Exam 36: Interest Rates and Monetary Policy

Since the financial crisis of 2008, the main tool of expansionary monetary policy used by the Fed has been

Reserves borrowed at the federal funds rate are usually repaid

Upon which of the following industries is a restrictive monetary policy likely to be most effective?

Assume that the required reserve ratio for the commercial banks is 25 percent.If the Federal Reserve Banks buy $3 billion in government securities from the nonbank securities dealers, then, as a result of this transaction, the lending ability of the commercial banking system will increase by

A bond with no expiration date is priced at $10,000 when the interest rate in the economy is 6 percent.If the interest rate falls to 5.5 percent, then this bond's price would decrease.

Changes in the interest rate are more likely to affect investment spending than consumer spending.

Typically the largest asset item in the Federal Reserve Banks' consolidated balance sheet (as illustrated in the book, for April 2016) is

Assume that there is a 25 percent reserve ratio and that the Federal Reserve buys $200 million worth of government securities.If the securities are purchased from the public, then this action has the potential to increase bank lending by a maximum of

The major purpose of the Federal Reserve buying government securities in open-market operations is to

A bond with no expiration date has a face value of $10,000 and pays a fixed 10 percent interest.If the market price of the bond rises to $11,000, the annual yield approximately equals

The total demand for money curve will shift to the right as a result of

Prior to the financial crisis of 2007-2009, the Fed would typically initiate an expansionary monetary policy by

The total demand for money will shift to the left as a result of

Which of the following would most likely result from the Fed imposing negative nominal interest rates in response to a financial crisis and recession?

The federal funds rate is the interest rate that charge(s) .

The Federal Reserve can increase aggregate demand by

When the Fed sells government securities in the open market, its intent is to try to increase aggregate demand.

When the required reserve ratio is increased, the excess reserves of member banks are

As expansionary monetary policy tools, quantitative easing (QE) and traditional open-market purchase differ in terms of the following, except

Assume the commercial banking system has checkable deposits of $20 billion and excess reserves of $2 billion when the reserve ratio is 25 percent.If the reserve ratio is then lowered to 20 percent, we can conclude that the