Assume that $4.2 million is deposited into a bank with a reserve requirement of 15 percent. Instructions: Round your answers to two decimal places. a. What is the money supply as a result? 2$ million b. If the government decides to raise the reserve requirement to 30 percent, what is the value of the money supply in this case? 2$ million

When the Federal Reserve conducts open market operations, it O buys or sells government bonds. increases or decreases the required reserve ratio. O buys and sells foreign currency manipulates of the rate at which it loans to member banks. How will the Fed's policy action change the money supply? Use only the actions corresponding to your choice in the previous part The money sup ply increases The money sup ply decreases Answer Bank The Fed bu vs bonds The Fed sells bonds The Fed buys foreign currency The Fed sells foreign currency The Fed increases the reserve ratio The Fed decreases the reserve ratio The Fed increases the rate at which it lends to member banks The Fed decreases the rate at which it lends to member banks

A purchase of U.S. government securities by the Fed causes   A. a multiple contraction of the money supply because deposits fall by more than the amount of the securities purchased.   B. a contraction of the money supply equal to the amount of the securities because all other transactions occur within the banking system.   C. an expansion of the money supply equal to the amount of the securities because all other transactions occur within the banking system.   D. a multiple expansion of the money supply because the required reserve ratio is less than one

Choose the correct answer   1. The neutrality of money refers to the idea that:   a) a change in money supply has no impact on output over any time        period.   b) a change in money supply has no short run impact on output.   c) the real quantity of money is constant in the long term.   2.  a) only the central bank can create money.  b) commercial banks can create credit.  c) all UK currency is backed by central bank holdings of gold.   3.  a) UK currency is a commercial bank liability.  b) UK currency is a Bank of England liability.  c) UK currency is a central bank asset.