If the Fed purchases government securities from a commercial bank, which of the following will happen? The Fed will increase the bank's reserves on deposit at the Fed. The assets (government securities) of the Fed will increase. Refer to Exhibit 13-2. What word (up or down) should go in the place of blank (1) and blank (2), respectively?
When commercial banks need more Federal Reserve Notes, a. they call the Bureau of Engraving and Printing, which delivers the requested amount. b. they call the Board of Governors of the Fed, which delivers the requested amount. c. they ask their customers to exchange their Federal Reserve Notes for U.S. Treasury securities.
It creates money to pay for the securities by adding the purchase amount to the banks' reserves. b. It pays for the securities with new Federal Reserve notes. c. It borrows the necessary funds from the Treasury.
The Fed has very good control over the money supply but not over bank reserves. The Fed conducts an open market purchase of Treasury bills of $10 million. If the required reserve ratio is 0.10, what change in the money supply can be expected using the oversimplified money multiplier?
a. acts when a majority of member banks agree on policy and the banks rarely agree. b. earns interest on discounting and cannot afford to lose the revenue.
The purchaser of the bond needs to spend less money to obtain a given number of dollars of interest per year, so the price of the bond must increase. a. Bank lending and deposits tend to change as interest rates change.
Select one: a. federal government agency that collects taxes and spends these receipts on tanks, bridges, government employees' salaries, etc. b. company that delivers packages to your front door.
If a bank has zero excess reserves and one of its creditworthy customers applies for a loan, the bank may be able to grant the loan if it can. Select one: a. apply some of its loan repayments to obtain the funds for the new loan. b. obtain extra funds in the federal funds market.
The four main tools of monetary policy are: A. tax rate changes, the discount rate, open-market operations, and the federal funds rate. B. tax rate changes, changes in government expenditures, open-market operations, and interest on reserves. C. the discount rate, the reserve ratio, interest on reserves, and open-market operations.
A decrease in the money supply will lower the interest rate, increase investment spending, and increase aggregate demand and GDP. B. A decrease in the money supply will raise the interest rate, decrease investment spending, and decrease aggregate demand and GDP.
If the Fed raises the discount rate at the same time it conducts an open market sale, it follows that the money supply will. fall. Suppose that the Fed undertakes an open market purchase of $25 million worth of securities from a bank.
When the Federal Open Market Committee (FOMC) votes on policy, it does so in the following order: the chair votes first, the vice chair votes second, and the remaining FOMC members vote based on their seniority at the Fed. False.