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46. Other things being equal, an increase in the supply of money

 

a. increases the price level.
 

b. reduces aggregate demand.
 

c. generate significant changes in relative prices.
 

d. reduces the amount of money balances.

 

47. As global financial markets become more intertwined, the Fed has

 

a. more control over fiscal policy.
 

b. less control over monetary policy.
 

c. more control over monetary policy.
 

d. less control over fiscal policy.

 

48. According to the quantity theory of money,

 

 

a. the velocity of money is the least stable factor in the monetary analysis.
 

b. a change in the money supply can lead only to a proportionate change in the price level.
 

c. price level changes can best be explained by Keynesian analysis.
 

d. the rate of inflation is not related to changes in the money supply.

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Darryn D'Souza
Darryn D'SouzaLv10
28 Sep 2019

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Related questions

5. Fiscal policy is enacted through changes in

A. interest rates and the price level.

B. the supply of money and foreign exchange.

C. unemployment and inflation

D. taxation and government spending. 

 

6. In an economy, the government wants to decrease aggregate demand by $48 billion at each price level to decrease real GDP and control demand-pull inflation. If the MPS is 0.25, then it could

A. increase taxes by $16 billion.

B. increase taxes by $24 billion.

C. decrease government spending by $10 billion.

D. decrease government spending by $16 billion.

 

7. If there is a constitutional requirement to maintain a balanced budget, then during a recession when tax revenues are shrinking, the government will have to implement

A. contractionary fiscal policy.

B. no change in fiscal policy.

C. expansionary fiscal policy.

D. countercyclical fiscal policy.

 

8. Most economists believe that fiscal policy is:

A. better than the monetary policy for "fine-tuning" the economy.

B. better than the monetary policy for month-to-month stabilization.

C. not as good as the monetary policy for month-to-month stabilization.

D. not very good at pushing the economy in a particular direction.

 

9. An increase in the legal reserve ratio

A. increases the money supply by increasing excess reserves

B. decreases the money supply by decreasing excess reserves

C. increases the money supply by decreasing excess reserves

D. decreases the money supply by increasing excess reserves

 

10. The discount rate is the rate of interest at which

A. Federal Reserve Banks lend to commercial banks

B. savings and loan associations lend to some builders

C. Federal Reserve Banks lend to large corporations.

D. commercial banks lend to large corporations

 

11. Which of the following actions by the Fed most likely increase commercial bank lending?

A. raising the reserve ratio

B. increasing the federal funds rate target

C. reducing the interest paid on excess reserves held at the Fed

D. selling bonds to commercial banks and the public

 

12. Assume the economy is operating at less than full employment. An expansionary monetary policy will cause interest rates to ______, which will ______ investment spending.

A. decrease; decrease

B. decrease; increase

C. increase; increase

D. increase; decrease 

 

Assuming people have rational expectations:
 
A) Monetary policy changes will cause the money supply to change, thereby causing changes in inflation and unemployment along a vertical Phillips Curve

B) When the Fed uses monetary policy, people quickly realize the impact that will be created by the policy, adjust wages and prices, and inflation will adjust to the new expectations which means the policy will not affect the real GDP

C) When the government uses fiscal policy, then changes in the money supply will create quick adjustments in wages and prices which will not cause changes in real GDP

D) When the Fed uses monetary policy, people do not quickly adjust wages and prices, therefore, inflation will deviate from expectations and create fluctuations in real GDP

A problem that the Fed faces when it attempts to control the money supply is that:
 
a. the 100-percent-reserve banking system in the U.S. makes it difficult for the Fed to carry out its monetary policy.
b. the Fed has to get the approval of the U.S. Treasury Department whenever it uses any of its monetary policy tools.
c. the Fed does not have a tool that it can use to change the money supply by either a small amount or a large amount.
d. the Fed does not control the amount of money that households choose to hold as deposits in banks.

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