AP Macro Money Market

Which of the following actions by the Federal Reserve will result in an increase in banks' excess reserves?

• buying bonds on the open market

• selling bonds on the open market

• increasing the discount rate

• increasing the reserve requirement

• increasing the federal funds rate

Expansionary monetary policy results in which of the following in the short run?

• I and II only

• I, II, and III

• I, II, and IV

• III and IV only

• IV only

Which of the following are true statements about the federal funds rate?

• I only

• II only

• III only

• I and II only

• II and III only

What will happen to the supply of loanable funds and the equilibrium interest rate if the Federal Reserve buys government securities?

• Increase/Increase

• Increase/Decrease

• Decrease/Decrease

• Decrease/Increase

• Decrease/remain unchanged

Which of the following is a monetary policy action a central bank would implement to control inflation?

• Lower the required reserve ratio

• Lower the discount rate

• Target a lower overnight interbank lending rate

• Sell government bonds to the public

Which of the following will happen if the central bank of a nation purchases government bonds on the open market?

• The monetary base will increase and the money supply will not change.

• The monetary base will increase and the money supply will increase.

• The monetary base will decrease and the money supply will increase.

• The monetary base will decrease and the money supply will not change

Which of the following changes will necessarily occur as a result of an increase in the nominal interest rate?

• The quantity of money demanded will decrease.

• The quantity of money supplied will decrease.

• The money demand curve will shift to the right.

• The money demand curve will shift to the left.

Which of the following actions by the Federal Reserve will result in a decrease in the money supply?

• A) Buying government bonds

• B) Selling government bonds

• C) Lowering the discount rate

• D) Decreasing the reserve requirement

What is the primary tool used by the Federal Reserve to control the money supply?

• A) Open market operations

• B) Changing the discount rate

• C) Adjusting the reserve requirement

• D) Setting the federal funds rate

If the Federal Reserve wants to combat inflation, which of the following actions is it most likely to take?

• A) Lower the federal funds rate

• B) Buy government securities

• C) Sell government securities

• D) Decrease the reserve requirement