ply or moneponds from the commercial banks in the open market by the Fed will a.

Question

ply or moneponds from the commercial banks in the open market by the Fed will a. increase the supply of money b. decrease the supply of money c. increase the discount rate d. decrease the discount rate 7. As the price level rises, the demand for money a. decreases because interest rates also increase. _- decreases because consumers buy fewer goods and services. c. increases because more money is needed for each transaction. d. increases becaus e investment spending will also increase. 8·The president has influence on Federal Reserve policy because a. he can veto any Fed policy b. he appoints the board members and the chair. d te cple board members at any time 9. The profitability of an investment project will increase if a. tax rates increase. b. real interest rates increase. c. real interest rates decrease d. business tax deductions decrease. 10. The Fed relies on open market operations, which work a. with the Treasury in creating money to finance bonds. b. through major stock exchanges to influence bond prices. c. directly through the nonbank public to change their assets d. through the banking system by affecting their reserves. 11. The net export component of aggregate demand is defined as U.S. a. imports minus U.S. exports. b. imports plus U.S. exports. c. exports minus U.S. imports. d. exports minus taxes and customs duties.

Explanation / Answer

Question number 6 option A is correct

Because the central bank is purchasing Government Bonds it will increase the money supply by increasing liquid in the market

Question number 7 option C is correct

The price level is increased and hence consumers find it difficult to buy the same quantity of goods and services with the same money so they demand more money

Question number 8 option B is correct

Although the Federal Reserve is an independent body its selection of board of directors depends upon the Congress and the cabinet decision.

Question number 9 the correct answer is option C

Investment projects are based on the fact that businesses have to pay interest on the amount borrowed. If interest rate is reduced more investment will be done.

Question number 10 the correct answer is option A

Question number 11 the correct answer is option C.

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