I need to check my homework, all I dont need any explaining. Thanks
1. When the Fed buys short-term Treasury securities, short-term interest rates:
a. fall.
b. rise.
c. could rise or fall.
d. stay the same.
2. Which is NOT a duty performed by the Federal Reserve System?
a. manage the nation's payment system
b. print money
c. regulate the U.S. banking system
d. maintain the bank account for the U.S. Treasury
3. If the Fed wants to decrease the money supply, it will:
a. buy government bonds.
b. lower the discount rate on lending.
c. set up the Term Auction Facility.
d. increase the rate of interest paid on reserves.
4. Because the United States has a fractional reserve banking system, banks hold:
a. less than 100% of deposits as reserves.
b. more than 100% of deposits as reserves.
c. 100% of deposits as reserves.
d. no currency in their vaults.
5. What reason do many people think explains why the Fed overstimulated the money supply in the 1970s?
a. because of a presidential dictate to do so
b. to induce a recession
c. because of the high unemployment associated with the oil crises
d. because it was trying to control inflation
6. What happens to GDP if the Fed is too responsive to changes in aggregate demand?
a. Volatility increases.
b. Volatility decreases.
c. GDP is difficult to influence in the short-run and the long-run.
d. It ends up being lower in all cases.
7. The problem associated with too much expansionary monetary policy is:
a. additional inflation.
b. additional unemployment.
c. higher interest rates.
d. reduced economic growth.
8. Monetary rules work best when:
a. the Fed loses control of the money supply.
b. interest rates are high.
c. money velocity is stable.
d. inflation expectations are high.
9. Disinflation is more painful when the central bank:
a. increases the rate of inflation.
b. runs out of money.
c. is credible.
d. is not credible.
10. When hit with a negative real shock, the Fed must pick a policy that chooses between:
a. a growth rate that's too low and an unemployment rate that's too high.
b. a growth rate that's too low and an inflation rate that's too high.
c. a growth rate that's too high and wages that are too low.
d. a growth rate that's too high and a savings rate that's too low.
11. In the ADâAS model, an increase in money growth will cause the growth rate of real GDP to increase in:
a. the short run only.
b. the long run only.
c. both the short run and the long run.
d. neither the short run nor the long run.
I need to check my homework, all I dont need any explaining. Thanks
1. When the Fed buys short-term Treasury securities, short-term interest rates:
a. fall.
b. rise.
c. could rise or fall.
d. stay the same.
2. Which is NOT a duty performed by the Federal Reserve System?
a. manage the nation's payment system
b. print money
c. regulate the U.S. banking system
d. maintain the bank account for the U.S. Treasury
3. If the Fed wants to decrease the money supply, it will:
a. buy government bonds.
b. lower the discount rate on lending.
c. set up the Term Auction Facility.
d. increase the rate of interest paid on reserves.
4. Because the United States has a fractional reserve banking system, banks hold:
a. less than 100% of deposits as reserves.
b. more than 100% of deposits as reserves.
c. 100% of deposits as reserves.
d. no currency in their vaults.
5. What reason do many people think explains why the Fed overstimulated the money supply in the 1970s?
a. because of a presidential dictate to do so
b. to induce a recession
c. because of the high unemployment associated with the oil crises
d. because it was trying to control inflation
6. What happens to GDP if the Fed is too responsive to changes in aggregate demand?
a. Volatility increases.
b. Volatility decreases.
c. GDP is difficult to influence in the short-run and the long-run.
d. It ends up being lower in all cases.
7. The problem associated with too much expansionary monetary policy is:
a. additional inflation.
b. additional unemployment.
c. higher interest rates.
d. reduced economic growth.
8. Monetary rules work best when:
a. the Fed loses control of the money supply.
b. interest rates are high.
c. money velocity is stable.
d. inflation expectations are high.
9. Disinflation is more painful when the central bank:
a. increases the rate of inflation.
b. runs out of money.
c. is credible.
d. is not credible.
10. When hit with a negative real shock, the Fed must pick a policy that chooses between:
a. a growth rate that's too low and an unemployment rate that's too high.
b. a growth rate that's too low and an inflation rate that's too high.
c. a growth rate that's too high and wages that are too low.
d. a growth rate that's too high and a savings rate that's too low.
11. In the ADâAS model, an increase in money growth will cause the growth rate of real GDP to increase in:
a. the short run only.
b. the long run only.
c. both the short run and the long run.
d. neither the short run nor the long run.
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Related textbook solutions
Related questions
A) If the Fed buys U.S. government securities,
| A. |
bank reserves will decrease. |
|
| B. |
the interest rate will rise. |
|
| C. |
the discount rate will rise. |
|
| D. |
the quantity of money will eventually increase. |
B) When the Fed buys U.S. government securities from a bank, the Fed pays for the securities by
| A. |
borrowing money from the U.S. Treasury. |
|
| B. |
crediting the bank's checking account at the Fed. |
|
| C. |
decreasing the amount of money in circulation. |
|
| D. |
giving the bank gold. |
C) If a banking system has $1,000 of reserves and the required reserve ratio is 50%, the maximum volume of checkable deposit liabilities of all depository institutions combined would be
| A. |
$5,000 |
|
| B. |
$2,000 |
|
| C. |
$1,000 |
|
| D. |
$500 |
D) Continuing with the scenario from the previous question, what would happen if the Fed reduced the reserve requirement from 50% to 10%?
| A. |
Reserves would fall and deposits would fall by ten times the decrease in reserves. |
|
| B. |
Reserves would fall and maximum deposits would rise. |
|
| C. |
Reserves would stay the same, and maximum deposits would rise to $10,000. |
|
| D. |
Reserves would stay the same, and maximum deposits would fall to $100. |
Assume that banks do not hold excess reserves and that households do not hold currency, so the only form of money is demand deposits. To simplify the analysis, suppose the banking system has total reserves of $400. Determine the money multiplier and the money supply for each reserve requirement listed in the following table.
| Reserve Requirement | Simple Money Multiplier | Money Supply |
|---|---|---|
| (Percent) | (Dollars) | |
| 20 | ||
| 10 |
A higher reserve requirement is associated with a money supply.
Suppose the Federal Reserve wants to increase the money supply by $200. Again, you can assume that banks do not hold excess reserves and that households do not hold currency. If the reserve requirement is 10%, the Fed will use open-market operations to worth of U.S. government bonds.
Now, suppose that, rather than immediately lending out all excess reserves, banks begin holding some excess reserves due to uncertain economic conditions. Specifically, banks increase the percentage of deposits held as reserves from 10% to 25%. This increase in the reserve ratio causes the money multiplier to to . Under these conditions, the Fed would need to worth of U.S. government bonds in order to increase the money supply by $200.
Which of the following statements help to explain why, in the real world, the Fed cannot precisely control the money supply? Check all that apply.
- The Fed cannot control the amount of money that households choose to hold as currency.
- The Fed cannot prevent banks from lending out required reserves.
- The Fed cannot control whether and to what extent banks hold excess reserves.
