21. To increase the money supply, the Fed can buy government bonds or increase t

Question

21. To increase the money supply, the Fed can
      buy government bonds or increase the discount rate.
       buy government bonds or decrease the discount rate.
       sell government bonds or increase the discount rate.
       sell government bonds or decrease the discount rate.

Asset              

Amount in $Billions

Small time deposits

780

Large time deposits

1,700

Demand deposits

450

Other checkable deposits

370

Savings deposits

4950

Traveler's checks

5

Money market mutual funds

740

Currency

880

Miscellaneous categories of M2

50

Mary

provides legal advice

wants knives sharpened

Clark

grows tomatoes

wants legal advice

Nathan

styles hair

wants tomatoes

Polly

brews beer

wants knives sharpened

Paul

sharpens knives

wants beer

       $6,400.
       $8,000.
       $12,500.
       $20,000.

Question 22. 22. If the reserve requirement is 15 percent a bank desires to hold no excess reserves and it receives a new deposit of $10, then this bank        must increase its required reserves by $10.
       will initially see its total reserves increase by $15.
       will be able to make new loans up to a maximum of $8.50.
       All of the above are correct.

Explanation / Answer

buy government bonds or decrease the discount rate. will be able to make new loans up to a maximum of $8.50 All of the above help explain the abundance of currency $3,603 billion it sells Treasury securities, which decreases the money supply. 9925 commodity money and function as a unit of account. 22.5% (18000/80000) Polly and Paul $12,500 (1000/0.08)

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