Monetary Policy II

Monetary Policy II

by Kendrick Broadus

Multiple Choice

Who is in charge of Monetary Policy

• The Government

• The Federal Reserve System

• The states

• The Department of the Treasury

Multiple Choice

Which one is not part of the Federal Reserve's dual mandate?

• Control of the money supply

• Maximum employment

• Price stability

Multiple Choice

The goals of monetary policy do NOT include the promotion of _____

• Moderate long-term interest rates

• Stable prices

• Maximum employment

• High government spending.

Multiple Choice

4.Monetary Policy is a regulatory policy by which the ______or monetary authority of a country controls the supply of money, availability of bank credit and cost of money that is the rate of interest:

• a) Central Bank (RBI)

• b) SBI

• c) IBA

• d) None of These

Multiple Choice

Which of the following is NOT one of the goals of the Federal Reserve system?

• Full employment (Less than 5%)

• Low tax rates

• Long-lasting economic growth

• Stable prices for good and services

Multiple Choice

what is the purpose of Monetary Policy?

• contribute to economic growth and stability

• keep rich people from getting too rich

• Functions like Fiscal Policy

• give Congress and the political parties more control of the economy

Scenario 1

This is a graph of the unemployment rate in Canada over the past 12 months. Take note of both the trend and the current unemployment rate.

Multiple Choice

Which economic goal does this data relate to?

• Full employment

• Price stability

• Economic growth

Poll

Which monetary policy goal do you think is MOST warranted in this scenario?

• Increase monetary growth

• Decrease monetary growth

• Maintain the status quo

Open Ended

Why did you choose the policy goal you chose?

Multiple Choice

For this question, imagine everyone agrees we need to increase monetary growth, which option below would BEST achieve that goal?

• Selling bonds in open market operations

• Lowering the discount rate

• Increasing the reserve requirement

• Increasing the discount rate

Scenario 2

This is a graph of the GDP Annual Growth Rate of Germany over the past 5 years. Make note of the current growth rate and the trend.

Multiple Choice

Which economic goal does this data relate to?

• Full employment

• Price stability

• Economic growth

Poll

Which monetary policy goal do you think is MOST warranted in this scenario?

• Increase monetary growth

• Decrease monetary growth

• Maintain the status quo

Open Ended

Why did you choose the policy goal you chose?

Multiple Choice

For this question, imagine everyone agrees we need to increase monetary growth, which option below would BEST achieve that goal?

• Buying bonds in open market operations

• Selling bonds in open market operations

• Increasing the reserve requirement

• Increasing the discount rate

Multiple Choice

An expansionary policy means that the Fed is attempting to

• increase the size of the nation's money supply

• decrease the size of the nation's money supply

Multiple Choice

A contractionary policy means that the Fed is attempting to

• increase the size of the nation's money supply

• decrease the size of the nation's money supply

Multiple Choice

Which policy would help fight inflation?

• Expansionary

• Contractionary

Multiple Choice

Which policy would help fight unemployment?

• Expansionary

• Contractionary

Multiple Choice

During a recession, the Fed should use...

• an expansionary policy

• a contractionary policy

Multiple Choice

During an expansion, the Fed should use...

• an expansionary policy

• a contractionary policy

Multiple Choice

What is the end result of Contractionary Monetary Policy

• Higher Inflation

• Lower Inflation

• Inflation Targeting

• None of the above

Multiple Choice

How is contractionary monetary policy expected to influence interest rates?

• Raise them

• Lower them

Multiple Choice

How is expansionary monetary expected to influence the unemployment rate?

• Increase it

• Decrease it

Multiple Select

When Interest Rates Are Lowered ....

• Lower interest rates induce more investment, so 𝚫I is positive.

• Higher interest rates deter investors, so 𝚫I is negative.

• This causes aggregate demand to shift to the right.

• This causes aggregate demand to shift to the left.

Multiple Choice

Which Fed action can shift the aggregate demand curve to the left?

• Lowering the federal funds rate

• Lowering income taxes

• Lowering reserve requirements

• Raising the discount rate

• Raising government spending on national defense

Multiple Choice

Suppose the government increases its purchases by $16 billion. If the multiplier effect exceeds the crowding­ out effect, then

• the aggregate supply curve shifts to the right by more than $16 billion

• the aggregate demand curve shifts to the left by more than $16 billion.

• the aggregate demand curve shifts to the right by more than $16 billion.

• the aggregate supply curve shifts to the left by more than $16 billion.

Multiple Choice

The goals of monetary policy do NOT include the promotion of _____

• Moderate long-term interest rates

• Stable prices

• Maximum employment

• High government spending.

Multiple Choice

Which of the following statements is true?

• Contractionary monetary policy would increase government revenue & slow down the economy.

• Contractionary fiscal policy would decrease the reserve requirement & slow down the economy.

• Contractionary fiscal policy would lead to a decrease in national debt.

• Contractionary monetary policy leads to a budget deficit.