In - Class Monetary Policy

The interest rate the Federal Reserve charges on loans to banks is:

• Discount rate

• Open market operations

• Federal funds rate

• Reserve requirement

• government spending

This monetary policy tool is used to determine the amount of deposits that banks must hold

• Open market operations

• Reserve requirement

• Discount rate

• Federal funds rate

• buying government securities

When the government BUYS bonds in the amount of $300 and the rr is 20%, the maximum change in the money supply will:

• Increase by $1,500

• Decrease by $1,500

• Increase by $1,200

• Decrease by $1,200

• Increase by $300

Which of the following relates to the Federal Reserve's mandate?

• Ensure a balanced federal budget

• Maximum employment & price stability

• Price stability ONLY

• a low federal funds rate

• a reserve ratio of at least 10%

If the central bank sells $500 in bonds on the open market and the reserve ratio is 10%, the maximum change in the money supply will:

• increase by $5,000

• decrease by $5,000

• increase by $4,500

• decrease by $4,500

• decrease by $500

If someone makes a deposit of $800 and the reserve requirement is 20%, how much will the money supply change on this transaction alone?

• $0

• $800

• $3,200

• $4,000

• $20

Adam Smith makes a deposit of $300 and the reserve requirement is 25%. What is the maximum change in the money supply once all money has been lent out?

• $300

• $0

• $1,200

• $900

• $25

A reserve requirement (ratio) is the:

• proportion of cash and security reserves the bank needs to hold.

• fraction of deposits that the bank is required to hold.

• loan to deposit ratio in the bank's balance sheet.

• money belonging to the bank's largest depositors.

• None of the answers

If on receiving a $300 deposit, the banks excess reserves increase by $285, what amount will be placed in required reserves?

• $285

• $0

• $15

• $50

• $3,000

What is the money multiplier if the reserve requirement is 25%?

• 4

• 5

• 40

• .4

• 1