macro ch. 15

If GDP is 3600 and the money supply is 300, what is the velocity?

12

If nominal GDP is 1800 and the money supply is 450, then what is velocity?

4

If GDP is 1800 and the money supply is 300, then what is the velocity?

6

Which of the following is described as an innovative and nontraditional method used by the Federal Reserve to expand the quantity of money and credit during the recent U.S. recession?

quantitive easing

When the central bank lowers the reserve requirement on deposits:

the money supply increases and interest rates decrease.

Which of the following is considered to be a relatively weak tool of monetary policy?

altering the discount rate

How are the specific interest rates for the lending and borrowing markets determined?

by the forces of supply and demand

Which of the following institutions determines the quantity of money in the economy as its most important task?

central bank

The central bank uses a ____________________ monetary policy to offset business related economic contractions and expansions?

countercyclical

Central Bank policy requires Northern Bank to hold 10% of its deposits as reserves. Northern Bank policy prevents it from holding excess reserves. If the central bank purchases $30 million in bonds from Northern Bank what will be the result?

Northern's loan assets increase by $30 million

Which of the following events would cause interest rates to increase?

a higher discount rate

If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would the most popular answer likely be?

fighting inflation

If a Central Bank decides it needs to decrease both the aggregate demand and the money supply, then it will:

follow tight monetary policy

When a Central Bank makes a decision that will cause an increase in both the money supply and aggregate demand, it is:

following a loose monetary policy

When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is:

following an expansionary monetary policy.

When the central bank decides to increase the discount rate, the:

interest rates increase

When banks hold excess reserves because they don't see good lending opportunities:

it negatively affects expansionary monetary policy.

In good economic times, a surge in lending exaggerates the episode of economic growth. Which of the following adaptations of monetary policy can moderate these exaggerated effects?

monitoring asset prices and leverage

vWhich of the following is a traditional tool used by the Fed during recessions?

open market operations

When the central bank decides it will sell bonds using open market operations:

the money supply decreases