36. Initially, quantitative easing was not much help in creating economic growth

Question

36. Initially, quantitative easing was not much help in creating economic growth because

a. banks did not lend out the excess reserves that were created by quantitative easing

b. the Federal government began to cut spending, which counteracted the expansionary monetary policy

c. the Federal Reserve also increased the required reserve ratio so additional reserves were not available for lending

d. the expansion of the monetary base was inflationary

37. If the US Treasury engages in a foreign exchange intervention to lower the value of the dollar relative to the euro by having the Federal Reserve sell dollars and buy euros in the foreign market, how will this affect the monetary base?

a. the monetary base will decline

b. the composition of the monetary base will change with no impact on the overall size of the monetary base

c. the monetary base will increase

d. there will be no impact on the monetary base

38. As a country's financial markets become more highly developed, we can expect monetary policy to be

a. less effective

b. more effective

c. strengthened

d. reserved

40. When the price level falls, indebted persons will be __________ off because the real value of their debt will have ________

a. better; decreased

b. better; increased

c. worse; increased

d. worse; decreased

Explanation / Answer

36) option (d) initially monetary expansion increases aggregate demand since the US is a developed and has utilised it full potential therefore any expansioary monetary or fiscal policy stimulate price increase rather than boost growth.

37)option (c) monetary base will increase as the quantity of dollar in economy will increase.

38 option b) more strengthened . now fed has many instruments at its disposal to affect the monterary policy and it will have more effect on real sectors of the economy.

40 option (b) worse off becuse now the value of money will increase and then purchase maximum from their debt at present time.

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