equlibrium and momenrum 4

The M1 definition of money includes which of the following?

Currency in circulation and demand deposits

If the legal reserve requirement is 25% the value of the simple deposit expansion (money) multiplier is

4

When money is used as a standard of value, a person is

making price comparisons among products

Which of the following are true statements about the federal funds rate? (Check all that apply).

II and III

Suppose the Federal Reserve buys $400,000 worth of securities from the securities dealers on the open market. If the reserve requirement is 20% and the banks hold no excess reserves, what will happen to the total money supply?

It will expand by $2,000,000.

A commercial bank holds $500,000 in demand deposit liabilities and $120,000 is reserves. If the required reserve ratio is 20%, which of the following is the maximum amount by which this single commercial bank and the maximum amount by which the banking system can increase loans?

$20,000 Single Bank, $100,000 Banking System

Which of the following does the Federal Reserve use most often to combat a recession?

buying securities

To reduce inflation, the Federal Reserve could

contract the money supply in order to raise interest rates, which decreases investment

Reserves, the money supply, and interest rates are most likely to change in which of the following ways when the Federal Reserve sells bonds?

Decrease Decrease Increase

Which of the following actions by the Federal Reserve will result in an increase in banks' excess reserves?

Buying bonds on the open market

Aggregate demand and aggregate supply analysis suggests that, in the short run, an expansionary monetary policy will shift

the aggregate demand curve to the right.

Which of the following combinations of monetary policy actions would definitely cause a decrease in aggregate demand?

Increase Sell bonds Increase

What will happen to the supply of loanable funds and the equilibrium interest rate if the Federal Reserve buys government securities?

*increase decreaase*

The real interest rate is simply stated as the

nominal interest rate minus the expected inflation rate

Expansionary monetary policy results in which of the following in the short run? (Check all that apply.)

I, II and III only

Identify how the following action will immediately affect M1, M2 and the monetary base. Joey transfers $500 from his savings account to his checking account.

M1 Increase, M2 Unchanged, Monetary Base Unchanged

A bank's balance sheet shows $20,000 demand deposits and $4,000 required reserves. What is the required reserve ratio?

20%

If the Fed buys $1,000 worth of bonds from a bank, what is the immediate change in demand deposits?

100?

A bank has $200,000 in demand deposits and no excess reserves. The reserve ratio is 10% and a customer withdraws $10,000. To meet the reserve requirement, how much must the bank increase it's total reserves?\*

9,000

Identify what will happen in the loanable funds market in the following scenario: In anticipation of longer life expectancy, people begin to save more for retirement.

supply curve shifts right