Mod 4.6: Monetary Policy

Which of the following is a goal of monetary policy? (CHOOSE TWO)

• zero inflation

• deflation

• price stability

• full employment

• balanced budget

Which of the following is a traditional Open Market Operation that might be used in an economy with limited reserves?

• increasing the discount rate

• increasing the reserve ratio

• increasing the interest on reserve balances

• buying bonds

• quantitative easing

In an economy with ample reserves, which of the following central bank actions would be used to combat inflation?

• quantitative easing

• buying bonds

• increasing the interest paid on reserves

• raising reserve requirements

• increasing the discount rate

What do economists call the time between recognizing a problem in the economy and the effects of monetary policy?

• Powell's dilemma

• Monetary policy lags

• The calm period

• The monetary policy worm hole

• The Central Bank conundrum

If the central bank in an economy with ample reserves raises the reserve requirement, what happens to the interest rate on reserves? (Hint: Think about the shape of the ample reserves curve.)

• They will increase.

• They will decrease.

• They will fall to zero.

• They will not change.

• They will be loaned out.

Which of the following describes the United States monetary system? (CHOOSE ALL THAT APPLY)

• there are scarce reserves

• there are ample reserves

• the FED controls monetary policy

• the FED prints money

• buying and selling bonds will change the interest rate

Expansionary monetary policy attempts to ___ aggregate demand by ___ interest rates.

• decrease, increasing

• increase, decreasing

• decrease, decreasing

• increase, increasing

• increase, maintaining