Refer to the given market-for–money diagrams. If the Federal Reserve increased the stock of
money, the
39.
Suppose the demand for money and the supply of money increase simultaneously. We
can
36–22
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written consent of McGraw-Hill Education.
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Understand
D i f f i c u l t y : 02 Medium
Learning Objective: 36-01 Discuss how the equilibrium interest rate is determined in the
market for money.
Test Bank: I
To pi c: Interest Rates
40.
Other things equal, if there is an increase in nominal GDP,
41.
Other things equal, if the supply of money is reduced,
42.
Answer the question on the basis of the table, in which columns (1) and (2) indicate the
36–23
(1)
Interest Rate
(2)
Dt
(3)
Da
12%
$100
$0
10
100
20
8
100
40
6
100
60
4
100
80
2
100
100
The given data suggest that the amount of money demanded for transactions
43.
Answer the question on the basis of the table, in which columns (1) and (2) indicate the
transactions demand (Dt) for money and columns (1) and (3) show the asset demand (Da)
for money.
(1)
Interest Rate
(2)
Dt
(3)
Da
12%
$100
$0
10
100
20
8
100
40
6
100
60
4
100
80
36–24
2
100
100
The given data suggest that the amount of money that society wishes to hold as an asset
44.
Answer the question on the basis of the table, in which columns (1) and (2) indicate the
transactions demand (Dt) for money and columns (1) and (3) show the asset demand (Da)
for money.
(1)
Interest Rate
(2)
Dt
(3)
Da
12%
$100
$0
10
100
20
8
100
40
6
100
60
4
100
80
2
100
100
If the money supply is $160, the equilibrium interest rate will be
36–25
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written consent of McGraw-Hill Education.
C.
6 percent.
D. 4 percent.
45.
Answer the question on the basis of the following information: For transactions,
households and businesses want to hold an amount of money equal
to one-half of nominal
GDP. The table shows the amounts of money they want to hold as an asset at various interest
rates.
Interest
Rate
Amount of Money
Demanded as an
Asset
10%
$20
8
40
6
60
4
80
2
100
If nominal GDP is $200 and the interest rate is 6 percent, the total amount of money that
households and businesses will want to hold is
36–26
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written consent of McGraw-Hill Education.
To pi c: Interest Rates
Type: Table
46.
Answer the question on the basis of the following information: For transactions,
households and businesses want to hold an amount of money equal
to one-half of nominal
GDP. The table shows the amounts of money they want to hold as an asset at various interest
rates.
Interest
Rate
Amount of Money
Demanded as an
Asset
10%
$20
8
40
6
60
4
80
2
100
If nominal GDP is $300 and the supply of money is $230, the equilibrium interest rate will
be
47. The price of a bond having no expiration date is originally $8,000 and has a fixed
annual interest payment of $800. A fall in the price of the bond
by $3,000 will provide a
new buyer of the bond an interest rate of
36–27
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written consent of McGraw-Hill Education.
B.
12 percent.
C.
14 percent.
D.
16 percent.
48.
Interest Rate
Transactions Demand for Money
Asset Demand for Money
Money Supply
2%
$220
$300
$460
4
220
280
460
6
220
260
460
8
220
240
460
10
220
220
460
Based on the given table, at equilibrium in the given market for money, the total amount of
money demanded is
A.
$500.
B.
$480.
C.
$460.
D.
$440.
49.
Interest Rate
Transactions Demand for Money
Asset Demand for Money
Money Supply
2%
$220
$300
$460
4
220
280
460
6
220
260
460
8
220
240
460
10
220
220
460
Based on the given table, the equilibrium interest rate is
50.
Interest Rate
Transactions Demand for Money
Asset Demand for Money
Money Supply
2%
$220
$300
$460
4
220
280
460
6
220
260
460
8
220
240
460
10
220
220
460
Based on the given table, an increase in the money supply of $20 billion will cause the
equilibrium interest rate to
36–29
51.
Which of the following is an asset on the consolidated balance sheet of the Federal
Reserve Banks?
52.
Reserves must be deposited in the Federal Reserve Banks by
53.
The securities held as assets by the Federal Reserve Banks consist mainly of
54.
Since the financial crisis that began in 2007, the Federal Reserve has added a significant
amount of which of the following securities?
55.
