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| 1 | |
To reduce net exports, the Fed might: |
| | A) | lower the discount rate, raising the interest rate and causing the dollar to depreciate. |
| | B) | sell government securities, raising the interest rate and causing the dollar to appreciate. |
| | C) | buy government securities, lowering the interest rate and causing the dollar to appreciate. |
| | D) | buy government securities, raising the interest rate and causing the dollar to depreciate. |
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| 2 | |
An increase in the interest rate: |
| | A) | increases the transactions demand for money. |
| | B) | decreases the total amount of money demanded. |
| | C) | increases the money supply. |
| | D) | increases the asset demand for money. |
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| 3 | |
Fed purchases of bonds from the public will: |
| | A) | raise interest rates and increase aggregate demand. |
| | B) | lower interest rates and increase aggregate demand. |
| | C) | lower interest rates and decrease aggregate demand. |
| | D) | raise interest rates and decrease aggregate demand. |
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| 4 | |
An increase in the money supply will: |
| | A) | reduce interest rates, increasing investment and GDP. |
| | B) | reduce interest rates, reducing investment and GDP. |
| | C) | raise interest rates, reducing investment and GDP. |
| | D) | raise interest rates, increasing investment and lowering GDP. |
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| 5 | |
By targeting the Federal funds rate, the Fed: |
| | A) | can generally push the prime rate in the opposite direction. |
| | B) | can generally push the prime rate in the same direction. |
| | C) | has little control over other interest rates. |
| | D) | can generally push investment in the same direction. |
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| 6 | |
The Fed does not pay interest on bank reserves. Consequently: |
| | A) | the Fed rarely uses changes in open market operations to conduct monetary policy. |
| | B) | an easy money policy is more effective in achieving its goals than a tight money policy. |
| | C) | banks and thrifts hold only small amounts of excess reserves. |
| | D) | the Fed rarely uses changes in the discount rate to conduct monetary policy. |
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| 7 | |
If the intent of the Fed is to increase GDP, it should: |
| | A) | raise the reserve requirement. |
| | B) | raise the discount rate. |
| | C) | ask banks to reduce their amount of loans outstanding. |
| | D) | buy government securities. |
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| 8 | |
The demand for money will decrease (shift to the left) as a result of: |
| | A) | an increase in the price of bonds. |
| | B) | a decrease in the interest rate. |
| | C) | an increase in the price level. |
| | D) | a decrease in nominal GDP. |
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| 9 | |
Which of the following chain of events would signal that the Fed is pursuing a tight money policy? |
| | A) | The interest rate rises and investment falls. |
| | B) | The interest rate rises and aggregate demand increases. |
| | C) | Investment falls and net exports increase. |
| | D) | Investment and net exports increase. |
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| 10 | |
Which of the following will cause the aggregate demand curve to shift to the left? |
| | A) | A reduction in interest rates |
| | B) | An easy money policy |
| | C) | A reduction in the reserve requirement |
| | D) | Fed sales of bonds to the public |
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