Monetary Policy

Assume reserve requirement is 10%; Mrs. Nemes deposits $1 million in cash into her checking account. The deposit will initially increase excess reserves by

• $100,000

• $900,000

• $1 million

• $9 million

If the required reserve ratio is .2, a $1 billion increase in bank reserves can lead to an increase in M1 of at most

• $6 billion

• $5 billion

• $1 billion

• $0.2 billion

The federal funds rate is

• the interest rate that banks charge governments

• the interest rate on personal loans

• the interest rate banks pay the Fed

• the interest rate that banks charge other banks for overnight loans

Which of the following is a monetary policy that can be used to counteract a recession

• buying bonds in the open market

• increasing the discount rate

• increasing the required reserve ratio

• lowering tax rates

Which of the following is a monetary policy tool that would fight inflation

• buying bonds in the open market

• decrease spending

• increase income taxes

• increase the required reserve ratio

The demand curve for money shifts to the right when

• the nominal interest rate decreases

• the nominal GDP increases

• the real GDP decreases

• inflation decreases

• the velocity of money increases

In the short run, a tight monetary policy tends to cause

• a decrease in the interest rate and a decrease in prices

• a decrease in the interest rate and an increase in private investment

• a decrease in prices and an increase in private investment

• an increase in the interest rate and an increase in private investment

• an increase in the interest rate and a decrease in private investment

If the required reserve ratio is 10 percent, what is the maximum change in the money supply from Bob's deposit of $50,000 cash into his checking account

• $5,000

• $45,000

• $55,000

• $450,000

• $500,000

What is the difference between stocks and bonds?

• stocks represent ownership, bonds represent loans

• bonds represent ownership, stocks represent loans

• stocks are counted towards GDP, bonds are not

• bonds are counted towards GDP, stocks are not

Assume the reserve requirement is 10%; Mrs. Nemes deposits $1 million in cash into her checking account. The deposit will initially increase required reserves by

• $100,000

• $900,000

• $1 million

• $9 million