51. The Fed is conducting expansionary monetary policy if it:A. increases the discount rate, buys bonds, and sets a lower target for the federal funds rate.B. decreases the discount rate and sells bonds.C. sets a lower target for the federal funds rate and buys bonds in the open market.D. increases reserve requirements and buys bonds in the open market.E. buys bonds in the open market and raises the discount rate.52. If banks become concerned about future conditions and decide to hold larger excess reserves, which of the followingis a likely result?A. A rise in interest ratesB. An increase in bond pricesC. An increase in aggregate demandD. An increase in the money supplyE. Both C and D53. The Fed is under no obligation to coordinate its actions with fiscal policy. And in fact, the Fed may take actionsspecifically designed to counteract some piece of fiscal policy. An example of fiscal and monetary policies with oppositeeffects is:A. an increase in taxes and increased sales of bonds by the Fed.B. a decrease in government spending and an increase in the discount rate.C. a decrease in taxes and a decrease in the target for the federal funds rate.D. an increase in government spending and an increase in reserve requirements.E. a decrease in taxes and increased purchases of bonds by the Fed.54. In the fictitious nation of Zagora, a worker can produce either 5 books or 10 televisions in an hour. In neighboringPlovdiv, a worker can produce either 3 books or 5 televisions in an hour. Which statement about this situation is true?A. Zagora has comparative advantage in the production of books.B. Zagora has comparative advantage in the production of televisions.C. Workers in Plovdiv can't possibly compete against the super-productive workers in Zagora.D. Workers in Zagora can't be expected to compete against the low-wage workers in Plovdiv.E. None of the above55. Given the U.S. has a current account deficit, a large increase in the demand for U.S. computer programs amongJapanese residents will have all the following effects except:A. an increase in the exchange rate, expressed in yen per dollar.B. an increase in the U.S. capital account surplus.C. an increase in investment in Japan.D. an decrease in the U.S. trade deficit.E. It may have all the above effects.56. Fiscal policy affects exchange rates because:A. as government spending increases, the government must buy more and more goods and services from foreigncountries.B. as government debt increases, interest rates rise, and the value of the currency rises.C. as government debt increases, interest rates rise, and the value of the currency falls.D. as the money supply increases, interest rates fall, and the value of the currency rises.E. as the money supply increases, interest rates fall, and the value of the currency falls.57. There are many kinds of trade restrictions, and trade restrictions are put into place for many reasons. Which of thefollowing is not a reason to use trade restrictions?A. To save natural habitats from over-useB. To protect the jobs of workers in certain industriesC. To make a political statement regarding the labor policies of another nationD. To compensate for higher taxes placed on domestic producersE. To create a lower prices for domestic consumers58. If the value of the U.S. dollar in foreign exchange markets rises:A. U.S. exports will become relatively less expensive.B. capital inflows into the United States will increase.C. people in the U.S. will purchase fewer imports.D. U.S. exports will likely decrease.E. All of the above59. Saying that leakages equal injections give the equation:A. T+S+X=G+1+MB. Y=C+S+TC. Y=C+I+G+X-MD. T+S+M=C+G+I+XE. T+S+M=G+I+X60. An economy producing at a level between full employment and full capacity is likely to experience:A. zero unemployment.B. demand-pull inflation.C. cost-push inflation.D. a high level of cyclical unemployment.E. a high level of seasonal unemployment.

Expansionary monetary policy is a powerful tool employed by central banks to invigorate and bolster…

51. The Fed is conducting expansionary monetary policy if it: A. increases the discount rate, buys bonds, and sets a lower target for the federal funds rate. B. decreases the discount rate and sells bonds. C. sets a lower target for the federal funds rate and buys bonds in the open market. D. increases reserve requirements and buys bonds in the open market. E. buys bonds in the open market and raises the discount rate.

