Monetary Policy: Limited Reserve

Multiple Choice

Who controls the Money Supply?

• The President

• Congress

• The Federal Reserve

• Ms. Harmon

Multiple Choice

Who originally appointed Jerome Powell as the Chair of the Federal Reserve?

• President Biden

• President Trump

• President Obama

• Ms. Harmon

Multiple Choice

When the Federal Reserve sells bonds, what happens in the Money Market?

• MS shifts to the right and interest rates decrease

• MS shifts to the left and interest rates decrease

• MS shifts to the left and interest rates increase

• MS shifts to the right and interest rates increase

Multiple Choice

If the current reserve requirement is 20% and the Federal Reserve buys $50 million in bonds from the U.S. government, how will this impact the money supply?

• increase $10 million

• decrease $10 milion

• increase $250 million

• decrease $250 million

Multiple Choice

Ms. Harmon makes a $1000 deposit into her checking account. Based on the deposit amount what is the total amount of money her bank can increase loans AND what would be the impact to the money supply if the reserve requirement is 10%?

• $1000 in loans

  $10,000 increase in the money supply

• $900 in loans

  $9,000 increase in the money supply

• $900 in loans,

  $10,000 increase in the money supply

• $1000 in loans,

  $9,000 increase in the money supply

Multiple Choice

Which of the following is NOT a tool of Limited Reserve Monetary Policy?

• Open Market Operations

• Reserve Requirements

• Taxes

• Discount Rate

Multiple Choice

If the FED wants to directly limit the amount of money banks can loan, which tool should they use?

• Buy Bonds

• Increase the Reserve Requirement

• Decrease the Discount Rate

• Sell Bonds

Multiple Choice

When the Federal Reserve buys government securities on the open market, which of the following will decrease in the short run?

• Interest rates

• Money supply

• Investment

• The amount of money loaned by banks

Multiple Choice

If the Federal Reserve institutes a policy to reduce inflation, which of the following is most likely to increase?

• GDP

• Investment

• Government spending

• Interest rates

Multiple Choice

An increase in the money supply is most likely to have which of the following short-run effects on interest rates and real output?

• Interest Rates Decrease and

  Real Output Decrease

• Interest Rates Decrease and

  Real Output Increase

• Interest Rates Increase and

  Real Output Decrease

• Interest Rates Decrease and

  Real Output No Change

Categorize

Options (12)

easy money policies

tight money policies

Buy Bonds

Sell Bonds

Decrease the Reserve Requirement

Increase the Reserve Requirement

Decrease the discount rate

Increase the discount rate

Increases the money supply

decreases the money supply

Increases Aggregate demand

Decreases Aggregate Demand

Organize these options into the right categories

Expansionary Policy

Contractionary Policy

Complete the practice problems on the back & turn into Google classroom