If the Bank of Canada were to conduct an open market purchase, it would Select one: a. decrease the money supply and decrease output. b. increase the money supply and decrease output. c. increase the money supply and increase output. d. decrease the money supply and increase output.
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- If the Bank of Canada were to conduct an open market sale, it would Select one: a. decrease the money supply and increase output. b. increase the money supply and decrease output. c. increase the money supply and increase output. d. decrease the money supply and decrease output.A central bank can increase the money supply by: Select one: a. changing the quantities of required and excess reserves by altering the legal reserve ratio. b. changing the discount rate so as to encourage or discourage commercial banks in borrowing from the central banks. c. changing the bank reserves through the sale or purchase of government securities. d. reducing the discount rate to reduce the cost of borrowing from the central bank.If the Central Bank decides to decrease the money supply, it will Select one: a. purchase government bonds. b. sell government bonds. C. purchase corporate bonds. d. reduce interest rates.
- If the Bank of Canada wanted to increase interest rates, it could Select one: a. increase the reserve requirement or implement an open market purchase. b. decrease the reserve requirement or implement an open market sale. c. decrease the reserve requirement or implement an open market purchase. d. increase the reserve requirement or implement an open market sale.BUSN5 CH2 WKSMultiple ChoiceIdentify the choice that best completes the statement or answers the question.1. Define economics.a) a financial and social systemb) the study of a country’s overall economic issuesc) the integration between consumers, families, and businessesd) the study of the choices that different entities make in allocating resources2. Macroeconomics focuses ona) the major issues facing the national economy, but has little or no relevance to individuals.b) smaller economic units such as individual consumers, families, and individual businesses operating within the economy.c) the major issues facing the national economy that may seem abstract, but directly affect an individual’s day-to-day life. d) the role of government, while microeconomics focuses on the private sector.3. After the collapse of the dot com bubble and the 9/11 terrorist attacks, the stock market depreciated and unemployment increased leading many to fear that the…Which of the following is the most accurate description of events when monetary authorities increase the size of commercial banks' excess reserves? Select one: a. The money supply is decreased, which increases the interest rate, and causes investment spending, output, and employment to decrease b. The money supply is increased, which decreases the interest rate, and causes investment spending, output, and employment to increase c. A rise in interest rates increases the money supply, causing a decrease in investment spending, output, and employment d. A fall in interest rates decreases the money supply, causing an increase in investment spending, output, and employment
- Commercial banks in Barbados hold no excess reserves. The required reserve ratio is .1. The central bank of Barbados has become concerned about a steep decline in investment spending. A. Calculate the simply money multiplier. Show your work. B. Identify an open market operation that Barbados' central bank is likely to implement to address the decline in investment spending. C. Draw a correctly labeled graph of the money market and show the effect of the central bank's policy identified in Part B on the nominal interest rate. D. Explain the effect of the change in Part C on aggregate demand in the short run.a. Assume that all the money is held as a deposit while banks keep 10% of the deposit as a reserve. Estimate the money multiplier and money supply in the economy. b. Assume that the public is holding 40% of their assets as currency while depositing the remaining in banks, while banks keep 10% of deposit as a reserve. Estimate the money multiplier and money supply in the economy.b) Explain whether each of the following events increases or decreases the money supply. i. The State Bank of Pakistan sells bonds in open-market operations. ii. The State Bank of Pakistan increases the reserve requirement. iii. The State Bank of Pakistan reduces the interest rate it pays on reserves. iv. MCB Bank repays a loan it had previously taken from the State Bank of Pakistan. v. After a rash of pickpocketing, people decide to hold less currency. vi. Fearful of bank runs, bankers decide to hold more excess reserves.
- Money: 1.Explain the functions of the central bankA 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 oneExplain whether each of the following events increases or decreases the money supply. a.The State Bank of Pakistan sells bonds in open-market operations. b.The State Bank of Pakistan increases the reserve requirement. c.The State Bank of Pakistan reduces the interest rate it pays on reserves. d.MCB Bank repays a loan it had previously taken from the State Bank of Pakistan. e.After a rash of pickpocketing, people decide to hold less currency. f.Fearful of bank runs, bankers decide to hold more excess reserves.
