(6) In practice, which tool does the Federal Reserve use most often to increase
ID: 1218581 • Letter: #
Question
(6) In practice, which tool does the Federal Reserve use most often to increase or decrease the money supply? The required reserve ratio The discount rate The prime rate Open market operations
(7) Which of the following regarding money is not true? Money is an asset. Money is backed by gold. Money is a form of wealth. Money is not an equivalent to income.
(8) M1 includes cash. coins. travelers’ checks. all of the above.
(9) Which of the following is not a motive for holding money? The transaction motive The depository motive The precautionary motive The speculative motive
(10) Which of the following statements is true? Excess demand is the result of an interest rate above equilibrium. If the Fed increases the money supply, the equilibrium interest rate rises. As the price of a bond increases, the interest rate increases. If the price level or real GDP changes, the money demand curve will shift.
(11) Which of the following statements is true? Lenders directly provide funds to borrowers through financial intermediaries. The financial system is synonymous with the Federal Reserve System. Equity holders have the first claim to the returns on investments. Bonds are debt instruments, while stocks are equity instruments.
(12) Which of the following is an example of equity finance? Buying Treasury bills Buying corporate bonds Buying municipal bonds Buying stock
(13) Calculate the present value of $10,000 invested at 12% for 10 years. $3,219.73 $6,635.99 $8,928.57 $9,254.67
(14) How many Federal Reserve districts are there in the U.S.? 8 10 12 14
(15) The Fed’s most commonly used tool of monetary policy is Changing the required reserve ratio Changing the discount rate Open market operations Printing currency
(16) Lowering the discount will increase the money supply. true false
(17) If the required reserve ratio is 10%, the increase in the money supply that results from $500,000 of new deposits equals $5,000. $50,000. $500,000. $5,000,000.
(18) If the Federal Reserve purchases government bonds, all of the following will occur except commercial bank reserves will increase. the discount rate will be forced up. the money supply will increase. there will be a multiple expansion of banking deposits.
(19) When real income increases, people will demand more money to do more shopping. people will demand less money and save more. people will invest more in interest-bearing assets. the demand for money is unaffected.
(20) The supply curve for loanable funds slopes upward because as the interest rate increases, the quantity of loanable funds supplied decreases. people will forego consumption at higher interest rates and save. as the interest rate increases, the supply of loanable funds increases. all of the above.
Explanation / Answer
6. Opem Market Operation .
7.Money isnot eqivalent to income.
8.all of the above.
9.The depositary motive .
10.If the price level /real GDP changes money demand curve will shift.
11.Bonds are debt instrument while stocks are equity instruments.
12.buying stocks.
13.10000/(1.12)^10 = 3219.73
14.12
15.Open market operation.
16.True.
17.500000
18.The discount rate will be forced up.
19.People will demand more to do shopping.
20.as the interest rate increases ,the supply of loanable funs increases.
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