Exam 16: The Monetary System: The Feds Tools of Monetary Control

The reserve ratio is 10 percent,banks do not hold excess reserves,and people hold only deposits and no currency.When the Fed sells $20 million worth of bonds to the public,bank reserves

The Fed can directly protect a bank during a bank run by

In recent years the Federal Open Market Committee has focused on a target for

The manager of the bank where you work tells you that the bank has $400 million in deposits and $340 million dollars in loans.The Fed then raises the reserve requirement from 5 percent to 10 percent.Assuming everything else stays the same,how much is the bank holding in excess reserves after the increase in the reserve requirement?

Scenario 29-1. The monetary policy of Namdian is determined by the Namdian Central Bank.The local currency is the dia.Namdian banks collectively hold 100 million dias of required reserves,25 million dias of excess reserves,250 million dias of Namdian Treasury Bonds,and their customers hold 1,000 million dias of deposits.Namdians prefer to use only demand deposits and so the money supply consists of demand deposits. -Refer to Scenario 29-1.Suppose the Central Bank of Namdia loaned the banks of Namdia 5 million dias.Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same.By how much would the money supply of Namdia change?

Suppose banks decide to hold more excess reserves relative to deposits.Other things the same,this action will cause the

To increase the money supply,the Fed could

Which of the following both increase the money supply?

Scenario 29-2. The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi.The local unit of currency is the taz.Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves,75 million tazes of excess reserves,have issued 7,500 million tazes of deposits,and hold 225 million tazes of Tazian Treasury bonds.Tazians prefer to use only demand deposits and so all money is on deposit at the bank. -Refer to Scenario 29-2.Assuming the only other thing Tazian banks have on their balance sheets is loans,what is the value of existing loans made by Tazian banks?

Scenario 29-2. The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi.The local unit of currency is the taz.Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves,75 million tazes of excess reserves,have issued 7,500 million tazes of deposits,and hold 225 million tazes of Tazian Treasury bonds.Tazians prefer to use only demand deposits and so all money is on deposit at the bank. -Refer to Scenario 29-2.Suppose that the Bank of Tazi changes the reserve requirement to 3 percent.Assuming that the banks still want to hold the same percentage of excess reserves what is the value of the money supply after banks adjust to the change in the reserve requirement?

If the reserve ratio is 5 percent,banks do not hold excess reserves,and people do not hold currency,then when the Fed purchases $20 million worth of government bonds,bank reserves

The banking system currently has $10 billion of reserves,none of which are excess.People hold only deposits and no currency,and the reserve requirement is 10 percent.If the Fed raises the reserve requirement to 12.5 percent and at the same time buys $1 billion worth of bonds,then by how much does the money supply change?

Scenario 29-2. The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi.The local unit of currency is the taz.Aggregate banking statistics show that collectively the banks of Tazi hold 300 million tazes of required reserves,75 million tazes of excess reserves,have issued 7,500 million tazes of deposits,and hold 225 million tazes of Tazian Treasury bonds.Tazians prefer to use only demand deposits and so all money is on deposit at the bank. -Refer to Scenario 29-2.Suppose the Bank of Tazi purchased 50 million tazes of Tazian Treasury Bonds from the banks.Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same.By how much does the money supply change?

The discount rate is

If the federal funds rate were above the level the Federal Reserve had targeted,the Fed could move the rate back towards its target by

Other things the same if reserve requirements are decreased,the reserve ratio

Which of the following policies is NOT in the Fed's monetary toolbox?

Reserves decrease if the Federal Reserve

If the public decides to hold more currency and fewer deposits in banks,bank reserves

Scenario 29-1. The monetary policy of Namdian is determined by the Namdian Central Bank.The local currency is the dia.Namdian banks collectively hold 100 million dias of required reserves,25 million dias of excess reserves,250 million dias of Namdian Treasury Bonds,and their customers hold 1,000 million dias of deposits.Namdians prefer to use only demand deposits and so the money supply consists of demand deposits. -Refer to Scenario 29-1 .Suppose the Central Bank of Namdia purchases 25 million dias of Namdian Treasury Bonds from banks.Suppose also that both the reserve requirement and the percentage of deposits held as excess reserves stay the same.By how much would the money supply of Namdia change?