1) Assume the Fed creates excess reserves in the banking system by buying govern
ID: 1092870 • Letter: 1
Question
1) Assume the Fed creates excess reserves in the banking system by buying government bonds, but banks do not make more loans because economic conditions are bad. This situation is a problem of:
cyclical asymmetry.
a restrictive money policy.
the net export effect.
a decrease in the Federal funds rate.
2) A Federal Reserve official notes: "A restrictive monetary policy can force a contraction of the money supply, but an expansionary monetary policy may not achieve an expansion of the economy." The official has described the problem of the:
political acceptability of monetary policy.
3) Which of the following will lead to an increase in aggregate demand?
An appreciation in the value of the U.S. dollar.
4) There is general agreement among economists that a proposed fiscal policy should be evaluated for its:
inflexibility of monetary policy tools. change in taxes on monetary policy. cyclical asymmetry of monetary policy.political acceptability of monetary policy.
3) Which of the following will lead to an increase in aggregate demand?
A decrease in the price level. An increase in the price level. An increase in national incomes abroad.An appreciation in the value of the U.S. dollar.
4) There is general agreement among economists that a proposed fiscal policy should be evaluated for its:
contribution to the purpose of "fine-tuning" the economy. contribution to the growth of exports and imports in the economy. potential positive and negative effects on long-run productivity growth. potential positive and negative effects on short-run business indebtedness.Explanation / Answer
1.
cyclical asymmetry.
2.
cyclical asymmetry of monetary policy.
3.
An increase in national incomes abroad
4.
potential positive and negative effects on long-run productivity growth.
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