Question

86. Reserves held by banks over and above their required reserves and reserves held as clearing balances: (a) are known as excess reserves; (b) do not earn interest paid by the Fed; (c) can never by lent to borrowers; (d) are counted as part of the money supply as soon as they are received from the Fed.

87. The U.S. is said to have an “elastic” currency or money supply. That’s because: (a) the elasticity of the U.S. money supply with respect to its foreign exchange value equals 1.0; (b) the Federal Reserve determines the supply of currency; (c) the U.S. Treasury determines the money supply, consistent with its borrowing needs; (d) the money supply expands faster or slower depending upon the pace of real economic activity.

88. Please indicate the proper order of maturities of Treasury securities, from the shortest duration to the longest duration: (a) bonds, notes, bills; (b) bonds, bills, notes; (c) bills, notes, bonds; (d) bonds, stocks, derivatives.

89. According to the acceleration principle: (a) a relatively small increase in consumer spending results in a relatively larger increase in inflation; (b) a relatively small increase in consumer spending perceived to be permanent results in a relatively larger increase in investment; (c) a relatively small decrease in the federal budget deficit results in an even LARGER increase in capital spending (due to momentum); (d) the faster interest rates decline, the faster investment spending declines.

PLEASE DO ALL THANK YOU

Answer 1

Answer 86. (a) are known as excess reserves;

reason- Reserves held over and above the required reserves are known as excess reserves.

Answer 87.(d) the money supply expands faster or slower depending upon the pace of real economic activity

reason- Money supply is elastic it means, the money can expand or contract according to the need of the economy.

Answer 88 (c) bills, notes, bonds;

reason- Bills are for shortest duration then comes notes which are for shirt time period to 2 years, then comes bond which are for longer than 2 years.

Answer 89. (b) a relatively small increase in consumer spending perceived to be permanent results in a relatively larger increase in investment

reason- Acceleration principle means there is a relationship between change in consumption pattern and change in capital investment