answer

watching

views

byzantiumgiraffe116Lv1

28 Sep 2019

Explain the main channels (not the Def's Toold: open market operatinos, required reserves, discount rate) through which the Fed can influence economic activity. Which theory has provided a better model, Classical or Keynesian, when it comes to prediciting how money affects the macro economy? Explain

answer

watching

views

For unlimited access to Homework Help, a Homework+ subscription is required.

You have 0 free answers left.
Get unlimited access to 3.8 million step-by-step answers.

Get unlimited access

Already have an account? Log in

Mahe AlamLv10

29 Sep 2019

Unlock all answers

Get 1 free homework help answer.

Already have an account? Log in

Related questions

Each Federal Reserve Bank is

Answer

		a corporation.
		a government owned enterprise.
		a government subsidized entity.
		a government-sponsored enterprise.

A transaction in which the Fed agrees to buy a security one day and sell it back the next day is

Answer

		an overnight securitization operation.
		a repurchase agreement.
		a legal tender.
		a rebate sale.

The Federal Reserve document that states the goals of the FOMC and the target for the federal funds rate is known as the

Answer

		Directive.
		Beige book.
		Bluebook.
		Green book.

How long is the normal term in office for a Governor of the Federal Reserve Board?

Answer

		Five years
		Seven years
		Fourteen years
		Life

The federal funds rate is the interest rate on

Answer

		loans to banks from the Fed.
		loans by banks to the Fed.
		short-term loans between banks.
		Treasury bills.

Expenditures of each Federal Reserve Bank are approved by

Answer

		the U.S. Senate.
		the President of the United States.
		the U.S. Treasury Department.
		the Federal Reserve Board of Governors.

Federal Reserve Banks pay for their central banking operations through

Answer

		government tax revenue.
		interest on the securities they own.
		fees charged to banks that use their services.
		dividends paid by local banks.

When the Fed engages in open-market operations, the transactions are conducted by

Answer

		the Open Market Desk at the Federal Reserve Bank of New York.
		the Open Market Desk at the Federal Reserve Board in Washington, D.C.
		the National Bureau of Economic Research.
		the Federal Open Market Committee.

In 2006, Chairman Greenspan left the Fed because

Answer

		President Bush wanted him to resign.
		he reached mandatory retirement age.
		his term as Governor expired.
		his term as Chairman expired.

The Federal Reserve publication that discusses forecasts for the economy is known as the

Answer

		Redbook.
		Beigebook.
		Bluebook.
		Greenbook.

The FOMC directive

Answer

		describes forecasts for the economy.
		states the target for the federal funds rate.
		discusses the regional economies around the country.
		shows the Fed's balance sheet.

The chairman of the Federal Reserve Board who reduced the inflation rate from over 10 percent to about 3 percent in the early 1980s was

Answer

		Arthur Burns.
		G. William Miller.
		Paul Volcker.
		Alan Greenspan.

Which Fed chairman ensured the independence of the Federal Reserve in the 1950s?

Answer

		William McChesney Martin
		Arthur Burns
		Paul Volcker
		G. William Miller

There are ____ Federal Reserve Banks.

Answer

		seven
		ten
		twelve
		fifteen

Purchases and sales of government securities in the secondary market are known as

Answer

		discount borrowing and lending.
		federal funds purchases and sales.
		discounting.
		open-market operations.

The monetary base can be divided into

Answer

		currency plus transactions deposits.
		vault cash plus reserves held at the Fed.
		required clearing balances plus currency.
		reserves plus currency.

The Fed does not generally change reserve requirements to affect the money supply because

Answer

		the impact is too large.
		the Fed needs the approval of Congress to do so.
		it's not legal for the Fed to do so.
		the Fed needs the approval of the President of the United States to do so.

The Fed has decided to tighten monetary policy, so it decreases the money supply through

Answer

		defensive open-market operations.
		dynamic open-market operations.
		reduced discount loans for profit.
		reduced discount loans for business needs.

A haircut is

Answer

		the extra collateral the Fed requires above the value of a discount loan.
		the extra principal a commercial bank requires the Fed to pay when making a discount loan.
		the difference between what an investor pays for a bond and what the investor sells the bond for.
		expected personal grooming for a member of the Board of Governors.

Currency held by the nonbank public plus banks' vault cash plus banks' deposits at the Fed equals

Answer

		the Fed's capital stock.
		discount loans.
		the monetary base.
		required clearing balances.

The extra collateral the Fed requires above the value of a discount loan is known as

Answer

		the term premium.
		a haircut.
		a covenant.
		secondary credit.

Currency held by the nonbank public plus banks' reserves equals

Answer

		the Fed's capital stock.
		discount loans.
		the monetary base.
		required clearing balances.

The money supply divided by the monetary base equals

Answer

		the reserve ratio.
		velocity.
		high-powered money.
		the money multiplier.

The main liability on the Federal Reserve's balance sheet is

Answer

		discount loans.
		securities.
		monetary base.
		capital.

A bank in good condition may take out a loan without the Fed questioning the purpose or nature of the loan. Such a loan is known as

Answer

		a no documentation discount loan.
		a haircut.
		a covenant.
		a primary credit discount loan.

If the Open-Market Desk at the Fed buys securities when the federal funds rate is below the primary credit discount rate, the most likely effect is that the

Answer

		federal funds rate decreases.
		primary credit discount rate decreases.
		primary credit discount rate increases.
		federal funds rate increases.

In November and December, people use more currency than usual, so the Fed increases the money supply through

Answer

		defensive open-market operations.
		dynamic open-market operations.
		discount loans for profit.
		discount loans for business needs.

