Solution : Option ( C ) A change in money multiplier .
Reason. : During recession to increase aggregate demand Federal bank purchases securities from commercial banks through its open market operation function . This results in increase in bank reserves , increase in money supply and decrease in interest rates . But it can't bring any change in multiplier because change in multiplier depends on the percentage of deposits that banks are required to hold as reserves . Money multiplier refers to how an initial deposit can lead to a bigger final increase in the total money supply .
A Fed purchase of securities from commercial banks will cause all of the following EXCEPT: a...
When the Fed conducts an open market purchase, the Fed buys securities from banks and the money supply increases As a result of the open market purchase, the O A. 0 B. ° C. money demand curve will shift to the left. money supply curve will shift to the left. money supply curve will shift to the right. OD. money demand curve will tthe right The new equilibrium will be where O A. the new money supply curve intersects the...
The U.S. Treasury maintains accounts at commercial banks. What would be the consequences for the money supply if the Treasury shifted funds from one of those banks to the Fed? Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. The balance sheet for the bank would reflect a decrease in reserves...
Discussion Questions for Tuesday, Apr. 23 1. Suppose the Fed conducts $10 million open market purchase from Bank A. If Bank A and all the other banks use reserves to purchase only securities, what will happen to deposits in the banking system and how much does it expand? 2. Let's assume that in a hypothetical economy currency in circulation is $600 billion, the amount of checkable deposits is $900 billion, excess reserves are $15 billion and required reserve ratio is...
1.The Fed purchases $100,000 of U.S. government securities from One Bank. Assuming the desired reserve ratio is 10 percent, banks loan all excess reserves, and the currency drain is 20 percent, how much does the quantity of money increase? A. $1,000,000 B. $10,000,000 C. $1,100,000 D. $900,000 E. $100,000 2.A bank maximizes its stockholders' wealth by ______. A. colluding with other banks to keep interest rates high colluding with other banks to keep interest rates high B. lending for long...
answer these will rate after If the Fed increases the discount rate, banks will face a higher cost of borrowing and will pass some of this cost onto customers in terms of higher interest rates. O it will be easier for banks to borrow the money needed to provide a higher volume of commercial loans. O it will then increase the required reserve ratio as well. O it will then decrease the required reserve ratio to offset any possible contractionary...
Assume that the central bank of nation decides to lower the reserve requirement for commercial banks. All other things equal, one can predict that this action will (Click to select the amount of required reserves. (Click to select)y excess reserves. (Click to select the amount of loans generated by commercial banks. Click to select the economy wide money supply, and finally [Click to select) Interest rates in that nation decrease increase not change
13) An open market purchase of bonds by the central bank will cause which of the following when a liquidity trap situation exists? A) The money supply, M, will not change. B) Output will increase. C) The interest rate will decrease. D) The interest rate will not change. E) none of the above 14) Which of the following is a liability on a bankʹs balance sheet? A) loans B) checkable deposits C) reserves D) all of the above E) none...
If the Fed buys securities there will be O A decrease in reserves and an increase in the money supply. O An increase in reserves and a decrease in the money supply. An increase in reserves and an increase in the money supply. A decrease in reserves and a decrease in the money supply.
4- When the Fed conducts open-market sales, a. it sells Treasury securities, which decreases the money supply. b. it lends money to member banks, which decreases the money supply. c. it borrows from member banks, which increases the money supply. d. it sells Treasury securities, which increases the money supply. 5- When the government levies a $100 million tax on people's income and puts the $100 million back into the economy in the form of a spending program such as new...
If the reserve ratio decreased from 20 percent to 10 percent, which of the following would happen to the money multiplier? a. It would rise from 10 to 20. b. It would rise from 5 to 10. c. It would fall from 10 to 5. d. It would fall from 20 to 5. 13. Which statement best describes the outcome of a decrease in the bank rate? a. Banks will borrow less from Bank of Canada, so reserves increase. b....