is quick and easy to implement.

The discount rate is the interest:

rate at which the Federal Reserve Banks lend to banks.

A contraction of the money supply:

increases the interest rate and decreases aggregate demand.

If the state of the economy is as depicted below, the FED should

embark on an tight money policy

The purpose of a tight money policy is to:

raise interest rates and restrict the availability of credit

Open-market operations refer to:

the purchase or sale of gov't securities (Bonds) by the Fed.

The three main tools of monetary policy are:

the discount rate, the reserve ratio, open-market operations

The Money Market Graph below depicts

the result of the "FED" buying bonds

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AP Macro: Monetary Policy

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Questions 18

Answers

1
If the state of the economy is as depicted below, the FED should
embark on an tight money policy
nothing
embark on an easy money policy
increase the money supply to increase interest rates</p>
2
Monetary Policy
is quick and easy to implement.
requires the approval of the President to implement.
requires unanimous consent at the FED
requires the approval of Congress to implement.
3
The FED directly sets:
the discount rate
the prime interest rate but not the Federal funds rate.
federal funds rate
both the Federal funds rate and the prime interest rate.
4
The discount rate is the interest:
yield on long-term government bonds.
rate at which the Federal Reserve Banks lend to banks.
rate at which commercial banks lend to the public.
rate at which the central banks lend to the U.S. Treasury.
5
A contraction of the money supply:
lowers the interest rate and increases aggregate demand.
increases both the interest rate and aggregate demand.
lowers both the interest rate and aggregate demand.
increases the interest rate and decreases aggregate demand.
6
If the FED were to increase the legal reserve ratio, we would expect:
more FED lending
more gov't spending.
lower interest rates
higher interest rates.
7
RRR =10%, and the FED buys a $1 million bond from a bank, M1 can increase by a total of ?
$100 million
none of the above
$10 million
$1 million
8
RRR =10%, and the FED buys a $1 million bond from a bank, which multiplier formula is correct?
1/MMM
1/RRR
1/MPC
1/MPS
9
If the state of the economy is as depicted below, the FED should
embark on an easy money policy
lower the discount rate
embark on an tight money policy
buy bonds
10
The purpose of the shift on the graph below is to
fight demand pull inflation
to increase aggregate demand
to fight cost push inflation
to decrease aggregate demand
11
Monetary policy is expected to have its greatest impact on:
(C) Consumption
(I) Business Investment
(G) Government Spending
(X) exports
12
If the reserve requirement is 10%, and the bank has $10 million in Demand Deposits it can lend
$5 million
$9 million
$1 million
$10 million
13
If the state of the economy is as depicted below, the FED should
tight money policy
easy money policy
decrease money supply
nothing
14
The purpose of a tight money policy is to:
increase aggregate demand and GDP.
increase investment spending.
alleviate recessions.
raise interest rates and restrict the availability of credit
15
Open-market operations refer to:
the specifying of loan maximums on stock purchases.
central bank lending to commercial banks.
the purchase or sale of gov't securities (Bonds) by the Fed.
purchases of stocks in the New York Stock Exchange.
16
The three main tools of monetary policy are:
changes in government expenditures, tax, interest rate
tax rate changes, changes in government expenditures
the discount rate, the reserve ratio, open-market operations
tax rate changes, the discount rate, open-market operations.
17
The Money Market Graph below depicts
An Increase in demand for transactional money
the result of the "FED" selling bonds
the result of the "FED" fighting inflation
the result of the "FED" buying bonds
18
Other things equal, a tight money policy will:
increase GDP.
increase interest rates
reduce interest rates.
increase investment.

AP Macro: Monetary Policy Flashcards | StudBud