Corporate finance for the pre-industrial world began to emerge in the Italian city-states and the low countries of Europe from the 15th century.. Multiple Choice . b. money demand increases and the price level decreases. decreases, rises, If the Federal Reserve reduces interest rates, it wants: a. b. Bob, a college student looking for summer work. c) overseeing the buying and selling of government securities in the open market. \text{Direct labor} \ldots & 800,000\\ What is Wave Waters debt ratio on this date? The marginal revenue of the 11th item is: A monopolist sets price at a point on the _______ curve, corresponding to the rate of output determined by the intersection of ______. (a) the money supply decreases, interest rates decline, GDP increases, and employment decreases (b) the money supply increases, interest rates increase, GDP decreases, 1) The Federal Reserve will lower short-run output by: a) Decreasing the money supply. b. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases, If the Federal Reserve was concerned about the "crowding-out" effect, they could engage in: A. expansionary monetary policy by lowering the discount rate. d. the average number of times per year a dollar is spent. In order to maintain price stability, the Federal Reserve has decided to engage in monetary restraint. When the Fed engages in open-market operations, the transactions are conducted by: a. the Open Market Desk at the Federal Reserve Bank of New York. Total costs for the year (summarized alphabetically) were as follows: b. &\textbf{past due}&\textbf{past due}&\textbf{past due}\\[5pt] b. sell bonds, thus driving down the interest rate. d, If the Federal Reserve wants to increase output, it increases A. government spending. Also assume the Federal Reserve conducts an Open Market Operations purchase of U.S. Treasury securities in the amoun, Assume that the reserve requirement is 20 percent, banks do not hold excess reserves, and there is no cash held by the public. You can also use your keyboard to move the cards as follows: If you are logged in to your account, this website will remember which cards you know and don't know so that they B. If the Fed raises the reserve requirement, the money supply _____. Above equilibrium, this results in excess supply. If the Federal Reserve increases the nominal supply of money, all else equal: a. the demand for money increases. D. all of the above. The shape of the curve determines the impact of an aggregate demand shift on prices and output. b) increase. Price falls to the level of minimum average total cost. a)increases; increases b)increases; decreases c)decreases; increase, If the Federal Reserve increases the rate of money growth and maintains it at the new higher rate, eventually expected inflation will (blank) and the short-run Phillips curve will shift (blank). If the Federal Reserve System buys government securities from commercial banks and the public: a. the money supply will contract. b. an increase in the demand for money balances. Suppose the Fed conducts $10 million open market purchase from Bank A. Sell government securities Ceteris paribus, if the Fed reduces the reserve requirement, then the lending capacity of the banking system increases Ceteris paribus, if the Fed reduces the discount rate, then the incentive to borrow funds increases d. buying and selling of government, 1) Open market operations are the: A) buying and selling of Federal Reserve Notes in the open market. The velocity of money is a. the rate at which the Fed puts money into the economy. What is the impact of the purchase on the bank from which the Fed bought the securities? The key decision maker for general Federal Reserve policy is the: Free . Increase; depreciate c. Decrease; de, Under expansionary monetary policy, the Federal Reserve increases the money supply, allowing the banking system to make additional loans - which increases the money supply even more - resulting in higher economic growth. D. conduct open market sales. The VOC was also the first recorded joint-stock company to get a fixed capital stock. Which of the following functions does the Fed perform? Let's say the Fed had raised interest rates by 1% before the family got a loan, and the interest rate offered by banks for a $300,000 home mortgage loan rose to 4.5%. b. If the Fed conducts an open-market sale, bank reserves _ and the money supply is likely to _. d. The Federal Reserve sells bonds on the open market. B. buys treasury securities decreasing i, To stop rampant inflation, the Fed decides to sell $400 billion worth of government bonds and other securities to banks, thus decreasing the banks' reserves. Aggregate supply will increase or shift to the right. Suppose the bond market and the money market both start out in equilibrium and then the Federal Reserve increases the money supply. \textbf{ELEGANT LINENS}\\ 1) Ceteris paribus, if bond prices rise, then A) the Federal reserve must be pursuing contractionary monetary policy. A) remains unchanged; decreases B) increases; decreases C) decreases; increases D) increases; remains unchanged E) rem, A decrease in the discount rate: a. Decreases the money supply, b. Then the bank can make new loans in the amount of: Initially a bank has a minimum reserve requirement of 15 percent and no excess reserves. In order to increase sales by one item per month, the monopolist must lower the price of its software by $1 to $49. Biagio Bossone. When the sellers deposit their checks in their bank accounts, their reserves will increase due to the deposits made. d. the price level decreases. Money is functioning as a store of value if you: Put it in a savings account so you can buy a new car next summer. E.the Phillips curve will shift down. Discuss how an open market purchase of $50 million worth of bonds (or treasury bills) by the Fed would a, According to Orthodox monetary theory, when the FED buys a bond from the banking sector, this is an example of a) an open market purchase and contractionary monetary policy. 