OOOOOOOOOOWhich one of the following statements is FALSE?Select one:a. The prime bank rate is the rate banks charge their most credit-worthy commercial customers.b. The Fed can influence the supply of federal funds through open market operations.c. "Tight money" policies tend to increase the money supply growth rate.d. The Fed does not directly set the federal funds rate but instead tightly controls the rate through open market operations.e. The prime bank rate in the United States is consistently higher than the federal funds rate.In recessions, tax revenues tend to decline and transfer payments like unemployment insurance and food stamps tend to increase, sothese programs...Select one:a. are procyclical.b. make Aggregate Expenditures lessc. are automatic stabilizers.d. create budget surpluses during economic downturns.e. increase unemployment.

The monetary policy is the policy taken by a central bank of a country to curb inflation and…

Which one of the following statements is FALSE? Select one: D a. The prime bank rate is the rate banks charge their most credit-worthy commercial customers. D b. The Fed can influence the supply of federal funds through open market operations. D c. "Tight money" policies tend to increase the money supply growth rate. D d. The Fed does not directly set the federal funds rate but instead tightly controls the rate through open market operations. D e. The prime bank rate in the United States is consistently higher than the federal funds rate. In recessions, tax revenues tend to decline and transfer payments like unemployment insurance and food stamps tend to increase, so these programs... Select one: D D D c. are automatic stabilizers. D d. create budget surpluses during economic downturns. D e. increase unemployment. a. are procyclical. b. make Aggregate Expenditures less

Which one of the following statements is FALSE? Select one: D a. The prime bank rate is the rate banks charge their most credit-worthy commercial customers. D b. The Fed can influence the supply of federal funds through open market operations. D c. "Tight money" policies tend to increase the money supply growth rate. D d. The Fed does not directly set the federal funds rate but instead tightly controls the rate through open market operations. D e. The prime bank rate in the United States is consistently higher than the federal funds rate. In recessions, tax revenues tend to decline and transfer payments like unemployment insurance and food stamps tend to increase, so these programs... Select one: D D D c. are automatic stabilizers. D d. create budget surpluses during economic downturns. D e. increase unemployment. a. are procyclical. b. make Aggregate Expenditures less

