Macroeconomics || Chapter 16

Traditional Keynesian analysis suggests that increases in the money supply shift the aggregate demand curve through increasing...

• net exports.

• investment.

• government spending.

• consumption.

According to the Keynesian theory a decrease in the money supply increases the interest rate and decreases investment spending. The result of this is that...

• real GDP increases by a smaller amount than the change in investment.

• real GDP decreases by a larger amount than the change in investment.

• real GDP decreases by the same amount as the change in investment.

• real GDP decreases by a smaller amount than the change in investment.

If the Fed increases the discount​ rate, relative to the federal funds​ rate, then this...

• would cause the money supply to increase.

• would increase the cost of funds for institutions borrowing from the Fed.

• would cause the required reserve ratio to decrease.

• would decrease the cost of funds for institutions borrowing from the Fed.

Select all that apply: The equation of exchange...

• states that expenditures by some people equal income received by others.

• is an accounting identity and is always correct.

• states that the money supply times velocity equals nominal national income.

Which of the following events would be likely to increase the supply of​ money?

• The Fed increases reserve requirements for banks.

• The Fed decreases the discount rate relative to the federal funds rate.

• The Fed conducts an open market sale of bonds.

Select all that apply: The​ Fed's credit policy since 2008 has...

• led to an expansion of asymmetric information problems by reducing​ banls' incentive to screen and monitor borrowers.

• given private banks more time to recover from the financial crisis.

• provided banks more liquidity.

The​ Fed's credit policy since 2008 has...

• lowered the reserve ratio.

• led to a reduction in the money multiplier.

• increased the money multiplier.

In an open​ economy, the net export effect...

• may offset an expansionary fiscal policy and an expansionary monetary policy.

• may offset an expansionary monetary policy but enhance an expansionary fiscal policy.

• may enhance an expansionary fiscal policy and an expansionary monetary policy.

• may offset an expansionary fiscal policy but enhance an expansionary monetary policy.

During three intervals between 2008 and​ 2015, the Federal Reserve engaged in policy actions involving expanding its assets that it termed​ "quantitative easing." Total reserves in the banking system increased.​ Hence, the Federal​ Reserve's liabilities to banks​ increased, and at the same time its assets rose as it purchased more assets​ - many of which were securities with private market values that had dropped considerably.

The money multiplier​ declined, so the net increase in the money supply was negligible.​ Indeed, during a portion of the​ period, the money supply actually declined before rising near its previous value.

The​ Fed's "quantitative​ easing" can be best described as a...

• monetary policy action.

• credit policy action.

• fiscal policy action.

Select all that apply:

According to the quantity theory of money and​ prices, a 6​% change in the money​ supply, holding other variables​ constant, leads to...

• a 6​% change in the price level.

• a 6​% change in the interest rate.

• a greater than 6% in a real GDP.

• a 6​% change in real GDP.