14) Which of the following is true? a) To tackle recession, the Fed buys treasur
ID: 1155708 • Letter: 1
Question
14) Which of the following is true?
a) To tackle recession, the Fed buys treasury bills, thereby increases the money supply.
b) To tackle recession the Fed purchases treasury bills, thereby increases the reserves.
c) To tackle inflation the Fed buys treasury bills, thereby decreases the interest rate.
d) a and b.
e) a, b, c.
15) Which of the following is true?
a) The money multiplier is easily calculated by the Fed.
b) Monetary policy is usually not successful because the government cannot control its expenditures.
c) Monetary policy can no longer fix the economy because the Fed cannot precisely calculate the money multiplier.
d) None of the above.
16) Expansionary monetary policy
a) Decreases private investment.
b) Increases aggregate demand.
c) a and b.
d) None is correct.
17) Which of the following is true?
a) To tackle inflation, the Fed sells treasury bills, thereby decreases the money supply.
b) To tackle inflation the Fed purchases treasury bills, thereby decreases the money supply.
c) To tackle inflation the Fed sells treasury bills, thereby increases the Federal Funds Rate.
d) None of the above.
e) a and c.
18) Contractionary monetary policy
a) Decreases private investment.
b) Increases aggregate demand.
c) a and b.
d) None is correct.
19) Bank regulations
a) Are not necessary because the financial sector works more efficiently without government supervision.
b) Are designed partly to ensure the safety of depositors.
c) Are designed partly to minimize run on banks.
d) Are designed mainly to control the money supply.
e) b and c.
f) b,c,d.
20) Which of the following is true?
a) FDIC is an agent of the federal government.
b) The federal government cannot limit the type of assets in which banks can invest in.
c) Deposit insurance limits the money supply.
d) a and b.
e) all of the above.
f) None of the above
Explanation / Answer
(14) (e)
During recession, Fed buys treasury securities to increase money supply, which increases the quantity of reserves in banking system, lowering interest rate.
(15) (d)
None of the statements is correct.
(16) (b)
Expansionary monetary policy increases money supply, decreases interest rate, increases investment and increases aggregate demand.
(17) (e)
Using contractionary monetary policy, Fed sells treasury securities to decrease money supply, which decreases the quantity of reserves in banking system, increasing federal funds rate.
(18) (a)
Contractionary monetary policy decreases money supply, increases interest rate, decreases investment and decreases aggregate demand.
NOTE: As per Chegg Answering Policy, first 5 questions are answered.
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