Exam 13: Monetary Policy

When more than one central bank attempts to shift the equilibrium exchange rate, we refer to this as:

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If the FOMC purchases government bonds priced at $5,000 from a bond dealer who banks at National Bank, and if the reserve requirement is 20 percent, then the required reserves of National Bank:

The figure given below depicts the equilibrium exchange rate between the U.S dollar and the Mexican peso. Figure 13.2 -Refer to Figure 13.2. Assume that the exchange rate is fixed at MXP 11 = $1 and the free market equilibrium rate is MXP 10 = $1. This means that at MXP 11 = $1,

Suppose Fed's purchase of government bonds results in a $120,000 increase in the excess reserves of a particular bank. What would be the applicable reserve requirement for the whole banking system to be able to expand the money supply by $600,000?

The table given below shows the assets and liabilities of the National Bank. Assume that this is the only bank in the economy. Table 13.2 Balance Sheet of National Bank Assets Liabilities Vault Cash \ 1,725 Deposits \ 5,450 Deposit in Fed \ 425 Loans \ 3,300 Total Assets \ 5,450 Total Liabilities \ 5,450 -Refer to Table 13.2. If the reserve requirement is 10 percent, how much can the whole banking system expand the money supply?

The quantity of excess reserves in the banking system and the federal funds rate can serve as short-run operating targets for the FOMC and help it perform the open market operation.

The Fed controls the money supply to achieve the policy goals set by the United States International Trade Commission.

Which of the following is true of the federal funds rate?

Scenario 13.2 Assume the following conditions hold. A)At all banks, excess reserves are zero. B)The deposit expansion multiplier is 3. C)The spending multiplier is 5. D)The initial equilibrium level of national income is $500 billion. E)The initial equilibrium interest rate equals 6 percent. F)The investment spending function is as illustrated in the figure below. Now the Federal Reserve engages in an open market operation by purchasing $1 billion worth of government bonds from private bond dealers, who then deposit the $1 billion in the banks. This acts to lower the equilibrium interest rate by 2 percent. -Refer to Scenario 13.2. What is the ultimate change in the money supply following the open market operation by the Fed?

If the U.S. dollar depreciates against the yen below the targeted exchange rate, the U.S. Federal Reserve has to intervene in the foreign exchange market such that:

A leftward shift in the money demand function would result from:

The supply of the U.S. dollar on the foreign exchange market is generated by:

The Federal Reserve (Fed) was created by the Congress as an independent agency.

The figure given below depicts the equilibrium in the foreign exchange market. Figure 13.1 -Refer to Figure 13.1. If the current equilibrium exchange rate is E₁ what action would the Fed have to take to achieve a target exchange rate of E₂?

An excess demand for money will result in all the following, except:

Other things equal, when the Fed raises the reserve requirement, the banking system's excess reserves will fall, the deposit expansion multiplier will decline, and the money supply will decrease.

Which of following policies of the Congress was aimed to place the Fed above politics and maintain continuity in the policymaking process?