51. The Fed is conducting expansionary monetary policy if it: A. increases the discount rate, buys bonds, and sets a lower target for the federal funds rate. B. decreases the discount rate and sells bonds. C. sets a lower target for the federal funds rate and buys bonds in the open market. D. increases reserve requirements and buys bonds in the open market. E. buys bonds in the open market and raises the discount rate.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the Fed is holding $35 billion in mortgage-backed and other securities and $65 billion in U.S. Treasury securities. Reserves are $60 billion and currency is $40 billion. Calculate the monetary base. A. $125 billion B. $200 billion C. $100 billion D. $135 billion
2. Problems and Applications Q2 If the Fed wants to increase the money supply, it can If the Fed wants to decrease the money supply, it can If the Fed wants to increase the money supply, it can bonds in open-market operations. the reserve requirement. the interest rate it pays on reserves. When the FOMC decreases its target for the federal funds rate, the money supply will If people decide to hold less currency after a rash of pickpocketing, the money supply
5.
7. The four major instruments (or tools) of monetary policy are: 1) Open market operations 2) The Discount Rate 3) The reserve ratio 4) Interest on Reserves The Fed uses four major tools to control the reserves of banks and the size of the money supply. 1) The Federal Reserve can buy or sell government securities in the open market to change the lending ability of the banking system: (a) buying government securities in the open market from either banks or the public ( increases, decreases ) the excess reserves of banks; (b) selling government securities in the open market to either banks or the public ( increases, decreases ) the excess reserves of banks. 2) The Fed can raise or lower the reserve ratio: (a) raising the reserve ratio ( increases, decreases ) the excess reserves of banks and the size of the monetary (checkable-deposit) multiplier; (b) lowering the reserve ratio (increases, decreases) the excess reserves of banks and the size of the monetary multiplier. 3) The Fed can…
Establishing upper and lower limits for the federal funds rate enabled the Fed to A. buy financial assets to make ample reserves available. B. sell financial assets to limited the reserves available. C. buy financial assets to limited the reserves available. D. sell financial assets to make ample reserves available.
When the Fed sells securities in the open market, the monetary base _______ and the interest rate _______. A. decreases; falls B. increases; rises C. decreases; rises D. increases; falls
9. In order to reduce the money supply, a central bank can: A. raise the reserve requirement. B. buy bonds in open market operations. C. lower the discount rate. D. engage in quantitative easing.
QUESTION 6 A central bank that desires to reduce the quantity of money will: Oa. a. Reduce the reserve requirements, reduce the discount rate, and sell the treasury securities in open market. a. Increase the reserve requirements, increase the discount rate, and purchase the treasury securities in open market. Ob. a. Increase the reserve requirements, reduce the discount rate, and sell the treasury securities in open market. Oc. Increase the reserve requirements, increase the discount rate, and sell the treasury securities in open market. Od. QUESTION 7 What is the principal tool by which the Fed attempts to change the monetary base? O a. Changes in the required reserve ratio O b.Discount loans O. Open Market Operations o d. Moral suasion QUESTION 8 Which of the following statements is true about M3? O a. Its total value more than four times as large as M2. O b. Its total value is smaller than that of M2. O C. It includes large-denomination time deposits. o d. Apart from those assets…
25. Suppose the Fed conducts an open market sale. We can expect this transaction to A) reduce the money supply, increase bond prices, and lower interest rates. B) increase the money supply, lower bond prices, and lower interest rates. C) increase the money supply, raise bond prices, and lower interest rates. D) reduce the money supply, reduce bond prices, and increase interest rates. 26. If the economy experiences an inflationary gap, a contractionary monetary policy will A) increase real GDP and increase the price level. B) increase real GDP and decrease the price level. C) decrease real GDP and increase the price level. D) decrease real GDP and decrease the price level. 27. Suppose the economy experiences a recessionary gap. Expansionary monetary policy will A) increase interest rates and increase the bond prices. B) increase interest rates and decrease…
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