Exam 35: Interest Rates and Monetary Policy

If the Fed were to reduce the legal reserve ratio,we would expect:

Other things equal,if the supply of money is reduced:

Answer the question on the assumption that the legal reserve ratio is 20 percent.Suppose that the Fed sells $500 of government securities to commercial banks (paid for out of commercial bank reserves)and buys $500 of securities from individuals,who deposit the cash in checking accounts. As a result of the given transactions,reserves in the banking system will:

Projecting that it might temporarily fall short of legally required reserves in the coming days,the Bank of Beano decides to borrow money from its regional Federal Reserve Bank.The interest rate on the loan is called the:

When the Fed raises the interest rate paid on reserves,it discourages bank lending.

The benchmark interest rate that banks use as a reference point for a variety of consumer and business loans is the:

Answer the question on the basis of the following information.For transactions,households and businesses want to hold an amount of money equal to one-half of nominal GDP.The table shows the amounts of money they want to hold as an asset at various interest rates. 10\% \ 20 8 40 6 60 4 80 2 100 Refer to the given information.If nominal GDP is $300 and the supply of money is $230,the equilibrium interest rate will be:

QE3 followed QE2 and Operation Twist.Which of the following best explains how QE3 differed from the other two in order to make it more effective?

Federal Reserve Notes in circulation are:

Assume that the commercial banking system has checkable deposits of $10 billion and excess reserves of $1 billion at a time when the reserve requirement is 20 percent.If the reserve requirement is now raised to 30 percent,the banking system then has:

From September 2007 to April 2008 the Fed lowered the federal funds rate from 5.25 percent to 2 percent in a series of steps.The Fed's actions were largely in response to:

In the 1990s and early 2000s,Japan's central bank reduced real interest rates to zero percent,but investment spending did not respond enough to bring the economy out of recession.Japan's experience is an illustration of:

The prime interest rate:

Assume that the price level is flexible both upward and downward and that the Fed's policy is to keep the price level from either rising or falling.If aggregate supply increases in the economy,the Fed:

Generally,the prime interest rate:

After falling form a peak of 138.1 million in January 2008 to a trough of 129.9 million in September 2010,employment in the U.S.economy:

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

The desire to hold money for transactions purposes arises because:

The Federal Reserve Banks buy government securities from commercial banks.As a result,the checkable deposits:

Answer the question on the basis of the following table: Interest Rate 2\% 4 6 8 10 Transaction Demand for \ 220 220 220 220 220 Asset Demand \ 300 280 260 240 220 Money \ 460 460 460 460 460 At equilibrium in the given market for money,the total amount of money demanded is: