The Fed buys $400,00 in bonds. If the reserve ratio is 20%, an no excess reserves held.....

Money supply will increase by 2 million

When the federal reserve buys bonds, the money supply and interest rates will change how?

increase money supply, decrease interest rates

When the federal reserve sells bonds, money supply and interest rates change in what way?

decrease money supply, increase interest rates

If the Fed wants to decrease interest rates, they should

Decrease the reserve requirement

Which combo would cause an increase in AD?

Decrease DR, buy bonds, decrease RR

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Enacting Monetary Policy

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AP Macro

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Questions 10

Answers

1
If the fed wants to decrease investment spending they should
Target a lower federal funds rate
Sell bonds on the open market
Decrease the Reserve Ratio
Decrease the Discount Rate
2
The Fed buys $400,00 in bonds. If the reserve ratio is 20%, an no excess reserves held.....
Money supply will decrease by 2 million
Money supply will increase by 2 million
Money supply will be unchanged
Money supply will increase by $800,000
3
When the federal reserve buys bonds, the money supply and interest rates will change how?
decrease money supply, decrease interest rates
decrease money supply, increase interest rates
increase money supply, increase interest rates
increase money supply, decrease interest rates
4
Bank holds $500,000 in demand deposits. 120k in reserves. If RR is 20%, how much money created?
$150,000
$80,000
$25,000
$100,000
5
When the federal reserve sells bonds, money supply and interest rates change in what way?
increase money supply, decrease interest rates
decrease money supply, increase interest rates
increase money supply, decrease interest rates
increase money supply, increase interest rates
6
We are experiencing inflation. The federal reserve should
Increase the discount rate
Buy bonds on the open market
Decrease the reserve ratio
Decrease the target federal funds rate
7
If we have GDP that is below our potential, the Federal Reserve should pursue....
Expansionary Fiscal Policy
Contractionary Fiscal Policy
Contractionary Monetary Policy
Expansionary Monetary Policy
8
If the Fed wants to decrease interest rates, they should
Sell bonds on the open market
Increase the discount rate
Decrease the reserve requirement
Target a higher federal funds rate
9
If the country is experiencing high unemployment, the Fed should
Increase the target federal funds rate
Increase the reserve ratio
Buy bonds on the open market
increase the discount rate
10
Which combo would cause an increase in AD?
decrease DR, sell bonds, decrease RR
Decrease DR, buy bonds, decrease RR
Increase DR, sell bonds, increase RR
Increase DR, buy bonds, increase RR

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