Econ 202- Chapter 12 Homework

If Abigail withdraws $300 cash from her checking account, then her bank's assets? -do not change, but its liabilities fall by $300. -fall by $300, but its liabilities do not change. -fall by $300, and its liabilities fall by $300. -fall by $300, and its liabilities rise by $300.

If the reserve requirement is 10%, a withdrawal of $500 leads to a potential decrease in the money supply of? $50. $2,500. $5,000. $4,500.

Sumit deposits $1,500 cash into his checking account. The reserve requirement is 25%. What is the change in his bank's required reserves? $1,500 $375 $1,125 $6,000

Sumit deposits $1,500 cash into his checking account. The reserve requirement is 25%. How much money can the banking system create? $1,500 $0 $1,125 $6,000

If the reserve requirement is 2.5% and a bank initially receives $30,000 in deposits from the Fed, then the maximum amount of money that the banking system can create is? $750 $1,500 $30,000 $1.2 million

If banks increase excess reserves to increase their ability to absorb a higher rate of defaults? -the potential multiplier will rise. -the potential multiplier will fall. -the actual multiplier will rise. -the actual multiplier will fall.

Which of the following is a basic goal of the Federal Reserve System? -full employment -a balanced federal budget -zero interest rates -export promotion

Which of the following statements concerning the structure of the Federal Reserve System is CORRECT? -The Fed's Board of Governors consists of 12 members. -The chairman and vice-chairman of the Board of Governors are appointed by the president and confirmed by the Senate for terms of 4 years. -There are 10 regional Federal Reserve banks. -The Federal Open Market Committee (FOMC) has seven members.

The main policymaking arm of the Fed is the? -Federal Open Market Committee. -Council of Economic Advisers. -Money Committee. -Beige Book Committee.

The Fed announced in September 2013 that it would postpone winding down its monetary stimulus until the economic recovery was stronger. When the Fed does finally begin to reduce bond purchases? -interest rates will rise. -interest rates will fall. -stock prices will rise. -bond prices will rise.

The Fed's monetary policies, like fiscal policy, are subject to _____ lags? -information -implementation -decision -All of the answers are correct.

Which of the following lists represents monetary policy actions that are consistent with one another? -buy government bonds, raise reserve requirements, raise the discount rate -sell government bonds, raise reserve requirements, lower the discount rate -sell government bonds, raise reserve requirements, raise the discount rate -buy government bonds, lower reserve requirements, raise the discount rate

A lower reserve requirement: -increases the ability of banks to make loans? -further limits deposit creation. -lowers the money multiplier. -restricts the borrowing capability of borrowers.

The main tool of monetary policy is: -the discount rate. -capital gains taxes. -open market operations. -the reserve requirements.

The discount rate is? -now set below the federal funds rate. -the interest rate banks charge one another when they lend or borrow reserves. -the Fed's most effective monetary policy tool. -the rate regional Federal Reserve banks charge depository institutions to borrow reserves.

Open market operations involve the purchase and sale of? -government securities. -corporate bonds. -municipal bonds. -utility bonds.

If the Federal Reserve decides to increase the money supply: -the federal funds rate will rise. -the federal funds rate will fall. -the federal funds rate will be unaffected. -deflation will occur.

When the Fed buys bonds, its demand ____ the price of bonds, ____ nominal interest rates. -increases; increasing -increases; decreasing -decreases; increasing -decreases; decreasing

Monetary policy involves all of the following EXCEPT: -increases in bank reserves. -increases in interest rates. -increases in personal taxes. -increase in buying securities.