Navigating Monetary Policy Concepts

What does the equilibrium nominal interest rate determine in the economy?

• The total amount of government spending

• The level of investment and consumer spending on interest-sensitive goods

• The unemployment rate

• The inflation rate

What does a decrease in the money supply typically cause?

• A decrease in investment spending

• An increase in interest rates

• An increase in consumer spending

• A decrease in interest rates

What is the money multiplier if the reserve requirement is 20%?

• 20

• 5

• 4

• 10

How can the central bank increase the money supply according to the video?

• By decreasing government spending

• By increasing taxes

• By decreasing the reserve requirement

• By increasing the reserve requirement

What effect does increasing the reserve requirement have on the money supply?

• It has no effect on the money supply

• It decreases the money supply

• It decreases the reserve ratio

• It increases the money supply

What happens when the central bank decreases the discount rate?

• The money supply decreases

• Banks lend out more money

• Interest rates increase

• Banks lend out less money

What is the primary purpose of open market operations?

• To change the reserve requirement

• To control inflation directly

• To adjust the unemployment rate

• To influence the money supply

What asset types do central banks buy in open market operations?

• Real estate properties

• Government bonds

• Cryptocurrencies

• Corporate stocks

What is the effect of quantitative easing on the money supply?

• It decreases the money supply

• It has no effect on the money supply

• It increases the money supply

• It increases the reserve requirement

Why is monetary policy more complicated in the real world compared to macroeconomics classes?

• Because the reserve requirement is zero

• Because interest rates are fixed

• Because the money multiplier is always changing

• Because banks hold excess reserves and do not loan out all their money