25. When the Fed lowers the discount rate, it b. raises the cost of borrowing fr

Question

25. When the Fed lowers the discount rate, it b. raises the cost of borrowing from the Fed, discouraging banks from making loans to the general public. increases the amount of excess reserves that banks hold, encouraging them to make loans to the general public. increases the amount of excess reserves that banks hold, discouraging them from making loans to the general public. decreases the amount of excess reserves that banks hold, discouraging them from making loans to the general public. c. e. People who are not curently employed, but say they want a job, are counted as unemployed only if they a 26. have previously held a job. are actively seeking employment. c. are willing to accept a reasonable offer d. are between 16 and 65 years of age. e are willing to accept any offer of employment. 27. If people refused to use banks to create checkable deposits, the banking system would: a. not be affected in the money creating process. b. not have a way to loan out excess reserves. c. be able to expand the money supply by more than the money multiplier indicates. not be able to create new money not be able to find new borrowers. d. e. Exhibit 15-4 Balance sheet of Tucker National Bank Assets Liabilities Required reserves Excess reserves s 4,000 Checkable deposits $20,000 16,000 Total $20,000 Total $20,000 In Exhibit 154, the bank could make a. $1,000 in new loans. b. $4,000 in new loans. c. $5,000 in new loans. d. none of the above. -28. Suppose the Organization of Petroleum Exporting Countries (OPEC) sharply increased the price of oil, whic triggered higher inflation rates in the United States. This type of inflation is best classified as: a. pseudo-inflation. b. demand-pull inflation. 29. c. cost-push inflation. d. hyperinflation.

Explanation / Answer

25. C. When the Fed lowers the discount rate, then banks will increase the excess reserves and increase the money supply through loans.

26. b. To be considered unemployed, a person should have looked for work actively in the past four weeks.

27. D. Not be able to create new money. Banks lend out after keeping the required reserve ratio.

28. D. None of the above. It can loans up to $16,000.

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