A) If the Fed buys U.S. government securities,
A.
bank reserves will decrease.
B.
the interest rate will rise.
C.
the discount rate will rise.
D.
the quantity of money will eventually increase.
B) When the Fed buys U.S. government securities from a bank, the Fed pays for the securities by
A.
borrowing money from the U.S. Treasury.
B.
crediting the bank's checking account at the Fed.
C.
decreasing the amount of money in circulation.
D.
giving the bank gold.
C) If a banking system has $1,000 of reserves and the required reserve ratio is 50%, the maximum volume of checkable deposit liabilities of all depository institutions combined would be
A.
$5,000
B.
$2,000
C.
$1,000
D.
$500
D) Continuing with the scenario from the previous question, what would happen if the Fed reduced the reserve requirement from 50% to 10%?
A.
Reserves would fall and deposits would fall by ten times the decrease in reserves.
B.
Reserves would fall and maximum deposits would rise.
C.
Reserves would stay the same, and maximum deposits would rise to $10,000.
D.
Reserves would stay the same, and maximum deposits would fall to $100.
A) If the Fed buys U.S. government securities,
| A. |
bank reserves will decrease. |
|
| B. |
the interest rate will rise. |
|
| C. |
the discount rate will rise. |
|
| D. |
the quantity of money will eventually increase. |
B) When the Fed buys U.S. government securities from a bank, the Fed pays for the securities by
| A. |
borrowing money from the U.S. Treasury. |
|
| B. |
crediting the bank's checking account at the Fed. |
|
| C. |
decreasing the amount of money in circulation. |
|
| D. |
giving the bank gold. |
C) If a banking system has $1,000 of reserves and the required reserve ratio is 50%, the maximum volume of checkable deposit liabilities of all depository institutions combined would be
| A. |
$5,000 |
|
| B. |
$2,000 |
|
| C. |
$1,000 |
|
| D. |
$500 |
D) Continuing with the scenario from the previous question, what would happen if the Fed reduced the reserve requirement from 50% to 10%?
| A. |
Reserves would fall and deposits would fall by ten times the decrease in reserves. |
|
| B. |
Reserves would fall and maximum deposits would rise. |
|
| C. |
Reserves would stay the same, and maximum deposits would rise to $10,000. |
|
| D. |
Reserves would stay the same, and maximum deposits would fall to $100. |
Related textbook solutions
Related questions
Assume the required reserve ratio is 20%
| Assets | Liabilities and net worth | |
| Reserves 80,000 | Demand Deposits 200,000 | |
| Securities 70,000 | Stocks 200,000 | |
| Properties 200,000 | ||
| TOTAL | 400,000 | 400,000 |
If the fed buys securities from ABC B in the amount of 20,000. What will the effect be on the nation's money supply?
________________
If the fed were to increase the reserve requirement from 20% to 25%, what would happen to them:
Bank's excess reserves______________
Nation's money supply_______________
