201Exam2-Fall 2017 ord Tell me what you want to do References Mailngs Review Vie

Question

201Exam2-Fall 2017 ord Tell me what you want to do References Mailngs Review View the F what is the change in the banks' total reserves? A) $2,000 B) $10,000 C) $20,000 D) $8,000 E) $100,000 26) When the Fed purchases government securities, A) excess reserves in the banking system increase, leading to more loans being made. B) required reserves in the banking system increase, leading to more loans being made. C) excess reserves in the banking system decrease, leading to fewer loans being made D) required reserves in the banking system decrease, leading to fewer loans being made E) the monetary base does not change. 27) To increase the quantity of money in the economy, the Federal Reserve can A) print more money and give it to the banks B) increase the required reserve ratio. C) buy government bonds in an open market operation. D) sell govemment bonds in an open market operation E) cut taxes. 28) The money multiplier is the A) fraction of the monetary base that is kept in currency B) factor by which a change in the monetary base is multiplied to give the change in the quantity of money C) factor by which a change in the deposits base is multiplied to give the change in the monetary base D) proportion by which a change in the quantity of money changes the monetary base E) number of times that the Fed conducts open market operations in a month 29) The quantity of money decreases if A) the currenev drain ratio increases. B) the desired reserve ratio decreases C) banks loan all excess reserves

Explanation / Answer

25) When Fed buys securities then it increases reserves of banks by 10,000. So, total reserve of bank increases or changes by $ 10000.

26) A. excess reserves in the banking system increase, leading to more loans being made.

Purchase of government securities increases reserves of banks and it resulted into increase in loans.

27) C. Buy government bonds in an open market operation.

29) D. the Treasury Department issues fewer government securities.

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