Moderate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
72. The Federal Open Market Committee consists of
a.
the president and the Board of Governors.
b.
Congresspeople, Senators, and the Board of Governors.
c.
the Secretary of the Treasury and the Board of Governors.
d.
the Board of Governors and five district bank presidents.
Moderate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
73. The Federal Open Market Committee meets
a.
once a month.
b.
eight times a year.
c.
four times a year.
d.
semi-annually.
Easy
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
74. In making policies about the nation’s money supply, the Federal Reserve Board
a.
operates as an independent entity.
b.
must consult each member bank.
c.
must consult with Congress.
d.
must coordinate all activity with the White House.
a
Easy
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
75. The monetary policies carried out by the Fed
a.
must be ratified by Congress.
b.
must be consistent with fiscal policies passed by Congress.
c.
are sometimes inconsistent with fiscal policy.
d.
must be approved by the president.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
76. When the Federal Reserve System was first established, its founders intended the Fed to
a.
b.
c.
d.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
77. The Federal Reserve System was established
a.
at the request of farmers to keep down interest rates.
b.
because Americans believe in centralization of authority.
c.
after four severe bank panics between 1873 and 1907.
d.
as part of the Treasury Department.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
78. The Federal Reserve System is
a.
controlled by the Department of the Treasury.
b.
the central bank for the United States.
c.
completely similar to the Bank of England.
d.
All of the above are correct.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
79. Members of the Board of Governors of the Federal Reserve System are
a.
elected by member banks to serve four-year terms.
b.
appointed by Congress for 14-year terms.
c.
appointed by the president for 14-year terms.
d.
appointed by the Supreme Court for lifetime terms.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
80. The main reason the United States established a central bank was
a.
a desire for a strong centralized financial authority.
b.
to follow the conclusions of economic theory.
c.
severe inflation after the Civil War.
d.
disastrous experiences with financial panics.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
81. Each Federal Reserve district bank is a corporation owned by
a.
the member banks in the district.
b.
the people of the United States.
c.
the U.S. Department of the Treasury.
d.
federal securities owners.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
82. The Federal Reserve System is controlled by the
a.
U.S. Department of the Treasury.
b.
House of Representatives and the Senate.
c.
Board of Governors.
d.
President of the United States.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
83. The principal objective of the Federal Reserve System is to
a.
circulate coins and paper Federal Reserve Notes.
b.
subsidize the income of member banks.
c.
help stabilize the economy through monetary policy.
d.
make profits to remit to the Treasury Department.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
84. Member banks of the Federal Reserve System
a.
advise the Fed on monetary policy.
b.
are immune from the effects of monetary policy.
c.
vote on members of the Board of Governors.
d.
have little control over the system they “own.”
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
85. The Federal Reserve System is a(n)
a.
corporation owned by its member banks.
b.
independent branch of the U.S. government.
c.
corporation owned by the government and member banks.
d.
agency created by presidential executive order.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
86. Although a corporation that is owned by its member banks, the Federal Reserve System
a.
reports directly to the president in an annual report.
b.
is quite independent of them, and they receive almost none of the Fed’s profits.
c.
is administered by Congress and all its profits are distributed to the member banks.
d.
turns all its profits over to the state governments of each district bank.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
87. The Federal Reserve Board of Governors
a.
serve at the pleasure of the president similar to other cabinet positions.
b.
report directly to Congress and are controlled by Congress.
c.
consists of 12 members, one from each district bank.
d.
is structurally independent of the executive and legislative branches of the federal government.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
88. Most power in the Federal Reserve System is held by the
a.
president and Congress.
b.
Secretary of the Treasury, who appoints the members of the Board of Governors.
c.
Board of Governors of the system.
d.
member banks of the system.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
89. In practice, money supply and short-term interest rates are determined by the
a.
Treasury and Commerce departments.
b.
Federal Open Market Committee.
c.
Board of Governors.
d.
