22. Of the policy tools available to the European Central Bank, the most frequen

Question

22. Of the policy tools available to the European Central Bank, the most frequently used are the

a. minimum reserve requirements

b. discount rates

c. standing lending facilities

d. open market operations (OMOs)

23. Government deficits can complicate monetary policy because borrowing can lead to

a. "crowding out," which leads to higher interest rates

b. "crowding in," which leads to lower interest rates

c. "crowding in," which leads to highest interest rates

d. "crowding in," which leads to lower interest rates

24. Open market operations in which the European Central Bank specifies an interest rate at which it will lend and then participating banks submit bids on the amount of money they wish to borrow at that rate are known as ______ tenders.

a. fixed-rate standard

b. fixed-rate reverse

c. variable-rate standard

d. variable-rate reverse

25. In order to overcome the stigma that might come from borrowing from the Federal Reserve following the 2007 financial crisis, the Federal Reserve created

a. the Federal Open Market Committee (FOMC)

b. the discount window

c. quantitative easing

d. the term auction facility (TAF)

26. In the face of a credit crunch, the Federal Reserve will most likely attempt to

a. lower interest rates in order to take liquidity out of the financial system

b. raise interest rates in order to inject liquidity into the financial system

c. raise interest rates in order to take liquidity out of the financial system

d. lower interest rates to inject liquidity into the financial system

27. Irving Fisher's equation of exchange is expressed as

a. V = (PL x T) / MS

b. MS x PL = V x T

c. MS x T = PL x V

d. MS / V = PL x T

28. Alistair tells a friend that he likes to deposit his entire paycheck into his checking account just in case prices fall. This is an example of the _________ demand for money.

a. transactions

b. speculative

c, precautionary

d. inflationary

30. Actual bank reserves are equal to

a. vault cash + required reserves

b. required reserves + excess reserves

c. deposits at the Fed + required reserves

d. deposits at the Fed + excess reserves

WILL MAKE SURE TO GIVE A THUMBS UP IF YOU COMPLETE

IF YOU COMPLETE YOU ARE A LIFESAVER SAVING ME FROM DROPPING THIS CLASS <3

Explanation / Answer

In 2008, Fed officials were quick in action to encourage commercial banks to borrow from the Fed, primarily by announcing that the discount window was available to meet their liquidity needs and secondly by reducing the primary credit rate and finally by introducing the TAF. The Fed was willing to provide credit and loans so as to avoid the bankruptcy of financial institutions that had the potential of a systemic risk

Most common used tool of monetary supply and forex market intervention is open market operations. ECB uses standard rates which are fixed as a part of open market operations for auctioning.

A crowding out effect implies a fall in the private investment due to government budget deficit when it is financed through the market for loanable funds.

22. Of the policy tools available to the European Central Bank, the most frequently used are the Option D. open market operations (OMOs)

23. Government deficits can complicate monetary policy because borrowing can lead to Option A. "crowding out," which leads to higher interest rates

24. Open market operations in which the European Central Bank specifies an interest rate at which it will lend and then participating banks submit bids on the amount of money they wish to borrow at that rate are known as Option A. fixed-rate standard

25. In order to overcome the stigma that might come from borrowing from the Federal Reserve following the 2007 financial crisis, the Federal Reserve created Option D. the term auction facility (TAF)

26. In the face of a credit crunch, the Federal Reserve will most likely attempt to Option D. lower interest rates to inject liquidity into the financial system

27. Irving Fisher's equation of exchange is expressed as Option A. V = (PL x T) / MS

28. Alistair tells a friend that he likes to deposit his entire paycheck into his checking account just in case prices fall. This is an example of Option D. inflationary demand for money

30. Actual bank reserves are equal to Option B. required reserves + excess reserves

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