Ans t pts 1 dif m top open market operations typ sa

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TB_Ch_19

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Intermediate Accounting: Reporting and Analysis
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Chapter 14 / Exercise 1
Intermediate Accounting: Reporting and Analysis
Jones/Wahlen
Expert Verified
ANS: T PTS: 1 DIF: M TOP: Open market operations
TYP: SA
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The document you are viewing contains questions related to this textbook.
Intermediate Accounting: Reporting and Analysis
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Chapter 14 / Exercise 1
Intermediate Accounting: Reporting and Analysis
Jones/Wahlen
Expert Verified
24. An open-market purchase by the Federal Reserve withdraws excess reserves from the banking system and causes the money supply to contract. PTS: 1 DIF: M TOP: Open market operations
TYP: SA 25. A decrease in the discount rate by the Federal Reserve causes the money stock to expand. PTS: 1 DIF: M TOP: Discount rate
TYP: SA 26. An increase in the discount rate by the Federal Reserve causes the money stock to expand. PTS: 1 DIF: M TOP: Discount rate
TYP: SA 27. Banks that wish to borrow required reserves can turn to the federal funds market. PTS: 1 DIF: E TOP: Federal funds rate
TYP: RE 28. The market in which banks make loans of reserves for terms of over one year is called the federal funds market. PTS: 1 DIF: E TOP: Federal funds rate
TYP: RE 29. In the banking system of the United States, banks that wish to borrow to make up reserve deficiencies must turn to the federal funds market. PTS: 1 DIF: D TOP: Federal funds rate
TYP: RE 30. Raising the required reserve ratio causes the money multiplier to increase. PTS: 1 DIF: M TOP: Required reserve ratio
TYP: SA 31. The total lag for fiscal policy tends to be shorter than the total lag for monetary policy. PTS: 1 DIF: E TOP: Money policy shortcomings
TYP: RE ESSAY 1. Discuss how a single bank creates money. What is the limit to which a single bank can add to the money supply? By how much can an entire banking system add to the money supply?
PTS: 1 2. Describe the three basic tools used by the Fed to change the money supply. Which of these tools is most relied on in practice? Least relied on? Why?
The Fed can use open market operations, change the required reserve ratio, or change the discount rate to change the money supply. In practice, the Fed most often relies on open market operations because it is the most flexible tool. It allows for the greatest fine-tuning of the money supply. The required

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