House and Senate.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
90. The Fed is institutionally independent. A major advantage of this is that monetary policy
a.
is subject to regular congressional scrutiny.
b.
will often offset fiscal policy.
c.
is not controlled by politicians.
d.
is usually coordinated with fiscal policy.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
91. The Fed is institutionally independent. A major disadvantage of this is that monetary policy
a.
will always be coordinated with fiscal policy.
b.
is not subject to democratic control as other policies are.
c.
will never offset fiscal policy.
d.
cannot be changed once it has been instituted.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
92. Critics of Fed independence argue that
a.
monetary policy and fiscal policy are necessarily inconsistent.
b.
political control ensures low rates of inflation.
c.
monetary policy run by specialists is inherently inflationary.
d.
unelected officials are undemocratic.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
93. Proponents of Fed independence maintain that
a.
independence helps ensure low unemployment rates.
b.
money is too important to be left to the bankers.
c.
independence permits objective decisions not based on politics.
d.
only the Federal Reserve knows how to act wisely.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
94. Part of the controversy about Fed independence include(s)
a.
the goal to bring all macroeconomic policy under the direct control of the president.
b.
the appropriate role of the Fed in policy making.
c.
how to make the Fed more powerful than other central banks.
d.
All of the above are correct.
Moderate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
95. In 1998, Japan decided to make the Bank of Japan, its central bank,
a.
more independent.
b.
more concerned with fighting inflation.
c.
subject to direct control by the Japanese prime minister.
d.
subject to direct control by the Diet, the Japanese parliament.
a
Moderate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
96. In Latin America, countries like Brazil and Mexico have found it necessary to grant their central banks more
independence in order to
a.
maintain higher levels of political stability.
b.
promote economic growth and employment.
c.
counteract high rates of inflation.
d.
deal with the consequences of globalization.
c
Moderate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
America’s Central Bank: The Federal Reserve System
97. Open market operations have their initial effect on bank
a.
lending.
b.
reserves.
c.
profits.
d.
revenues.
Moderate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
98. Open market operations generally involve the purchase and sales of
a.
government securities.
b.
stocks and bonds.
c.
coins and currency.
d.
Federal Reserve notes.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
99. Does the Fed have good control over the money supply?
a.
Yes, open market operations generate exact changes in bank lending.
b.
Yes, reserve requirements create new loans.
c.
No, because of difficulties estimating the reserve ratio.
d.
No, because of difficulties estimating the size of the excess reserves and cash holdings by the public.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
100. If the Fed buys a T-bill from an individual rather than from a bank, the effect on the money supply is
a.
smaller because there is no multiplier process.
b.
larger because of the multiplier process.
c.
the same.
d.
impossible to predict without knowing the value of the multiplier.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
101. The Fed relies on open market operations, which work
a.
with the Treasury in creating money to finance bonds.
b.
through major stock exchanges to influence bond prices.
c.
directly through the nonbank public to change their assets.
d.
through the banking system by affecting their reserves.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
102. ____ is the rate that applies when banks borrow and lend reserves to one another.
a.
The repo rate
b.
The discount rate
c.
The coupon rate
d.
The federal fund rate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
103. If the Fed buys a T-bill from a commercial bank, how will it pay for the T-bill?
a.
It will give the bank new reserves.
b.
It will write the bank a check.
c.
It will transfer cash to the bank’s vault.
d.
It will take reserves from another bank.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
104. If the Fed sells a T-bill to a commercial bank, how will this affect the money supply?
a.
It will increase the money supply.
b.
It will increase bank reserves.
c.
It will decrease the money supply.
d.
It will have no effect on the money supply.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
105. If the Fed sells a T-bill to an individual rather than to a commercial bank, how will this affect the money supply?
a.
It will increase the money supply.
b.
It will increase the checking account balance of the individual.
c.
It will have no effect on the money supply.
d.
It will decrease the money supply.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
106. When the Fed wants to expand the money supply through open market operation, it
a.
sells government securities to the Treasury.
b.
sells government securities to member banks.
c.
buys government securities from member banks.
d.
buys government securities from the Treasury.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
107. If the Federal Open Market Committee decides to expand the money supply, then it will
a.
raise the discount rate to member banks.
b.
issue directions to purchase government securities, thus putting more reserves in member banks.
c.
issue directions to sell government securities, thus taking reserves from member banks.
d.
order new Federal Reserve notes delivered to member banks.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
108. When the Fed purchases government securities from a commercial bank, the bank
a.
loses its ability to make loans.
b.
automatically becomes poorer.
c.
loses equity in the Fed.
d.
receives reserves that can be loaned out.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
109. The money supply contracts when the Fed
a.
replaces old worn-out notes and bills.
b.
borrows from the Treasury.
c.
sells government securities.
d.
purchases stocks from corporate businesses.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
110. Which of the following is the most frequently used tool of monetary policy?
a.
changing the discount rate
b.
changing reserve requirements
c.
open market operations
d.
interest rate changes
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
111. The Fed’s purchase and sale of government securities is known as
a.
margin operations.
b.
open market operations.
c.
bank reserve operations.
d.
cash management operations.
