposits to 1,000 million?
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.
Suppose the Fed decides to purchase $60 billion worth of government securities on the open market d. Under what circumstances (recession or inflation) would the Fed be pursuing such an open market policy e. To attain those same objectives, what should the Fed do(increase or decrease) with the: a. Discount rate? b. Reserve requirement?
Which of the following would NOT result in a decreased money supply? Select one: O a. Decrease in the reserve ratio b. Increase in the currency ratio Decrease in the money multiplier d. Decrease in the monetary base C.