1 A) the money supply exceeds the quantity of money demanded B) the money supply will increase and the interest rate will rise C) the money supply will decrease and the interest rate will rise D) the interest rate will rise and the quantity of money demanded will decrease 2 A) raise interest rates, reducing planned investment and GDP B) raise interest rates, increasing planned investment and lowering GDP C) reduce interest rates, increasing planned investment and GDP D) reduce interest rates, reducing planned investment and GDP 3 A) both the price of bonds and the interest rate received by bond holders will increase B) both the price of bonds and the interest rate received by bond holders will decrease C) the price of bonds will decrease and the interest rate received by bond holders will increase D) the price of bonds will increase and the interest rate received by bond holders will decrease 4 <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0217511447/883761/ch33_q4.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (21.0K)</a>]]> A) sell bonds to the public B) lower the discount rate C) raise the reserve requirement D) auction fewer reserves through the Term Auction Facility 5 A) a reduction in interest rates B) an expansionary monetary policy C) a reduction in the reserve requirement D) Fed sales of bonds to the public 6 A) securities and Federal Reserve Notes outstanding B) securities and Treasury deposits C) Federal Reserve Notes outstanding and reserves of commercial banks D) securities and loans to commercial banks 7 A) sell government securities B) lower the reserve requirement C) lower the discount rate D) sell additional reserves through the Term Auction Facility 8 A) increase excess reserves by $30 billion B) reduce excess reserves by $7.5 billion C) reduce the potential money supply by $90 billion D) reduce the potential money supply by $120 billion 9 A) raise the reserve requirement B) raise the discount rate C) purchase government securities in the open market D) ask banks to reduce their amount of loans outstanding 10 A) for each 1 percent increase in inflation above its target rate, the Fed should reduce the real Federal funds rate by ½ percentage point B) for each 1 percent increase of real GDP above potential GDP, the Fed should raise the real Federal funds rate by ½ percentage point C) for each 1 percent increase in inflation above its target rate, the Fed should reduce the money supply by 2 percentage points D) for each 1 percent increase of real GDP above potential GDP, the Fed should increase the money supply by 2 percentage points
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