26. If the Fed is using open-market operations, An open market operation is a purchase or sale of ___ by the ___ in the open market. The Fed approved a 0.25 percentage point rate hike, the first increase since December 2018. Then, ceteris paribus, bank reserves _____ (increase, decrease, or do not change), currency in circulation _____ (increases, decreases, or does not change), and thus the monetary base will _____ (decrease or increase). Wave Waters total liabilities on December 31, 2012, are $7,800. To decrease the money supply the Fed can: Raise the reserve requirement, raise the discount rate, or sell bonds. Which of the following indicates the appropriate change in the U.S. economy? Suppose that the Fed purchases from bank B some bonds in the open market and that, before the sale of bonds, bank B had no excess reserves. They will remain unchanged. B. d. lend more reserves to commercial banks. Use these flashcards to help memorize information. D. The money multiplier decreases. \begin{array}{lcc} This is an example of which type of unemployment? A change in the reserve requirement affects: The money multiplier and excess reserves. Suppose that the sellers of government securities deposit the checks drawn on th. Now suppose the Fed lowers. When the economy overheats, the government sometimes cools it down with higher taxes, spending reductions, and less money. d. the money supply and the pric, When the Fed increases the quantity of money, the: a. equilibrium interest rate falls b. demand for money curve shifts right c. supply of money curve shifts leftward. The Federal Reserve (the Fed), the central bank of the United States, has a Congressional mandate to promote maximum employment and price stability. a. increases, rises b. increases, falls c. decreases, falls d. decreases, does not change e. . B. increase the supply of bonds, decrease bond prices, and increase interest rates. Suppose the Federal Reserve buys government securities from the non-bank public. c. Increase the interest rate paid on ban, Which of the following describes what the Federal Reserve would do to pursue an expansionary monetary policy? Changing the reserve requirement is expensive for banks. The change in total revenue that results from a one-unit increase in quantity sold is: For a monopolist, after the first unit of output, marginal revenue is always: Suppose a monopoly firm produces software and can sell 10 items per month at a price of $50 each. If the FED sells $10 million worth of government securities in an open market operation, then the money supply can potentially: A. increase by $150 million. Which of the following lends reserves to private banks? \text{Accounts receivable amount}&\text{\$\hspace{1pt}232,000}&\text{\$\hspace{1pt}129,000}&\text{\$\hspace{1pt}100,400}\\ A decrease in the reserve ratio will: a. Instead of paying her for this service,the neighbor washes the professor's car. \text{French income tax rate on the French division's operating income} & \text{45\\\%}\\ Each bond is worth $1000 (so the Fed has bought $3000 worth of bonds). All rights reserved. When the Fed raises the reserve requirement, it's executing contractionary policy. The French import duty is charged on the price at which the product is transferred into France. e. raise the reserve requirement. b. increase causing an increase in investment spending shifting aggregate demand, When the Federal Reserve increases the money supply, it aggregate demand and moves the economy along the Phillips curve to a point with inflation and unemployment. C. money supply. For the federal deficit to be lowered, a) the federal gov't must decrease its spending and increase net exports. Suppose the U.S. government paid off all its debt. \end{array} Government bond operations. Increase the demand for money. The Fed is most likely to do this by: A. purchasing government bonds from the public B. selling government bonds to the public C. selling government bonds to the treasury D. purchasi, Which of the following tends to reduce the effect of the expansionary open market operation on the money supply? See Answer If the Fed purchases $10 million in government securities, then wh. Here are the answers with discussion for yesterday's quiz. B. an exchange between a private bank and the Federal Reserve where the Fed buys or sells government bonds to private banks. C. influence the federal funds rate. Ceteris paribus, what will occur if the Fed buys bonds through open-market operations? d) borrow reserves from the Federal Reserve. B. fewer reserves and inc, Suppose you read in the paper that the Fed plans to reduce money supply. How does the Federal Reserve regulate the money supply? $$ The current account deficit will increase. \text{Manufacturing overhead} \ldots & 1,200,000 \\ Fill in either rise/fall or increase/decrease. Federal Reserve purchases of government bonds ______________ total reserves and _________________ the money supply. Within the Federal Reserve, the organizational body that is responsible for conducting open market operations (i.e., the buying and selling of government securities) is the (a) FOMC (b) Board of Governors (c) Board of Directors (d) Federal Reserve Ban, Which of the following is the basic economic policy function of the Federal Reserve Banks? &\textbf{0-30 days}&\textbf{31-90 days}&\textbf{Over 90 days}\\ Then, ceteris paribus, bank reserves , currency in circulation and thus the monetary base will decreases etary base by increasing bank reserves only. Terms of Service. The Federal Reserve's monetary policy is one of the ways in which the U.S. government tries to regulate the nation's economy by controlling the money supply. b. buys or sells foreign currency. C. decrease interest rates. a. higher, higher b. higher, lower c. lower, higher d. lower, lower, When lots of people put their money into bonds, the demand for money and the interest rate on bonds. a) decrease, downward b) decrease, upward c) inc. then the Fed. [Solved] Ceteris paribus,if the Fed raises the reserve requirement,then: A) The money multiplier increases. a. contractionary; buying b. expansionary; buying c. expansionary; selling d. contractionary; selling, Suppose the Federal Reserve conducts an open market purchase of $10 million worth of securities from a bank. \end{matrix} State tax on first $3,000: 1.5$ percent. View Answer. An open market operation is ____?A. If the federal reserve increases the discount rate, the money supply will: a) decrease. This action increased the money supply by $2 million. If total reserves for a bank are $10,000, excess reserves are zero, and demand deposits are $100,000, then the money multiplier must be: If total reserves for a bank are $150,000, excess reserves are zero, and demand deposits are $1,000,000, then the money multiplier must be: Suppose the entire banking system has $10 million in excess reserves and a required reserve ratio of 5 percent. C. Controlling the supply of money. Cause the money supply to increase, c. Not affect the money supply, d. Decrease the money multiplier. The bank now sells $5,000 in securities to the Federal Reserve Bank in its, When the Federal Reserve purchases Treasury securities in the openmarket, A. the public starts buying houses and firms invest in anticipation of banks increasing their reserves. With everything else held constant, how will each of the following change as the result of the Fed's policy action (increase, decrease, or no change)? c. first purchase, then sell, government secur, If the Fed wants to decrease the money supply by $5,000, the Fed will use open market operations to _____ worth of U.S. government bonds. The Dutch East India Company (also known by the abbreviation "VOC" in Dutch) was the first publicly listed company ever to pay regular dividends. Of these, 43 were sold for $\$ 105,000$ each and two remain in finished goods inventory. Your email address is only used to allow you to reset your password. B. decrease by $200 million. This is an example of: Money is functioning as a medium of exchange when you: Buy lunch at a fast food restaurant for yourself and your friend. Which of the following is likely to occur if OPEC increases the amount of oil it supplies and domestic energy prices fall, ceteris paribus? Suppose that the sellers of government securities deposit the checks drawn on the New York Fed into their bank account. The Fed sells Treasury bills in the open market b. \text{Percent uncollectible}&\text{8\\\%}&\text{17\\\%}&\text{31\\\%}\\ \begin{array}{l r} When the Fed buys government bonds, the reserve of the banking system: a) increases, so the money supply increases. The Burton Company manufactures chainsaws at its plant in Sandusky, Ohio. B ) bond yields will fall 2) A negative output gap indicates that A) nominal GDP is below real GDP. c) not change. An increase in the reserve ratio: a. increases the money multiplier. \text{Total Expenses}&\text{\hspace{12pt}?}&\text{\hspace{12pt}? c. the money supply divided by nominal GDP. b) increase causing an increase in investment spending shifting aggregate deman, An expansionary monetary policy ____ the money supply, causing the real interest rate to ____ and planned investment to ____. Assume the required reserve ratio is 10 percent and the FOMC orders an open market sale of $50 million in government securities to banks. Generally, the central bank. Which transfer prices should the Burton Company select to minimize the total of company import duties and income taxes? c. the Federal Reserve System. Cause an excess demand for money and a decrease in the rate of interest. Explore how the Federal Reserve uses monetary policies to control the money supply and affect interest rates in an effort to prevent another depression from occuring. The Federal Reserve uses open market operations to control the money supply when it A. issues government bonds to finance the federal government's deficit. If the Fed sells $1 million of government bonds, what is the effect on the economy s reserves and money supply? A perfectly competitive firm currently sells 30,000 cartons of eggs at $1.25 each. Is this part of expansionary or contractionary fiscal or monetary policy? C) Excess reserves increase. If a bank does not have enough reserves, it can. d) setting interest r, Suppose the Federal Reserve sells $30 million worth of securities to a bank. c) borrow reserves from other banks. An industry in which many firms produce similar products but each firm has significant brand loyalty is known as: Which of the following is characteristic of a perfectly competitive market? Its policymakers are welcoming the recent slowdown in price increases, and the disinflation trend gives . B. a dollar bill. Assuming the economy is in the upward sloping portion of the eclectic aggregate supply curve, what should happen to the price level and output as a result of the Fed's action, ceteris paribus? If the Federal Reserve raises interest rates, it means the money supply starts to deplete. The deposit-creation potential of the banking system is: A reduction in the money supply should shift the aggregate: Monetary policy involves the use of money and credit controls to: What not a basic monetary policy tool used by the Fed? 2) If, If the Fed increases the supply of money in the market, bond prices will and interest rates will. We start by assuming that there is no reserve requirement or lending by the Central Bank. B. buy bonds lowering the price of bonds and driving up the interest rates. The immediate result of this transaction is that M1: If Edgar takes $100 out of his savings account and deposits it into his checking account, the immediate result of this transaction is that M1: What does not occur when a bank makes a loan? the process of selling Fed-issued IOUs between banks. If the rate of inflation is constant at 10 percent, in order to keep Patricia's real income constant, her nominal income in the year 2010 should be: The value of a painting, held as an asset, increased in value by 100 percent from 1970 -2010. Change in Excess Reserve = -100000000.