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Worksheets4.6 Monetary Policy Review
Total questions: 10
Worksheet time: 5mins
When a central bank sells securities in the open market, which of the following set of events is most likely to follow?
An increase in the money supply, a decrease in interest rates, and an increase in AD
An increase in the money supply, an increase in interest rates, and a decrease in AD
An increase in interest rates, an increase in the government budget deficit, and a movement toward trade surplus
A decrease in the money supply, an increase in interest rates, and a decrease in AD
A decrease in the money supply, a decrease in interest rates, and a decrease in AD
If the Federal Reserve sells a significant amount of government securities in the open market, which of the following will occur?
The total amount of loans made by commercial banks will decrease.
The total amount of loans made by commercial banks will increase.
The money supply will increase.
Rates of interest will decrease.
Rates of interest and amount of loans made by commercial banks will remain unchanged.
To counteract a recession, the Federal Reserve should
raise the reserve requirement and the discount rate
sell securities on the open market and raise the discount rate
sell securities on the open market and lower the discount rate
buy securities on the open market and raise the discount rate
buy securities on the open market and lower the discount rate
Open market operations refer to which of the following activities?
The buying and selling of stocks in the New York stock market
The loans made by the Federal Reserve to member commercial banks
The buying and selling of government securities by the Federal Reserve
The government's purchases and sales of municipal bonds
The government's contribution to net exports
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 by up to $300,000
increase the money supply by up to $100,000
decrease the money supply by up to $100,000
Which of the following government policies can reduce the rate of inflation in the short run?
Providing investment tax credit for businesses
Reducing personal income tax rates
Selling bonds on the open market
Decreasing the reserve requirement
Decreasing the discount rate
The purchase of bonds by the Federal Reserve will have the greatest effect on real gross domestic product if which of the following situations exist in the economy?
The required reserve ratio is high, and the interest rate has a large effect on investment spending.
The required reserve ration is high, and the interest rate has a small effect on investment spending.
The required reserve ratio is low, and the interest rate has a large effect on investment spending.
The required reserve ratio is low, and the marginal propensity to consume is low.
The marginal propensity to consume is high, and the interest rate has a small effect on investment spending.
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
The Federal Reserve can cause an increase in interest rates in an attempt to
reduce inflation
reduce cyclical unemployment
reduce structural unemployment
increase aggregate demand
increase investment spending
Which of the following is a monetary policy action a central bank would implement to control inflation?
Target a lower overnight interbank lending rate
Sell government bonds to the public
Lower the discount rate
Lower the required reserve ratio
Increase the monetary base
