# Econ 202- Chapter 12 Homework

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question
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.
fall by \$300, and its liabilities fall by \$300
question
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.
\$5,000
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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
\$375
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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
\$6,000
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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
\$1.2 million
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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.
the actual multiplier will fall
question
Which of the following is a basic goal of the Federal Reserve System? -full employment -a balanced federal budget -zero interest rates -export promotion
full employment
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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 chairman and vice-chairman of the Board of Governors are appointed by the president and confirmed by the Senate for terms of 4 years.
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The main policymaking arm of the Fed is the? -Federal Open Market Committee. -Council of Economic Advisers. -Money Committee. -Beige Book Committee.
Federal Open Market Committee.
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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.
interest rates will rise.
question
The Fed's monetary policies, like fiscal policy, are subject to _____ lags? -information -implementation -decision -All of the answers are correct.
All of the answers are correct.
question
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
sell government bonds, raise reserve requirements, raise the discount rate.
question
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.
increases the ability of banks to make loans.
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The main tool of monetary policy is: -the discount rate. -capital gains taxes. -open market operations. -the reserve requirements.
open market operations.
question
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.
the rate regional Federal Reserve banks charge depository institutions to borrow reserves.
question
Open market operations involve the purchase and sale of? -government securities. -corporate bonds. -municipal bonds. -utility bonds.