ECON Final Exam Ch. 16 Multiple Choice
An indirect effect of monetary policy is that as the money supply...
increases, interest rates fall, and borrowing and spending increase.
An open market sale of government securities by the Fed will cause which of the following?
An excess quantity of reserves demanded and an increase in the federal funds rate
In the above figure, assume the aggregate demand of the economy is AD2 and the Fed actions move aggregate demand to AD1. In this situation, the Fed has practiced...
Contractionary monetary policy
To change the rate of growth of the money supply, the Fed can do all but which one of the following?
Shift the demand for the money curve by changing the interest rate
As the world economy becomes more integrated through globalization...
The Fed will have a more difficult time reaching its money supply growth rate targets
Quantitive easing refers to a policy action in which a central bank...
buys government securities to directly increase bank reserves
A contractionary monetary policy causes...
higher interest rates, which increases the international price of the dollar and decreases net exports
The direct effect of an increase in the money supply is to...
increase aggregate demand as people try to spend their excess money balances
If the Fed's credit policies are to induce banks to hold substantial excess reserves by allowing banks to earn more interest on excess reserves at the Fed, then...
the money multiplier will fall