United States – BPROG: Analytic
The study of economics, and defi – The study of economics, and definitions of economics
Implementing Monetary Policy in Normal Times: Open Market Operations
112. When the Fed wants to expand the money supply, it
a.
buys government securities.
b.
sells government securities.
c.
buys common stock.
d.
sells common stock.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
113. Which of the following is correct?
a.
The Fed has very good control over the money supply and bank reserves.
b.
The Fed has very poor control over the money supply and bank reserves.
c.
The Fed has very good control over bank reserves but not over the money supply.
d.
The Fed has very good control over the money supply but not over bank reserves.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
114. The Fed conducts an open market purchase of Treasury bills of $10 million. If the required reserve ratio is 0.10, what
change in the money supply can be expected using the oversimplified money multiplier?
a.
$100 million
b.
$10 million
c.
0
d.
−$10 million
e.
−$100 million
1
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
115. The Fed conducts an open market sale of Treasury bills of $5 million. If the required reserve ratio is 0.20, what
change in the money supply can be expected using the oversimplified money multiplier?
a.
$25 million
b.
$5 million
c.
0
d.
−$5 million
e.
−$25 million
1
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
116. The tool most frequently relied on by the Fed is
a.
interest rate changes.
b.
changing the money multiplier.
c.
changing the discount rate.
d.
open market operations.
e.
changing the reserve ratio.
d
1
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
Table 13-1
EFFECTS OF AN OPEN MARKET TRANSACTION ON THE BALANCE SHEETS OF BANKS AND THE FED (In
millions of dollars)
BANKS
FEDERAL RESERVE SYSTEM
ASSETS
LIAB.
ASSETS
LIAB.
Reserves +$10
U.S. Gov’t
Bank Reserves
U.S. Gov’t
Sec. +$10
+$10
Securities −$10
117. In Table 13–1, the Federal Reserve System has
a.
sold $10 million in government securities to banks, taking payment in cash.
b.
sold $10 million in government securities to banks, taking payment from the bank’s reserves.
c.
purchased $10 million in government securities from banks, paying for them with increases in banks’ reserves.
d.
purchased $10 million in government securities from banks, paying for them with new Federal Reserve notes.
c
Moderate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
118. In Table 13–1, if the required reserve ratio is 10 percent, what will happen to the money supply? Use the
oversimplified money multiplier in your calculations.
a.
The money supply will decrease by $100 million.
b.
The money supply will decrease by $10 million.
c.
The money supply will not change.
d.
The money supply will increase by $10 million.
e.
The money supply will increase by $100 million.
e
Moderate
DISC: Understanding and Applying – DISC: Understanding and Applying Economic
United States – BPROG: Analytic
Understanding and applying econo – Understanding and applying economic models
Implementing Monetary Policy in Normal Times: Open Market Operations
119. After the transaction in Table 13-1 is completed, what happens to actual reserves, required reserves, and excess
reserves? Assume the required reserve ratio is 25 percent.
a.
Actual reserves increase by $10 million, required reserves increase $2.5 million, and excess reserves increase
by $7.5 million.
b.
Actual reserves decrease by $10 million, required reserves decrease $2.5 million, and excess reserves decrease
by $7.5 million.
c.
Actual reserves increase by $10 million, required reserves are unchanged, and excess reserves increase by $10
million.
d.
Actual reserves decrease by $10 million, required reserves decrease by $10 million, and excess reserves are
unchanged.
c
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
120. Assume the required reserve ratio is 20 percent and the FOMC orders an open market purchase of $100 million in
government securities from member banks. If the oversimplified money multiplier is assumed, then the money supply will
a.
increase by $500 million.
b.
increase by $100 million.
c.
decrease by $100 million.
d.
decrease by $500 million.
a
Moderate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
121. Assume the required reserve ratio is 10 percent and the FOMC orders an open market sale of $50 million in
government securities from member banks. If the oversimplified money multiplier is assumed, then the money supply will
a.
increase by $500 million.
b.
increase by $100 million.
c.
decrease by $100 million.
d.
decrease by $500 million.
