The Federal Reserve affects the money supply ( ) by ()
A. indirectly; changing the amount of reserves, which turn into deposits.
B. indirectly; changing the amount of deposits, which turn into reserves.
C. directly; changing the amount of deposits, which turn into reserves.
D. directly; changing the discount rate.
Option A.) indirectly; changing the amount of reserves, which turn into deposits.
The Federal Reserve affects the money supply in the economy indirectly because it does not have a direct control on the money supply of a nation.
So, it changes the reserve requirements of how much percentage of deposits the commercial banks must hold with the Federal Reserve. If the Federal Reserve wants to increase the money supply, it can do so, by decreasing the reserve requirements of the commercial banks so that more money is available in the hands of the commercial banks to lend to the general public which in turn leads to more money supply. On the other hand, if the Federal Reserve wants to decrease the money supply, it can do so, by increasing the reserve requirements of the commercial banks so that less money is available in the hands of the commercial banks to lend to the general public which in turn leads to less money supply.
The Federal Reserve affects the money supply ( ) by () A. indirectly; changing the amount...
9 In the U.S econormy the money supply is cot A) U.S Treasury. B) Federal Reserve System D) Senate Committee on Banking and Finance. 10. Ceteris paribus, if the Fed raised the required reserve ratio A) Banks could increase their lending B) The Federal funds interest rate would rise. The size of the monetary multiplier would decrease. D) The size of the monetary multiplier would increase. 11. Money is created when A) Loans are made. Checks written on one bank...
Suppose that the Federal Reserve wants to decrease the money supply. Which of the following policies would achieve this goal? Group of answer choices Decrease the reserve requirement. Buy Treasury Bills from banks. Raise the Discount Rate. Decrease the interest rate paid on reserves held at the Fed.
To _____ the money supply, the Federal Reserve could _____. A. decrease; lower the discount rate B. increase; raise the federal funds rate C. increase; lower the reserve requirements D. decrease; conduct open-market purchases
of the Federal Reserve 18. The Federal Open Market Committee (FOMC) is made up of: A) the chair of the Board of Governors along with the 12 presidents of the Fede ent of the New York al Reserve System along with Banks. B) the seven members of the Board of Governors along with the president of the Federal Reserve Bank. C) the seven members of the Board of Governors of the Federal Reserve S the three members of the Council...
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 $500. Determine the money multiplier and the money supply for each reserve requirement listed in the following table.Reserve RequirementSimple Money MultiplierMoney Supply(Percent)(Dollars)25 10 A higher reserve requirement is associated with a money supply.Suppose the Federal Reserve wants to increase the money supply...
QUESTION 4 4. Match the circumstances of the Federal Reserve banknotes to their changing meaning or role When held by the public A medium of exchange - money When in the private bank vault B. reserves When back at the Federal Reserve C. trash QUESTION 5 5. Match the terms to their definition the amount of reserves the private bank is required to hold - determined by A. multiplying the total checkable account liabilities of the bank by th required...
The Federal Reserve adjusts interest rates indirectly through which of tools? Group of answer choices federal tax policy reserve requirement open market operations discount rate
8. The reserve requirement, open market operations, and the money supply 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 $500. Determine the money multiplier and the money supply for each reserve requirement listed in the following table. Reserve Requirement (Percent) Money Supply (Dollars) Simple Money Multiplier A lower reserve requirement is associated...
71. Which of the following is the basic economic policy function of the Federal Reserve Banks? A. holding the deposits or reserves of commercial banks B. acting as fiscal agents for the Federal government C. controlling the supply of money D. the collection or clearing of checks among commercial banks
If the Fed wished to decrease the money supply, it could A. lower the required reserve ratio. B. lower the interest rate on term deposits. C. lower the interest rate on reverse repurchase agreements. D. raise the interest rate it pays on reserves.