Tax on amount over $3,000 :3 percent. b) decreases the money supply and raises interest rates. 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. &\textbf{0-60 days}&\textbf{61-120 days}&\textbf{Over 120 days}\\ \text{Selling expenses} \ldots & 500,000 Compute the following for the current year: In addition, the company had six partially completed units in its factory at year-end. Match the terms with definitions. When the Fed decreases the discount rate, banks will a) borrow more from the Fed and lend more to the public. 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. b. the money supply is likely to decrease. 23. The equilibrium price level and equilibrium output should both increase. We develop a model of price formation in a dealership market where monitoring of the information flow requires costly effort. Price charged is always less than marginal revenue. This action increased the money supply by $2 million. See Answer Ceteris paribus, if the Fed raised the required reserve ratio: Expert Answer When you've placed seven or more cards in the Don't know box, click "retry" to try those cards again. These actions can be classified as expansionary or contractionary, depending on the prevailing market conditions. The nominal interest rates rises. Keynes viewed the economy as inherently unstable and suggested that during a recession policy makers should: Cut taxes and/or increase government spending. During the year, the company started and completed 45 motor homes at a cost of $\$ 55,000$ per unit. Which of the following could cause a recession? [Solved] Ceteris Paribus,if the Fed Raises the Reserve Requirement,then If the Federal Reserve increases the nominal supply of money, all else equal: a. the demand for money increases. b. will cause banks to make more loans. See our $$ Use the model of aggregate demand and aggregate supply to illustrate the impact of this change in the interest rate on output and the price level in the short run. 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? d) means by which the Fed supplies the, Suppose the Fed wishes to use monetary policy to close an expansionary gap. Open market operations. When the Federal Reserve sells bonds as a part of a contractionary monetary policy, there is: A. Now suppose the Fed conducts an open market purchase of government bonds equal to $1, Fiscal policy is conducted by: a. a-Ceteris paribus, an increase in the interest rate would lead to a fall in investment due to an inward shift of the investment line. c) decreases, so the money supply increases. C. Controlling the supply of money. Consider an open market purchase by the Fed of $16 billion of Treasury bonds. An increase in the reserve ratio: a. increases the money multiplier. 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. How will the lending capacity of the banking system be affected if the reserve requirement is 5 percent? c) buying and selling of government securities by the Treasury. Decrease in the federal funds rate B. b. - By buying and selling bonds through open-market operations - By buying and selling stocks - By setting the interes, Suppose the Fed decided to purchase $100 billion worth of government securities in the open market, directly deposited into the banking system. C. purchases government bonds to increa, 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 Bank o, Assume that the required reserve ratio is 10%; banks hold no excess reserves, and the public holds all money in the form of currency. The financial sector has grown relative to the real economy and become more fragile. e. raise the reserve requirement. To fight a recession, the Fed should conduct what kind of monetary policy to do what to interest rates and shift aggregate demand to the: A. contractionary; increase; left B. contractionary; decrease; Assume the demand for money curve is stationary and the Fed increases the money supply. a. What happens if the Federal Reserve lowers the reserve - Investopedia In terms of pricing, which of the following is not true for a monopolist? \text{Total uncollectible? a. increase, increase, sell b. increase, increase, buy c. decrease, decrease, buy d. decrease, If the Fed is following policies to reduce inflation, it is most likely to be: a. lowering interest rates b. raising the money supply c. lowering the money supply d. both lowering interest rates and, When the interest rate falls in the money market, the quantity of money demanded ______ and the quantity of money supplied _______. Its marginal revenue curve is below its demand curve. To decrease the money supply, the Fed can, raise the reserve requirement, raise the discount rate, or sell bonds. If the price of computers falls during a period when the average price level remains constant, which of the following has occurred? c) borrow reserves from other banks. Decrease the price it asks for the bonds. The paper argues that the process of financialization has profoundly changed how capitalist economies operate. B. increase the supply of bonds, decrease bond prices, and increase interest rates. a. In order to increase sales by one item per month, the monopolist must lower the price of its software by $1 to $49. When the Fed buys bonds in open-market operations, it _____ the money supply. They will remain unchanged. Which of the following functions does the Fed perform? Ceteris paribus if bond prices rise then A the Federal reserve must be 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. d) All of the above. Suppose the Federal Reserve conducts an open market purchase of $150 million government securities from the non-bank public. \text{Cost of Goods Sold}&\underline{\text{\hspace{19pt}85,250}}&\underline{\text{\hspace{19pt}85,250}}\\ d. an increase in the supply of bonds and a fal, When there is an excess supply of money: A. the Fed will decrease the money supply. B. buy bonds lowering the price of bonds and driving up the interest rates. A. buy $25,000 B. sell $25,000 C. sell $5,000 D. buy $1,000 E. sell $1,000, In times of economic downturn, the Federal Reserve will engage in ___ monetary policy by ___ bonds. The key decision maker for general Federal Reserve policy is the: Free . If market interest rates rise, the selling price of existing bonds in the market will, ceteris paribus, . All other trademarks and copyrights are the property of their respective owners. (a) increases because the resulting increase in the interest rate leads to a decrease in investment (b) increases because the resulting decrease in the interest rate leads to an increase in investment (, The Fed decreases the quantity of money. Patricia's nominal annual income in 2009 was $60,000. C. The value of the dollar will decrease in foreign exchange markets. If the Fed buys more bonds from the public, then the money supply will: Increase and the aggregate demand curve will shift to the right. Holding the deposits or reserves of commercial banks. Reserve Requirements of Depository Institutions - Federal Register B. Money demand c. Investment spending d. Aggregate demand e. The equilibrium level of national income, When the expected inflation rate falls, the real cost of borrowing ______ and bond supply ______, everything else held constant. Suppose the U.S. government paid off all its debt. Enter the email address you signed up with and we'll email you a reset link. __ Money paid to stockholders from earnings of a corporation. This situation is an example of: After quitting one job, some people with marketable skills find that it takes several months to find a new job. A perfectly competitive firm is a price taker because: It has no control over the market price of its product. c. buys bonds from ban, The Federal Reserve's sale or purchase of government bonds is referred to as: a. open market operations b. credit rationing c. quantitative easing d. monetarism, If the Fed wants to increase the money supply through an open market operation, it will a. purchase government securities. b. it will be easier to obtain loans at commercial banks. The Fed - Calculation of Reserve Balance Requirements Which of the following is NOT a basic monetary policy tool used by the Fed? B. c. buy bonds, thus driving up the interest rate. \text{Percent uncollectible}&\text{8\\\%}&\text{17\\\%}&\text{31\\\%}\\ Assume central bank money (H) is initially equal to $100 million. The Dutch East India Company (also known by the abbreviation "VOC" in Dutch) was the first publicly listed company ever to pay regular dividends. 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. How does it affect the money supply? Assume that the reserve requirement is 20%. C. decisions by the Fed to raise or lower interest rates. The nominal interest rates falls. a. d. the money supply is not likely to change. Monetary policy can help the Federal Reserve System to protect, influence, and increase benefits to the economy. raise the discount rate. d) increases the money supply and lowers interest rates. What effect will this open market operation have on demand deposits and M1? On March 5 and 6, I surveyed over 500 consumers about their concerns about COVID-19, awareness of the Fed's . Raise the reserve requirement, increase the discount rate, or . If the market price was below the ATC and at the current firm's rate of production the MC was less than the market price an increase in output would: increase profit but economic profits would still be negative.