Federal Reserve Notes in circulation are
56.
Which of the following will increase commercial bank reserves?
36–31
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written consent of McGraw-Hill Education.
D.
the sale of government bonds in the open market by the Federal Reserve Banks
57.
When a commercial bank borrows from a Federal Reserve Bank,
58.
The Federal Reserve Banks sell government securities to the public. As a result, the
checkable deposits
59.
The Federal Reserve Banks buy government securities from commercial banks. As a
result, the checkable deposits
60.
The commercial banking system borrows from the Federal Reserve Banks. As a result,
the checkable deposits
61.
Which of the following is a tool of monetary policy?
36–33
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written consent of McGraw-Hill Education.
Di ffi c ult y: 01 Easy
Learning Objective: 36-03 List and explain the goals and tools of monetary policy.
Test Bank: I
To pi c: Tools of Monetary Policy
62.
In the United States, monetary policy is the responsibility of the
63.
The four main tools of monetary policy are
64.
Which of the following is not a tool of monetary policy?
65.
Open–market operations include
66.
Assume the reserve ratio is 25 percent and Federal Reserve Banks buy $4 million of
U.S. securities from the public, which deposits this amount
into checking accounts. As a
result of these transactions, the supply of money is
67.
Assume the legal reserve ratio is 25 percent and the Fourth National Bank borrows
$10,000 from the Federal Reserve Bank in its district. As a
result,
68.
Open–market operations refer to
69.
If the Federal Reserve System buys government securities from commercial banks and
the public,
36–36
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written consent of McGraw-Hill Education.
Di ffi c ult y: 01 Easy
Learning Objective: 36-03 List and explain the goals and tools of monetary policy.
Test Bank: I
To pi c: Tools of Monetary Policy
70.
The purchase of government securities from the public by the Fed will cause
71.
When the Fed loans money in exchange for government bonds being posted as collateral,
this is known as a
72.
Collateralized loans
36–37
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written consent of McGraw-Hill Education.
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Di ffi c ult y: 01 Easy
Learning Objective: 36-03 List and explain the goals and tools of monetary policy.
Test Bank: I
To pi c: Tools of Monetary Policy
73.
In a repo transaction, the Fed money; in a reverse repo transaction, the Fed money.
74.
In a reverse repo transaction,
75.
The collateral used for repos and reverse repos is (are)
36–38
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written consent of McGraw-Hill Education.
AACSB: Knowledge Application
A c c e s s i b i l i t y : Keyboard Navigation
Blooms: Remember
Di ffi c ult y: 01 Easy
Learning Objective: 36-03 List and explain the goals and tools of monetary policy.
Test Bank: I
To pi c: Tools of Monetary Policy
76.
All else equal, if the Fed engages in a repo transaction, then it means the Fed is
attempting to
77.
Assume that a single commercial bank has no excess reserves and that the reserve ratio
is 20 percent. If this bank sells a bond for $1,000 to a
Federal Reserve Bank, it can expand
its loans by a maximum of
78.
Assume that U.S. National Bank has no excess reserves and that the reserve ratio is 20
percent. If U.S. National borrows $5 million from a
Federal Reserve Bank through a repo
transaction, it can expand its loans by a maximum of
79.
Which of the following Fed actions will decrease the money supply?
80.
Suppose the Federal Reserve Banks sell $2 billion of government bonds to the public,
which pays for them by drawing checks. As a result,
commercial bank reserves will
36–40
81.
Consolidated Balance Sheet:
Commercial Banking System
Assets
Liabilities & Net Worth
Reserves
$72
Checkable Deposits
$240
Securities
110
Loans From Federal Reserve Banks
2
Loans
60
Consolidated Balance Sheet:
Federal Reserve Banks
Securities
$240
Reserves of Commercial Banks
$72
Loans to Commercial Banks
2
Treasury Deposits
30
Federal Reserve Notes
140
Refer to the given balance sheets. If the reserve ratio is 25 percent, commercial banks have
excess reserves of
A.
$12.
B.
$22.
C.
$16.
D.
$24.
82.
Consolidated Balance Sheet:
Commercial Banking System
Assets
Liabilities & Net Worth
Reserves
$72
Checkable Deposits
$240
Securities
110
Loans From Federal Reserve Banks
2
Loans
60
Consolidated Balance Sheet: