7. Which of the following increase when the Fed makes open market purchases? a. money supply and reserve

Which of the following increase when the Fed makes open market purchases?
a. money supply and reserves
b. money supply but not reserves
c. reserves but not money supply
d. neither money supply nor reserves

A U.S. company uses U.K. pounds it already owned to purchase bonds issued by a company in the U.K. Which of these countries has an increase in net capital outflow?
a. The U.S. but not the U.K.
b. The U.K. but not the U.S.
c. Neither the U.S. nor the U.K.
d. The U.S. and the U.K.

Which of the following is included in both M1 and M2?
A. Currency
B. Savings deposits
C. Small-denomination time deposits
D. Money market deposit accounts

8- A bank has $8,000 in deposits and $6,000 in loans. It has loaned out all it can given the reserve requirement. It follows that the reserve requirement is

A.15 B.40 C.25 D.20

The country of Elbia has a GDP of $2,000, consumption of $1,300, and gov-ernment purchases of $400. Which ofthe following is equal to $300?

a. domestic investment

b. domestic investment plus net capital outflow

c. domestic investment minus net capital outflow

d. None of the above is correct.

10- A bank has $500,000 in deposits and $475,000 in loans. It has loaned out all it can. It has a reserve ratio of

15- If the money multiplier is 3 and the Fed buys $50,000 worth of bonds, what happens to the money supply?

a.it increases by $100,000

b.it increases by $150,000

c.it decreases by $100,000

d.it decreases by $150,000

16- When the Fed purchases $1000 worth of government bonds from the public, the U.S. money supply eventually increases by
a. more than $1000.
b. exactly $1000.
c. less than $1000.
d. None of the above are correct.

17- A Big Mac in Japan costs 400 yen while it costs $4.50 in the U.S.. The nominal exchange rate is 100 yen per dollar. What would both make the real exchange rate move towards purchasing-power parity?

The Fed sets the interest that borrowers pay on loans from

a. the discount window and the term auction facility

b. the term auction facility but not the discount window

c. neither the discount window nor the term auction facility

d. the discount window but not the term auction facility

 

 

 

 

 

 

answer:

when the Fed makes open market purchases,

a. money supply and reserves increases.

This is because, when Fed purchses from open market, it will increase the money supply in the economy.

8.

A U.S. company uses U.K. pounds it already owned to purchase bonds issued by a company in the U.K.

c. Neither the U.S. nor the U.K. has an increase in net capital outflow.

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