Homework Answers
5.
a. When Fed buys bonds the money supply increases as it releases money to system
b. Money supply increases as more funds become available
c. It is the interest rate charged by Fed for its borrowers and when it is increased the money supply decreases as the demand decreases
d. Higher the reserve requirement more money needs to be held at Fed hence it decreases the money supply
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5. Explain how each of the following changes the money supply a. The Fed buys bonds...
In which of the following cases does the quantity of money supply (MS) in the money...
In which of the following cases does the quantity of money supply (MS) in the money market decrease? a.The Fed buys bonds in open-market operations. b.The Fed raises the reserve requirement. c.The Fed decreases the interest rate it pays on reserves(on required and excess reserves). d.The Federal Open Market Committee (FOMC) decreases its target for the federal funds rate and market interest rates. e.The Fed decreases the discount rate that it charges banks. f.None of the above.
The Fed wants to increase the money supply (which is currently $3,000) by $200. The money multiplier is 4, and people h...
The Fed wants to increase the money supply (which is currently $3,000) by $200. The money multiplier is 4, and people hold no cash. For each 1 percentage point the discount rate falls, banks borrow an additional $30. Explain how the Fed can achieve its goals using the following tools: a. Change the reserve requirement. Instructions: Enter your response rounded to the nearest whole number. The Fed should (Click to select) the reserve requirement to percent. b. Change the discount...
15. Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve...
15. Suppose a bank has $3,000 in reserves, $25,000 of deposits, and a 10 percent reserve requirement. What is the amount of excess reserves? ________________________ 16. The U.S unemployment rate for November 2018 fell to 3.7%, the lowest since 2000 after sitting at 4.1% for six consecutive months. What does this tells us about the U.S economy? What it doesn’t tell us about the U.S economy? Is this a perfect indicator of the U.S labor market? Why/why not? ___________________________________________________________________ _______________________________________________________________________________________________________________________________________________________....
The Fed wants to increase the money supply (which is currently $7,000) by $250. The money...
The Fed wants to increase the money supply (which is currently $7,000) by $250. The money multiplier is 3, and people hold no cash. For each 1 percentage point the discount rate falls, banks borrow an additional $10. Explain how the Fed can achieve its goals using the following tools: a. Change the reserve requirement. Instructions: Enter your response rounded to the nearest whole number. The Fed should Raise or lower? the reserve requirement to percent ??
The Fed buys bonds in the open market and pays for the bonds by transmitting funds...
The Fed buys bonds in the open market and pays for the bonds by transmitting funds to the bond dealer's deposit account in a bank, at which point it becomes part of the money supply. The Fed has just created money, because it has added to the reserve account of the bond dealer's bank, and the money supply increases by the amount of the purchase. Please add more to my response above. Be more specific. Question: 4) Explain how the...
Fed buys bonds in the open market influence the money supply it create money, they create...
Fed buys bonds in the open market influence the money supply it create money, they create wealth. ey supply of Hooba is $10,000 in a pl the money supply if they hold all depoits in reserve it the Banks cannot rnsl As banks create decreases the reserve requirement to 10 percest, the If Hooba could increase by no more than $9,000.e n u CHOICE QUESTIONS (1.5 marks banking system. percest, the money supply Per Question, 30 in total) (1) Which...
When the Federal Reserve conducts open market operations, it buys or sells government bonds. buys and...
When the Federal Reserve conducts open market operations, it buys or sells government bonds. buys and sells foreign currency. manipulates of the rate at which it loans to member banks. increases or decreases the required reserve ratio. How will the Fed's policy action change the money supply? Use only the actions corresponding to your choice in the previous part. The money supply increases The money supply decreases Answer Bank Answer Bank The Fed sells foreign currency The Fed buys bonds...
a) Show the changes to the balance sheets for commercial banks when the Federal Reserve buys...
a) Show the changes to the balance sheets for commercial banks when the Federal Reserve buys $50 million in us Treasury Bills. If the public holds a fixed amount of currency (so that all loans create an equal amount of deposits in the banking system , the minimum reserve requirement is 5%, by how much will checkable bank deposits in commercial banks change? b) Now suppose that the Fed raises the discount rate significantly. How would you expect this to...
5. Using a supply and demand graph of the market for money, show the effects on...
5. Using a supply and demand graph of the market for money, show the effects on the nominal interest rate if the Fed takes the following monetary policy actions: (LO2, LO3) a. The Fed lowers the discount rate and increases dis- count lending. b. The Fed increases the reserve requirements for com- mercial banks. c. The Fed conducts open market sales of government bonds to the public. d. The Fed decreases the reserve requirements for como mercial banks.
If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens...
If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to the money supply? a. It increases by a maximum of $150,000. b. It decreases by a maximum of $200,000. c. It increases by a maximum of $100,000. d. It decreases by precisely $100,000.
The Fed wants to increase the money supply (which is currently $3,000) by $200. The money multiplier is 4, and people hold no cash. For each 1 percentage point the discount rate falls, banks borrow an additional $30. Explain how the Fed can achieve its goals using the following tools: a. Change the reserve requirement. Instructions: Enter your response rounded to the nearest whole number. The Fed should (Click to select) the reserve requirement to percent. b. Change the discount...
Fed buys bonds in the open market influence the money supply it create money, they create wealth. ey supply of Hooba is $10,000 in a pl the money supply if they hold all depoits in reserve it the Banks cannot rnsl As banks create decreases the reserve requirement to 10 percest, the If Hooba could increase by no more than $9,000.e n u CHOICE QUESTIONS (1.5 marks banking system. percest, the money supply Per Question, 30 in total) (1) Which...
When the Federal Reserve conducts open market operations, it buys or sells government bonds. buys and sells foreign currency. manipulates of the rate at which it loans to member banks. increases or decreases the required reserve ratio. How will the Fed's policy action change the money supply? Use only the actions corresponding to your choice in the previous part. The money supply increases The money supply decreases Answer Bank Answer Bank The Fed sells foreign currency The Fed buys bonds...
a) Show the changes to the balance sheets for commercial banks when the Federal Reserve buys $50 million in us Treasury Bills. If the public holds a fixed amount of currency (so that all loans create an equal amount of deposits in the banking system , the minimum reserve requirement is 5%, by how much will checkable bank deposits in commercial banks change? b) Now suppose that the Fed raises the discount rate significantly. How would you expect this to...
5. Using a supply and demand graph of the market for money, show the effects on the nominal interest rate if the Fed takes the following monetary policy actions: (LO2, LO3) a. The Fed lowers the discount rate and increases dis- count lending. b. The Fed increases the reserve requirements for com- mercial banks. c. The Fed conducts open market sales of government bonds to the public. d. The Fed decreases the reserve requirements for como mercial banks.
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