Moderate
United States – BPROG: Analytic
Understanding and applying econo – Understanding and applying economic models
Implementing Monetary Policy in Normal Times: Open Market Operations
122. If the FOMC orders the sale of T-bills in the open market, then bank reserves are
a.
decreased, but the money supply will remain unchanged.
b.
decreased, and a multiple contraction of the money supply will occur.
c.
increased, but the money supply will remain unchanged.
d.
increased, and a multiple expansion of the money supply will occur.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
123. Banks will hold additional excess reserves when
a.
loans to customers look safe and interest rates are high.
b.
they anticipate a bank audit.
c.
loans to customers look risky and interest rates are low.
d.
the economy is booming and there is a large demand for loans.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
124. If the FOMC orders a purchase of government securities from member banks, where does the FOMC get the money
to pay for the securities?
a.
It creates money to pay for the securities by adding the purchase amount to the banks’ reserves.
b.
It pays for the securities with new Federal Reserve notes.
c.
It borrows the necessary funds from the Treasury.
d.
It auctions off part of the securities it already owns.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
125. The Fed cannot predict the effects of open market operations with perfect accuracy because of
a.
changes in people’s desires for cash.
b.
foreigners desire to hold U.S. dollars.
c.
banks’ desires to hold excess reserves.
d.
All of the above are correct.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
126. When the Fed buys a Treasury bill from the public, how does it usually pay for the T-bill?
a.
by writing a check on a commercial bank account
b.
by printing new Federal Reserve notes
c.
by creating new reserves in bank accounts
d.
by prepaying taxes into the Treasury’s account
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
127. Why does the Fed have imperfect control over the money supply?
a.
Because the Fed does not know how much reserves will change when it buys or sells securities.
b.
Because of unpredictable changes in the public’s desire to hold cash and banks’ desires to hold reserves.
c.
Because of unpredictable changes in reserve requirements.
d.
Because of the secrecy of FOMC meetings, which lead to policy surprises.
DISC: Monetary and fiscal policy
United States – BPROG: Reflective Thinking – BPROG: Analysis
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
128. The Fed has which of the following as its strongest control over the money supply?
a.
interest rate changes
b.
the discount rate
c.
open market operations
d.
the required reserve rate
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
129. If the Fed buys a U.S. Treasury bill from a member of the public, the banking system has
a.
less reserves and the money supply tends to fall.
b.
more reserves and the money supply tends to fall.
c.
less reserves and the money supply tends to grow.
d.
more reserves and the money supply tends to grow.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
130. If the Fed sells a U.S. Treasury bill to a member of the public, the banking system has
a.
less reserves and the money supply tends to fall.
b.
more reserves and the money supply tends to fall.
c.
less reserves and the money supply tends to grow.
d.
more reserves and the money supply tends to grow.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
131. When the Fed sells a government security to the public, how does it usually receive payment for the security?
a.
by accepting checks on bank accounts
b.
by drawing money out of circulation
c.
by decreasing member bank profits not distributed by the Fed
d.
by decreasing reserves in bank accounts at the Fed
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
132. If the Fed buys $5 million in government bonds, how much will the money supply change?
a.
It will increase by $5 million.
b.
It will increase by more than $5 million.
c.
It will decrease by $5 million.
d.
It will decrease by more than $5 million.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
133. If the Fed sells $5 million in government bonds, how much will the money supply change?
a.
It will increase by $5 million.
b.
It will increase by more than $5 million.
c.
It will decrease by $5 million.
d.
It will decrease by more than $5 million.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
134. The reserves supply schedule has a positive slope because
a.
the Fed lowers the discount rate as interest rates rise.
b.
the Fed makes more money available at higher interest rates.
c.
as interest rates rise, banks will find loans more profitable.
d.
as interest rates rise, people will demand more loans.
DISC: Monetary and fiscal policy
United States – BPROG: Analytic
Monetary and fiscal policy
Implementing Monetary Policy in Normal Times: Open Market Operations
135. An increase in the reserve supply
a.
will result in inflation if the unemployment rate is high.
b.
causes interest rates to rise.
c.
shifts the aggregate demand curve inward.