Question 7 (3 points) The major tools of monetary policy available to the Federal Reserve System involve: Question 7 options: Open-market operations…

Question 7 (3 points)

The major tools of monetary policy available to the Federal Reserve System involve:

Open-market operations and changing government spending.

Reserve requirements and tax policy.

The discount rate and exchange rates.

Reserve requirements and open-market operations.

Question 8 (3 points)

The tool of monetary policy that involves the Fed’s buying and selling of government bonds is:

The discount rate.

Moral suasion.

Open-market operations.

Reserve requirements.

Question 9 (3 points)

The interest rate the Fed targets is the:

Prime rate.

Federal funds rate.

Discount rate.

AAA corporate bond rate.

Question 10 (3 points)

When the Fed raises the target for the federal funds rate, it:

Increases the required reserve ratio.

Buys government bonds.

Sells government bonds.

Lowers the discount rate.

Question 11 (3 points)

The purpose of a restrictive monetary policy is to:

Increase the growth rate of aggregate demand.

Increase investment spending.

Reduce or keep inflation low.

Lower interest rates and make credit more readily available.

Question 12 (3 points)

How would the Fed use open market operations (OMO) to raise interest rates:

The Fed sells bonds to banks.

The Fed reduces the reserve requirement.

The Fed sells gold certificates.

The Fed buys bonds from banks.

Question 13 (3 points)

A Restrictive monetary policy by the Fed should lead to:

An increase in the monetary base, an increase in the money supply, and a decrease in the Fed Funds rate.

A decrease in the monetary base, a decrease in the money supply, and an increase in the Fed Funds rate.

A decrease in the monetary base, a decrease in the money supply, and a decrease in the Fed Funds rate.

An increase in the monetary base, a decrease in the money supply, and an increase in the Fed Funds rate.

Question 14 (3 points)

A Restrictive monetary policy by the Fed should lead to:

Leave investment unchanged but decrease aggregate demand.

An increase in investment and an increase in aggregate demand.

A decrease in investment and a decrease in aggregate demand.

A decrease in investment and an increase in aggregate demand.

Question 15 (3 points)

When the Federal Reserve uses open market operations (OMO) in an expansionary monetary policy:

The Fed will lower taxes and increase government spending.

The Fed will decrease the discount rate, decreasing the monetary base.

The Fed will buy bonds from banks, increasing bank reserves and increasing the monetary base.

The Fed will purchase stocks from banks, increasing the monetary base.

Question 16 (3 points)

An expansionary monetary policy by the Fed should lead to:

A decrease in investment and a decrease in aggregate demand.

Leave investment unchanged but decrease aggregate demand.

An increase in investment and an increase in aggregate demand.

An increase in investment and a decrease in aggregate demand.

Question 17 (3 points)

Federal Reserve policy may have little impact on aggregate demand if:

Exchange rates do not respond to a change in market interest rates.

Investment by firms fails to respond to lower interest rates.

Banks meet their reserve requirements.

People fail to spend the extra money they receive when the Fed cuts taxes.

Question 18 (3 points)

A liquidity trap is said to exist when a change in monetary policy has no effect on:

The supply of government bonds.

The natural level of employment.

Aggregate supply.

Interest rates.

Question 19 (3 points)

Because of the problem of lags, monetary authorities should probably respond to conditions:

Expected to exist in the future.

Immediately as they arise.

In the recent past.

Based on past statistics.







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