Econ week 12 QUICK PASS 2023//2024

Econ week 12 QUICK PASS 2023//2024 When the central bank decides it will sell bonds using open market operations - ANSWER the money supply decreases When the central bank decides to increase the discount rate, the interest rates - ANSWER increase Atlantic Bank is required to hold 10% of deposits as reserves. if the central bank increases the discount rate, how would atlantic bank respond? - ANSWER by increasing its reserves _____ will often cause monetary policy to be considered counterproductive because it makes it hard for the central bank to know when the policy will take effect - ANSWER long and variable time lags Which of the following is described as an innovative and nontraditional method used by the Federal Reserve to expand the quantity of money and credit during the recent U.S. recession? - ANSWER quantitative easing The central bank uses a _____ monetary policy to offset business related economic contractions and expansions - ANSWER countercyclical Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank? - ANSWER reserve requirements If the economy is in recession with high unemployment and output below potential GDP, then _____ would cause the economy to return to its potential GDP - ANSWER loose monetary policy If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would the most popular answer likely by? - ANSWER fighting inflation THe _____ is the institution designed to control the quantity of money in the economy and also to oversee the - ANSWER Central bank; safety and stability of the banking system If GDP is 3600 and the money supply is 300, what is the velocity? - ANSWER 12 How are the specific interest rates for the ledning and borrowing markets determined? - ANSWER by the forces of supply and demand If a central bank decides it needs to decrease both the aggregate demand and the money supply, then it will follow - ANSWER tight monetary policy According to the quantity theory, if constant growth in the money supply is combined with fluctuating velocity, which of the following is most likely to result? - ANSWER Unpredictable rises and falls in nominal GDP When banks hold excess reseves because they don't see good lending opportunities, - ANSWER it negatively affects expansionary monetary policy. When the central bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is - ANSWER following an expansionary monetary policy. If GDP is 2400 and the money supply is 600, then what is the velocity? - ANSWER 4 Central Bank policy requires Northern Bank to hold 10% of its deposits as reserves. Northern Bank policy prevents it form holding excess reserves. If the central bank purchases $30 million in bonds form Northern Bank what will be the result? - ANSWER Northern's loan assets increase by $30 million Which of the following institutions determines the quantity of money in the economy as its most important task? - ANSWER The Central Bank Regardless of the outcome in the long run, _____ always has the effect of stimulating the economy in the short run - ANSWER expansionary monetary policy A central bank that desires to reduce the quantity of money in the economy can - ANSWER raise the reserve requirement Which of the following is considered to be a relatively weak tool of monetary policy? - ANSWER altering the discount rate Which of the following instituions oversees the safety and stability of the U.S. banking system? - ANSWER The Federal Reserve When the Federal Reserve announces that it is implementing a new interest rate policy, the _____ will be affected - ANSWER real interest rate What is the name given to the macroeconomic equation MV=PQ - ANSWER basic quantity equation of money When a Central Bank takes action to decrease the money supply and increase the interest rate, it is following - ANSWER a contractionary monetary policy The quantitative easing policies adopted by the Federal Reserve are usually thought of as - ANSWER temporary emergency measures What term is used to describe the interest rate charged by the central bank when it makes loans to commercia