The monetary base will increase if ______________.

the Fed increases its holding of U.S. government securities
the Fed increases its holding of gold and foreign exchange
the Fed increases the discount rate
banks increase their deposits at the Fed

Following an open market operation, the Fed's assets increase by $5 million and its liabilities increase by $5 million. These changes are indicative of an open market ______________.

purchase from the government
sale to a commercial bank but not to the public
sale to either a commercial bank or the public
purchase from either a commercial bank or the public

The Fed sells $50 million of U.S. government securities to the Manhattan Commercial Bank. The Fed's assets will _______ and the Fed's liabilities will _______. The Manhattan Commercial Bank's assets will _______ and the Manhattan Commercial Bank's liabilities will _______.

not change; not change; increase by $50 million; decrease by $50 million
increase by $50 million; decrease by $50 million; not change; not change
decrease by $50 million; decrease by $50 million; not change; not change
decrease by $50 million; not change; increase by $50 million; not change

If an increase in the monetary base of $8 billion increases money supply by $64 billion, then the money multiplier is equal to ________.

$8 billion
1/8
8
$64 billion

_______ in the currency drain _______ the money multiplier.

An increase; increases
A decrease; decreases
An increase; decreases
A decrease; does not change

Suppose that the Fed conducts an open market operation that results in the commercial banks having excess reserves of $100,000. If the currency drain is 20 percent and the required reserve ratio is 10 percent, then at the end of the first round, total deposits will be _______ and at the end of the second round total deposits will _______.

$80,000; $57,600
$100,000; $190,000
$80,000; $137,600
$20,000; $34,400

If the Fed fears inflation it will undertake an open market _______ of securities, the money supply will _____________ and interest rates will _________.

purchase; decrease; rise
sale; increase; fall
sale; decrease; rise
purchase; increase; fall

When the Fed sells securities in the open market, the U.S. dollar _______ on the foreign exchange market and _______.

rises; aggregate demand increases
falls; the increase in imports is greater than the increase in exports
rises; aggregate demand decreases
falls; aggregate demand decreases

In the land of Oz the monetary unit is the emerald. Households and firms in Oz currently hold 100,000 emeralds. The price level is 100. If the price level jumps to 110 and other things remain the same, households and firms will ____________.

increase the money they hold by 10,000 emeralds
increase the money they hold by 1,000 emeralds
decrease the money they hold by 10,000 emeralds
decrease the money they hold by 1,000 emeralds

If people are holding more money than they would willingly hold, they will _______ bonds. The price of a bond will _______ and the interest rate will _______.

sell; rise; fall
purchase; fall; rise
purchase; rise; fall
sell; fall; rise

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