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A purchase of U.S. government securities by the Fed causes A. a multiple contraction of the money supply because deposits fall by more than the amount of the securities purchased. B. a contraction of the money supply equal to the amount of the securities because all other transactions occur within the banking system. C. an expansion of the money supply equal to the amount of the securities because all other transactions occur within the banking system. D. a multiple expansion of the money supply because the required reserve ratio is less than one
Suppose that the money supply increases by 20 percent. If there is no inflation, what does the quantity theory of money tell us must happen to real GDP? It must increase by more than 20 percent. It must increase by less than 20 percent. It must increase by exactly 20 percent. None of the above are correct. Which of the following statements is true of the federal funds market? No banks are refused loans in the federal funds market. In the federal funds market, banks with a shortage of reserves borrow funds, while banks with an excess of reserves lend them out. The interbank lending system works more efficiently in periods of financial panic than in periods of financial stability. Although the federal funds market aims to provide liquidity to needy banks, it is not very popular as overnight loans are logistically inefficient for large banks. On a graph with real GDP growth on the x-axis and the unemployment rate on the y-axis, you plot each year's values for the United States as…
Multiple choices 1. Banks face liquidity risk because A) they can have difficulty meeting their depositor's demands to withdraw money. B) they are unable to borrow from the Federal Reserve. C) households and businesses may seek to borrow a large amount of funds in a short period of time. D) governments tend to run high budget deficits. 2. The original intention of the Fed's role as lender of last resort was to make loans to banks that were A) not illiquid nor insolvent. B) illiquid, but not insolvent. C) insolvent, but not illiquid. D) both illiquid and insolvent. 3. Why might a nation seek to maintain a pegged exchange rate? A) It makes business planning easier for firms involved in the global economy. B) It removes the need to intervene in the foreign exchange market. C) It ensures that the exchange rate will remain at its equilibrium. D) It makes their currency more attractive on the foreign exchange market. 4. Suppose a country pegs its currency. If investors start to believe the…
27.A household buys U.S. government bonds, and at the same time the Federal Reserve (Fed) also buys government bonds. From the standpoint of monetary theory, the key difference between the two transactions is that A: the Fed is putting money into circulation, whereas the household is not. B: the household makes the purchase on the open market. C: the bonds held by the Fed do not need to be repaid at maturity. D: the Fed is putting bonds into circulation, whereas the household is not. C: the Fed requires permission from Congress to make the purchase.
When the Fed sells government securities, it: Group of answer choices raises the cost of borrowing from the Fed, discouraging banks from making loans to thegeneral public. lowers the cost of borrowing from the Fed, encouraging banks to make loans to thegeneral public. decreases the amount of excess reserves that banks hold, discouraging them from makingloans to the general public. increases the amount of excess reserves that banks hold, encouraging them to make loans tothe general public.
The graph shows the demand curve for bank reserves, RD. The current quantity of reserves supplied is $20 billion. The Fed wants to set the federal funds rate at 4 percent a year. Does the Fed conduct an open market operation and if so, does it buy or sell securities? ... 8- Question Viewer 7- Draw a point on the curve that shows the federal funds rate when the quantity of reserves supplied is $20 billion. Label it 1. The Fed wants to set the federal funds rate at 4 percent a year. Draw a supply of reserves curve that achieves the target. Label it. Draw a point to show the new equilibrium federal funds rate. Label it 2. -... Federal funds rate (percent per year) Q Q 6- 5- 4- 3- 2- 1- RD མ] 0 10 20 30 40 50 60 70 80 Reserves on deposit at the Fed (billions of dollars) >>> Draw only the objects specified in the question.
28. The Monetary Policy Rule and the Velocity of Money The quantity equation shows that the product of the money supply (M) and the velocity of money (V) is equal to the product of the price level (P) and real GDP (Y): M × V = P × Y. Monetarists argued that the central bank should follow a monetary policy rule to ensure that the money supply (M) grows at a certain rate over time. They argued that the inflation rate was slow to change and predictable, so constant growth of the money supply would translate into steady growth of nominal GDP (P x Y). To see why this could be the case, consider the fact that any time the left-hand side of the quantity equation, M × V, changes by a certain percentage, the right-hand side, P x Y, must change by the same percentage: Percentage Change in (M x V) Percentage Change in (P x Y) You can use a general rule about percentage changes to analyze changes in the variables of the quantity equation even further. The percentage change in the product of two…
Establishing upper and lower limits for the federal funds rate enabled the Fed to A. buy financial assets to make ample reserves available. B. sell financial assets to limited the reserves available. C. buy financial assets to limited the reserves available. D. sell financial assets to make ample reserves available.
Suppose that the government increases its spending. What monetary policy should the Fed adopt simultaneously if it wants to keep the interest rate constant at its initial level? a. reduce money supply b. increase money supply c. do nothing d. None of the above
25. Suppose the Fed conducts an open market sale. We can expect this transaction to A) reduce the money supply, increase bond prices, and lower interest rates. B) increase the money supply, lower bond prices, and lower interest rates. C) increase the money supply, raise bond prices, and lower interest rates. D) reduce the money supply, reduce bond prices, and increase interest rates. 26. If the economy experiences an inflationary gap, a contractionary monetary policy will A) increase real GDP and increase the price level. B) increase real GDP and decrease the price level. C) decrease real GDP and increase the price level. D) decrease real GDP and decrease the price level. 27. Suppose the economy experiences a recessionary gap. Expansionary monetary policy will A) increase interest rates and increase the bond prices. B) increase interest rates and decrease…
11. Which policy tool involves the federal reserve setting a short-term interest rate to lend directly to financial institutions? a. The fed funds rate b. The discount rate c. The interest rate paid on excess reserves d. The rate of required reserves 12. Suppose the federal reserve announces a policy of purchasing short-term bonds from the financial system. This policy is an example of a. Expansionary monetary policy through open market operations designed to decrease the federal funds rate b. Contractionary monetary policy through open market operations designed to increase the federal funds rate
If the central bank buys bonds from the market with open market operations when the money market is in equilibrium and money demand is stable, which of the following developments will occur? a. Interest rate doesn't change b. Investments increase c. Interest rate decrease d. Interest rate increase