QUESTION 1 Suppose that the Fed wants to increase money supply using open-market operations. A purchase of short-term government bonds in the amount of $10 mln will increase money supply by O A. $10 mln B. less than $10 min OC. more than $10 mln

QUESTION 1 Suppose that the Fed wants to increase money supply using open-market operations. A purchase of short-term government bonds in the amount of $10 mln will increase money supply by O A. $10 mln B. less than $10 min OC. more than $10 mln

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If the Fed is pursuing a fixed interest rate target, an increase in the money supply will be required when Select one: O a. money demand increases. O b. GDP decreases. c. M2 increases relative to M1, because the transaction cost of transferring money from savings accounts to checking accounts declines. O d. money demand decreases.
Suppose the required reserve ratio increased from 5 percent to 10 percent, and suppose banks kept no excess reserves. Ceteris paribus, it follows that the "money" (or "deposit") multiplier would: Select one: O a. decrease from 20 to 10. O b. increase from 5 to 10. O c. decrease from 10 to 20. O d. decrease from 1/5 to1/10.
16. Suppose that the Federal Reserve conducts an open market operation in which it purchases $100 in US Treasury bonds from a private saver. (a) In an economy without banks, by how much, in dollar terms, will the total money supply increase as a result of this open market operation? (b) In an economy with banks in which all members of the nonbank public immedi- ately deposit all of the currency they receive, but in which all banks engage in 100 percent reserve banking, by how much will the total money supply increase as a result of this open market operation? (c) In an economy with banks, in which all banks choose a 10% reserve ratio and in which all members of the nonbank public immediately deposit all of the currency they receive, by how much will the total money supply increase as a result of this open market operation? (d) In an economy with banks, in which all banks choose a 10% reserve ratio, but in which all members of the nonbank public hold 50% of the funds they receive as…
Cash: $129.25 billion Checking deposits: $207.4 billion Saving accounts: $273.5 billion Small denomination time deposits: $27.3 billion Bank reserves held at the Fed: $43.0 billion Suppose that in a certain economy, the above are the only forms of money. How big is the monetary base (MB)? O a. $508.20 billion O b. $364.15 billion O c. $610.15 billion O d. $316.50 billion O e. $172.25 billion O f. $653.15 billion
In the short run, what would be the result of an increase in the monetary base? Assume the reserve ratio is unchanged. O a. Demand for money decreases. Ob. Demand for money increases. O c. Quantity demanded of money decreases. O d. Price level decreases. O e. Nominal interest rate falls.
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When households and firms start selling off their bonds, which of the following will be the result? a. The market price of bonds increases. O b. The money demand curve shifts leftward. C. The nominal interest rate falls. O d. The nominal interest rate rises. е. The money supply curve shifts leftward.
Suppose the Board of Governors has determined that housing bubbles can be detrimental to the economy and try to cool down the economy. To accomplish this goal, they would most likely pursue policies that promote: O lower interest rates and an expansion of bank lending activity. O higher interest rates and a contraction of bank lending activity. O higher interest rates and an expansion of bank lending activity. O lower interest rates and a contraction of bank lending activity.
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None
If money supply increases 10%, and we assume a constant money velocity: O We should have a price increase of 10% in the short-run, and an output increase of 10% in the long-run. O We don't have enough data to answer. O Price and output increase by 10% in the long-run. O Price and output increase by 5% in the long-run. O We should have an output increase of 10% in the short-run, and a price increase of 10% in the long-run.
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