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Questions and Answers

(338 solutions)

Suppose the Fed purchases a $1,000 government bond from you. If you deposit the entire $1,000 in your bank, what is the total potential change in the money supply as a result of the Fed's action if reserve ratio is 10 percent?

a. $10,000Money Multiplier=Reserve Ratio1​Given a reserve ratio of 10% (or 0.10):Money Multiplier=10.10=10\text{Money Multiplier} = \frac{1}{0.10} = 10Money Multiplier=0.101​=10If the Fed purchases a $1,000 government bond and you deposit the entire amount in your bank, the total...

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Which of the following policy combinations would consistently work to increase the money supply?

d. Buy government bonds, decrease interest paid on reserves, decrease the discount rate...

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The discount rate is _______.

b. the interest rate the Fed charges on loans to banks...

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Which of the following statements about monetary policy is true?

a. In recent times, the Fed has targeted interest rates as opposed to the money supply....

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Suppose Chandler changes his $1,000 demand deposit from Bank A to Bank B. If the reserve ratio is 10 percent, what is the potential change in demand deposits as a result of Chandler's action?

d. $0...

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Which of the following policy actions by the Fed is likely to increase the money supply?

d. Decreasing interest on reserves...

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If the reserve ratio is 20 percent, the value of the money multiplier is _______.

c. 5...

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The reserve ratio is the ratio of a bank's reserves to its _______.

a. deposits...

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Which of the following statements is true?

b. When the Fed buys government bonds, the money supply increases....

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To insulate the Federal Reserve from political pressure, _______.


c. the Board of Governors is appointed to 14-year terms...

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