Untitled Flashcards Set

The tool of monetary policy that involves the Fed's buying and selling of government bonds is __________.

Open-market operations.

A __________ is when people rush to a bank to withdraw all of their deposits because they feel that the bank could fail.

Bank run.

When the demand for money is greater than the supply of money, __________.

Interest rates will rise.

The three main monetary policy tools are __________.

Open-market operations, the discount rate, and reserve requirements.

If the Federal Reserve wants to increase the monetary base, it might __________.

Engage in an open market purchase of Treasury bills.

When the Fed decreases banks' reserves through an open-market operation, __________.

The monetary base decreases, loans decrease, and the money supply decreases.

The major tools of monetary policy available to the Federal Reserve System include __________.

Reserve requirements, open-market operations, and the discount rate.

The Federal Reserve system was created largely as a response to __________.

A devastating financial panic that caused the stock market to collapse.

To decrease the money supply, the central bank could __________.

Make open-market sales.

Crowding out results in a(n) __________.

Decrease in private investment spending resulting from government deficit spending.

If the Federal Reserve wants to increase the money supply, it will __________.

Lower the reserve requirement.

A business will want to borrow to undertake an investment project when the rate of return on that project is __________.

Greater than the interest rate.

In the loanable funds market, savers __________.

Supply funds.

When the Federal Reserve is conducting an open market operation, it is __________.

Buying or selling Treasury securities.

All of the following are responsibilities of the Fed EXCEPT __________.

Mint bills and coins.

All other things unchanged, a general decrease in the amount of government borrowing will typically __________.

Shift the loanable funds demand curve to the left.

The federal funds rate is the interest rate at which __________.

Banks borrow excess reserves from other banks.

Businesses will undertake projects if the rate of return is __________.

Greater than or equal to the interest rate levied on the loan.

If it looks like a bank won't meet the Federal Reserve's reserve requirement, normally it will first turn to __________.

Other member banks and borrow at the federal funds rate.

The Fisher Effect states that __________.

The expected real rate of interest increases by one percentage point for each percentage point change in expected inflation.

When a financial institution finances investments by borrowing money it is said to be using __________.

Leverage.

Which of the following is a tool used by the Fed in the conduct of monetary policy? __________.

Buying and selling federal government bonds.

Now that fast food places such as McDonald's are accepting credit card payments: __________.

The demand for money has decreased.

The Fed's main assets are __________.

U.S. Treasury bills.

The discount rate is the interest rate the Fed charges on loans to __________.

Banks.

The Federal Reserve System was created in __________.

The Federal Reserve System is the __________ for the United States.

Central bank.

When banks borrow and lend reserves from each other, they are participating in the __________ market.

Federal funds.

Crowding out is a phenomenon __________.

Where an increase in government's budget deficit causes the overall investment spending to fall.

When the central bank wants to expand the monetary base, the most commonly used method is to __________.

Buy government bonds from commercial banks.

The opportunity cost of holding money is __________.

The difference between interest rates on monetary assets and on nonmonetary assets.

In the Federal Reserve system, there are __________ districts.

In the U.S., the institution that is charged with determining the size of the monetary base and with regulating the banking system is the __________.

Federal Reserve.

When a bank borrows from the Federal Reserve, it pays the __________.

Discount rate.

The Fed's main liabilities are __________.

Currency and bank reserves.