Exam 30: Monetary Policy: Conventional and Unconventional

If the Fed sells a U.S.Treasury bill to a member of the public, the banking system has

When the Fed wants to expand the money supply, it

Assume the required reserve ratio is 10 percent and the FOMC orders an open market sale of $50 million in government securities from member banks.If the oversimplified money multiplier is assumed, then the money supply will

The actual control of the Federal Reserve System resides in the

If the Fed reduces the required reserve ratio, how will this affect excess reserves and the money supply?

The demand for reserves will increase at lower levels of GDP.

The central bank of the United States is known as the

Which of the following will cause movement along the reserve demand schedule?

The Fed can drive up interest rates by selling government securities and decreasing the money supply.

The opportunity cost of holding excess reserves will be lower at an 8 percent federal funds rate in comparison to a 10 percent federal funds rate.

We should expect to see home construction activity decrease when interest rates increase.

The Fed has control over bank reserves and complete control over the money supply.

Why do economists insist on emphasizing the difference between money and income? Why is this difference important in macroeconomics?

How does an open market purchase by the Fed affect the level of bank reserves and the interest rate? Illustrate the interest rate effect by drawing the appropriate graph.

Most power in the Federal Reserve System is held by the

Describe the origins of the Fed and the arguments about the independence of the Fed.

Income is to money as

When interest rates increase, banks will normally

The Fed cannot predict the effects of open market operations with perfect accuracy because of

If the Fed raises the reserve requirement on deposits from 15 percent to 20 percent, what would happen to the money supply?