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WorksheetsMonetary Policy
Total questions: 10
Worksheet time: 5mins
Which of the following is most likely to occur if the Fed engages in open market operations to reduce inflation?
A decrease in interest rates
A decrease in reserves in the banking system
A decrease in the government deficit
An increase in the money supply
An increase in exports
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
When an economy is operating below the full-employment level of output, an appropriate monetary policy would be to increase which of the following?
The discount rate
The required reserve ratio
The international value of the dollar
Open market purchases of government bonds
Government expenditures on goods and services
The Fed decreases the federal funds rate by
increasing the reserve requirement
decreasing the discount rate
increasing the discount rate
selling government bonds on the open market
buying government bonds on the open market
Suppose that all banks keep only the minimum reserves required by law and that there are no currency drains. The legal reserve requirement is 10 percent. If Maggie deposits the $100 bill she received as a graduation gift from her grandmother into her checking account, the maximum increase in the total money supply will be
$10
$100
$900
$1,000
$1,100
Which of the following will lead to a decrease in a nation's money supply?
A decrease in income tax rates
A decrease in the discount rate
An open market purchase of government securities by the central bank
An increase in reserve requirements
An increase in government expenditures on goods and services
In the short run, an expansionary monetary policy would most likely result in which of the following changes in the price level and real GDP?
Price level: Decrease
Real GDP: Increase
Price level: No change
Real GDP: Decrease
Price level: Increase
Real GDP: No change
Price level: Increase
Real GDP: Decrease
Price level: Increase
Real GDP: Increase
In the short run, which of the following would occur to bond prices and interest rates if a central bank bought bonds through open-market operations?
Bond Prices: No change
Interest Rates: Increase
Bond Prices: Increase
Interest Rates: Increase
Bond Prices: Increase
Interest Rates: Decrease
Bond Prices: Decrease
Interest Rates: Increase
Bond Prices: Decrease
Interest Rates: Decrease
If the reserve requirement is 25 percent and banks hold no excess reserves, an open market sale of $400,000 of government securities by the Federal Reserve will
increase the money supply by up to $1.6 million
decrease the money supply by up to $1.6 million
increase the money supply by up to $300,000
increase the money supply by up to $100,000
decrease the money supply by up to $100,000
With a constant money supply, if the demand for money decreases, the equilibrium interest rate and quantity of money will change in which of the following ways?
Interest Rate: Increase
Quantity of Money: Decrease
Interest Rate: Increase
Quantity of Money: Not change
Interest Rate: Decrease
Quantity of Money: Decrease
Interest Rate: Decrease
Quantity of Money: Increase
Interest Rate: Decrease
Quantity of Money: Not change
