Chapter 17 Monetary Policy and Inflation

| November 9, 2018

2)
Increased investment spending in the economy would be a possible result of
A)
an increase in interest rates.
B)
an open market purchase of bonds by the Fed.
C)
an open market sale of bonds by the Fed.
D)
a decrease in the money supply.

3)
Decreased investment spending in the economy would be a possible result of
A)
a decrease in interest rates.
B)
an open market purchase of bonds by the Fed.
C)
an open market sale of bonds by the Fed.
D)
an increase in the money supply.

4)
From time to time, the Federal Reserve buys back government bonds from the
private sector through a process called
A)
bond recall procedures.
B)
open market purchases.
C)
backflip bond investments.
D)
voluntary redemption procedures.

5)
From time to time, the Federal Reserve sells various quantities of government
bonds to the private sector through a process called
A)
bond recall procedures.
B)
backflip bond investments.
C)
open market sales.
D)
voluntary redemption procedures.

6)
Selling government bonds through open market operations allows the Federal
Reserve to
A)
decrease money in the Treasury.
B)
decrease the money supply in the private sector.
C)
receive discounts on future sales.
D)
receive a high rate of interest on the bonds.

7)
How can the Federal Reserve actually increase the money supply?
A)
by delaying transfer of money among banks
B)
by raising the discount rate
C)
by doubling the reserve requirement
D)
by purchasing more government bonds in the open market

8)
What would be a way for the Federal Reserve to stimulate a sluggish economy?
A)
print more money
B)
buy government bonds on the open market
C)
sell more government bonds
D)
encourage the stock market

9)
What would be a way for the Federal Reserve to slow down the economy when it is
growing too quickly or is inflationary?
A)
print more money
B)
buy back government bonds on the open market
C)
sell more government bonds
D)
encourage the stock market

10)
An open market purchase by the Fed
A)
increases the total amount of reserves in the banking system.
B)
decreases the total amount of reserves in the banking system.
C)
does not change the total amount of reserves in the banking system.
D)
causes the reserve requirement to fall.

11)
The most commonly used tool in monetary policy is
A)
changes in required reserve ratios.
B)
changes in the discount rate.
C)
open market operations.
D)
express lending transactions.

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