hw5-solutions.pdf - Homework #5, Due Tuesday, Nov 14. 1)...

Homework #5, Due Tuesday, Nov 14.
1) Monetary policy has several tools and the one used more frequently is
A) open market operations.
B) changing the discount rate.
C) changing required reserve ratios.
D) changing borrowing at commercial banks.
Answer: A
2) Fed increased the discount rate from 6.25 percent to 6.5 percent on August 17, 2006. This increase
means that
3) Which of the following increases the quantity of money? 4) You deposit $4,000 in currency in your checking account. The bank holds 20 percent of all deposits as
reserves. As a direct result of your deposit, your bank will create
5) You withdraw $2,000 from your account. Your bank has a desired reserve ratio of 20 percent. This
transaction, by itself, will directly reduce
A) the quantity of money by $1,600.
B) deposits by $1,600.
C) the quantity of money by $2,000.
D) deposits by $2,000.
Answer: D
6) The opportunity cost of holding money is the