Reserves held by banks at the Fed that earn implicit interest payments in the form of earnings credits for Fed services are known as

Answer

		required clearing balances.
		reserve requirements.
		excess reserves.
		non-transaction deposits.

Required clearing balances

Answer

		pay interest in the form of earnings credits.
		count as reserves and can be used to meet reserve requirements.
		pay interest equal to the federal funds rate minus one percent.
		are required to be held against transactions deposits.

Ryan savedâ $50,000 last year in his bank account so that he could buy a car this year. In thisâ case, money served the function of aâ ________.

means of deferred payment

unit of account

store of value

medium of exchange

A bank is said to have enough liquidityâ if:

it holds deposits amounting to at leastâ $100,000.

it operates for seven days a week for more than 12 hours a day.

it has enough funds to conduct its

dayminusâtominusâday

businesses and meet the regulatory requirements.

the value of its assets exceeds the value of its liabilities by at leastâ $50,000.

Consider an economy that only produces wooden chairs. Inâ 2012, the economy produced 100 wooden chairs priced atâ $10 each. The nominal GDP of the economy for the year 2012 willâ be:

â$10,000.

â$10.

â$100.

â$1,000.

Hyperinflationary episodes are always related to extremely rapid growthâ of:

real GDP.

money supply.

interest rates.

money demand.

Which of the following financial organizations have the ability to influence the supply of reserves in the Unitedâ States?

The World Bank

The Fed

Only private commercial banks

Only public sector banks

A retired worker receives a pension that is not indexed to inflation. Which of the following will happen if the rate of inflationâ rises?

The retiree will be better off.

Theâ retiree's purchasing power will fall.

The shareholders of the firm in which he worked will lose.

Theâ retiree's purchasing power will increase.

Assuming all elseâ equal, what is likely to happen to the demand curve for reserves in an economy if it goes through a period of rapidâ expansion?

There will be a n upward movement along the demand curve for reserves.

The demand curve for reserves will shift to the left.

There will be a downward movement along the demand curve for reserves.

The demand curve for reserves will shift to the right.

If the nominal interest rate in an economy isâ 9% and the expected inflation rate isâ 6%, then the expected real interest rate in the economyâ is:

â15%.

â9%.

â6%.

â3%.

If nominal GDPâ increases, what might be the cause of thisâ increase?

If nominal GDPâ increases, this could be causedâ by:

â(Select

all that

apply.â)

An increase in the price level

Deflation

An increase in real GDP

A decrease in the price level

Given the followingâ information, what is the growth rate of nominalâ GDP?

Upper Y 0Y0

real GDPâ =

â$10001000

â(in millions)

Upper Y 1Y1

real GDPâ =

â$11001100

â(in millions)

Upper Y 0Y0

price levelâ = 120120

Upper Y 1Y1

price levelâ = 130130The growth rate of nominal GDP is

nothing â%.

â (Round

your answer to the nearest

hundredth.â)

According to the quantity theory ofâ money, what must the growth rate of the money supply be given the followingâ information?

The growth rate of real GDP is

1.01.0â%.

The growth rate of nominal GDP is

3.83.8â%.

The nominal interest rate is

7.17.1â%.

The real interest rate is

4.34.3â%.

The money supplyâ (M2) is

â$10 comma 61210,612

â(in billions)According to the quantity theory ofâ money, the growth rate of the money supply must be

nothing â%.

â (Round

your answer to the nearest

tenth.â)

According to the quantity theory ofâ money, what is the inflationâ rate?

Use the information given above and calculate the inflation rate.

According to the quantity theory ofâ money, the inflation rate is

nothing â%.

â (Round

your answer to the nearest

tenth.â)

According to the quantity theory ofâ money, the inflation rate is

the ratio of money supply to nominal GDP.

the gap between the growth rate of money supply and the growth rate of real GDP.

the gap between the nominal and real interest rates.

the gap between the growth rate of money supply and the growth rate of nominal GDP.

If the inflation rate is

positivepositiveâ,

what must beâ true?

The growth rate of nominal GDP

greater than>

the growth rate of money supply.

The growth rate of real GDP

less than<

the growth rate of money supply.

The growth rate of real GDP

greater than>

the growth rate of money supply.

The growth rate of nominal GDP

less than<

the growth rate of money supply.

An open market operation isâ ____________.

the process of sellingâ Fed-issued IOUs between banks.

an exchange between a private bank and the Federal Reserve where the Fed buys or sells government bonds to private banks.

where a bank borrows reserves or bonds from the Federalâ Reserve's discount window.

an exchange between private banks where the banks buy or sell bonds to each other.

The Federal Reserve conducts open market operations when it wants toâ ____________.

change the liquidity levels of banks.

influence the discount rate.

influence the federal funds rate.

change the level of reserves it holds for banks.

When the Fed

sellssells

government bonds

toto

privateâ banks, it

â¼

the electronic reserves that banks hold.

lavendersquirrel414

In an effort to move the economy out of a recession, the federal government would engage in expansionary economic policies. Respond to the following points in your paper on the actions the government would take to address expansionary fiscal and monetary policies:

Expansionary Fiscal Policy:

Explain the actions the federal government would take while engaging in expansionary fiscal policy in terms of the following:

The necessary change in taxes and government spending,

The effect on aggregate demand, GDP, and employment.

Expansionary Monetary Policy:

The three tools the Federal Reserve Bank (The Fed) uses when conducting monetary policy are the required reserve ratio, the discount rate, and open market operations.

Explain the actions of the Fed in regard to the three tools.

When the required reserve ratio is increased or decreased

When the discount rate is increased or decreased

Buying or selling government securities when conducting expansionary monetary policy

Explain how these actions would affect the money supply, interest rates, spending, aggregate demand, GDP, and employment.