ECO 2020 INCLUSIVE ACCESS
21st Edition
ISBN: 9781260564617
Author: McConnell
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 36.4, Problem 3QQ
To determine
Increase in money supply.
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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.
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…
When the Fed wishes to decrease the money supply, it can
a.
increase the required reserve ratio.
b.
decrease the required reserve ratio.
c.
ask people to buy more bonds.
d.
turn additional funds over to the Treasury.
Chapter 36 Solutions
ECO 2020 INCLUSIVE ACCESS
Ch. 36.1 - Prob. 1QQCh. 36.1 - Prob. 2QQCh. 36.1 - Prob. 3QQCh. 36.1 - Prob. 4QQCh. 36.4 - Prob. 1QQCh. 36.4 - Prob. 2QQCh. 36.4 - Prob. 3QQCh. 36.4 - Prob. 4QQCh. 36.5 - Prob. 1QQCh. 36.5 - Prob. 2QQ
Ch. 36.5 - Prob. 3QQCh. 36.5 - Prob. 4QQCh. 36 - Prob. 1DQCh. 36 - Prob. 2DQCh. 36 - Prob. 3DQCh. 36 - Prob. 4DQCh. 36 - Prob. 5DQCh. 36 - Prob. 6DQCh. 36 - Prob. 7DQCh. 36 - Prob. 8DQCh. 36 - Prob. 1RQCh. 36 - Prob. 2RQCh. 36 - Prob. 3RQCh. 36 - Prob. 4RQCh. 36 - Prob. 5RQCh. 36 - Prob. 6RQCh. 36 - Prob. 7RQCh. 36 - Prob. 8RQCh. 36 - Prob. 9RQCh. 36 - Prob. 1PCh. 36 - Prob. 2PCh. 36 - Prob. 3PCh. 36 - Prob. 4PCh. 36 - Prob. 5PCh. 36 - Prob. 6PCh. 36 - Prob. 7P
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- 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.arrow_forwardIf the Federal Reserve wants to decrease the money supply, then it should Check all that apply. Group of answer choices buy U.S. bonds. sell U.S. bonds. increase the required reserve ratio. increase taxes. decrease the discount rate.arrow_forwardCommercial 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.arrow_forward
- Prosperville is experiencing demand-pull inflation. The government is hoping to reduce the money supply by $400 billion. With a reserve requirement of 0.10, what is the change in reserves needed to achieve the desired change in the money supply?arrow_forwardWhich of the following lists two things that both decrease the money supply? a. Raise the discount rate and lower the reserve requirement ratio b. Raise the discount rate and raise the reserve requirement ratio c. Lower the discount rate and raise the reserve requirement ratioarrow_forwardThe banking system currently has $10 billion of reserves, none of which are excess. People hold only deposits and no currency, and the reserve requirement is 10 percent. If the Fed raises the reserve requirement to 12.5 percent and at the same time buys $1 billion worth of bonds, then by how much does the money supply change? a) It falls by $12 billion. b) It falls by $19 billion. c) It falls by $21 billion. d) It rises by $19 billion.arrow_forward
- Controlling the money supply allows the Federal Reserve to a. Influence government spending and taxes and therefore consumption and investment b. Influence interest rates and therefore consumption and investment c. Influence interest rates and therefore government spending and taxes d. Influence government spending and taxes and therefore interest ratesarrow_forwardThe people in an economy have $20 million in money. Bank hold 1% of the deposits as reserves. What is the money multiplier in this economy?arrow_forwardIf the Required Reserve Ratio is 0.10, what does the Fed need to do to contract the supply of money by $40 billion? Select one: a. Buy $2 billion worth of government bonds from banks b. Buy $4 billion worth of government bonds from banks c. Buy $8 billion worth of government bonds from banks d. Sell $4 billion worth of government bonds to banks e. Sell $2 billion worth of government bonds to banks f. Sell $8 billion worth of government bonds to banksarrow_forward
- When the central bank lowers the reserve requirement on deposits: a) the money supply increases and interest rates decrease. b) the money supply decreases and interest rates increase. c) the money supply and interest rates increase. d) the money supply and interest rates decrease.arrow_forwardIn the United States, the Federal Reserve sets the reserve requirement, which banks must meet through deposits at the Federal Reserve district banks and cash held at the bank. What does this requirement achieve? Check all that apply. a. It ensures that banks cannot hoard money by holding too many reserves. b. It means that a bank must have one dollar of deposits for every dollar it lends out. c. It helps to prevent bank runs by reassuring the public that banks will not make too many loans and run out of cash. d. It helps to facilitate transfers of funds between banks when a customer from one bank writes a check to a customer of another bank.arrow_forwardThe task I am struggling with: Tracy Williams deposits $500 that was in her sock drawer into a checking account at the local bank. The reserve ratio is 10%. a) how dies the deposit initially change the T-account of the local bank? How does it change the money supply? b) If the bank maintains a reserve ratio of 10%, how will it respond to the new deposit? c) if every time the bank makes a loan, the loan results in a new checkable bank deposit in a different bank equal to the amount of the loan, by how much could the total money supply in the economy expand in response to Tracy´s initial cash deposit of $500? Thank you very much for your help.arrow_forward
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