Money and Monetary Policy

Front

A contraction in the money supply will most likely have what impact on aggregate demand for products?

Back

decrease

Front

If the money supply stays constant but the demand for money decreases, interest rates will generally:

Back

Decrease

Front

If there is more demand for money than there is money in supply, interest rates will:

Back

Increase

Front

Which of the following changes would cause an increase in the equilibrium interest rate?
An increase in the money supply,
An increase in income taxes,
An increase in real income,
A decrease in aggregate demand for products

Back

An increase in real income

Answer explanation

An increase in real income increases the demand for money and the equilibrium nominal interest rate.

Front

Which of the following will most likely result in a country's lower real interest rate?
Options:
Increased demand for products.
Increased amount of money saved.
Increased amount of money demanded.
Increased levels of consumer confidence.

Back

Increased amount of money saved.

Answer explanation

This will increase the supply of loanable funds and result in a lower real interest rate.

Front

The Federal Reserve announces it will lower interest rates. Why would it take this action?

Back

Fear economy is falling into a recession

Front

The Fed issues an order to raise the reserve requirement on banks. What reason for this action?

Back

Fear the economy is growing too rapidly

Front

The Fed's Open Market Committee sells millions of bonds to private brokers. Reason for action?

Back

Fear the economy is growing too rapidly

Front

The rate of inflation rises. This stems from what kind of change in interest rates?

Back

decrease

Front

Monetary policy decisions are decided by: Congress, Senate, The Federal Reserve, President

Back

The Federal Reserve