18. The four main tools of monetary policy are A. tax-rate changes, the discount

Question

18. The four main tools of monetary policy are A. tax-rate changes, the discount rate, open-market operations, B. tax-rate changes, changes in government expenditures, open-market operations, and interest on excess reserves. C. the discount rate, the reserve ratio, interest on excess reserves, and open-market operatioes D. changes in government expenditures, the reserve ratio, the federal funds rate, and the discount rate and the federal funds rate 19. Assume that the economy is in a recession and there is a budget deficit A strict balanced-budget amendment that equire the Federal government to balance its budget during a recession would be: A. Expansionary and worsen the effects of the recession B. Contractionary and worsen the effects of the recession C. Contractionary and counter the effects of the recession D. Expansionary and counter the effects of the recession 20. When a check is drawn and cleared, the A. reserves and deposits of both the bank against which the check is cleared and the bank receiving the check are unchanged by this transaction. B. bank against which the check is cleared loses reserves and deposits equal to the amount of the check C. bank receiving the check loses reserves and deposits equal to the amount of the check D. bank against which the check is cleared acquires reserves and deposits equal to the amount of the check 21. An economy is experiencing a high rate of inflation. The government wants to redace consumption by $36 billion to reduce inflationary pressure. The MPC is 0.75. By how much should the government raise taxes to achieve its objective? A. $6 billion B. $9 billion C. S12 billion D. $16 billion 22. The crowding-out effect arises when: A. Government lends in the money market, thus decreasing interest rates B. Government borrows in the money market, thus decreasing interest rates C. Government lends in the money market, thus increasing interest rates D. Government borrows in the money market, thas causing an increase in interest 23. Money is "created" when: A. A depositor gets cash from the bank's ATM B. A bank accepts deposits from its customers C. People receive loans from their banks D. People spend the incomes that they receive 24. Assume the reserve ratio is 25 percent and Federal Reserve Banks buy $4 million of U.S. securities from the public, which deposits this amount into checking accounts. As a result of these transactions, the supply of money is $12 million. A. not directly affected, but the money-creating potential of the commercial banking system is increased by B. directly increased by $4 million and the money-creating potential additional $16 million. of the commercial banking system is increased by an reduced by $4 million and the money-creating potential of the commercial banking system is decreased by an increased by $4 million and the money-creating potential of the commercial banking system is increased by an additional $12 million. D, directly additional $12 million. 25. The amount that a commercial bank can lend is determined by its A. required reserves B. excess reserves. C. outstanding loans D. outstanding checkable deposits

Explanation / Answer

Ans 18)

Option C is correct response as Monetary policy has nothing to do with government expenditures, tax rate changes

Ans 19)

Contractionary and worsen the effects of recession

Ans 20)

Option B is correct response

Ans 22)

Crowding out effect causes increase in interest rate and decrease in investment spendidng

ANs 23)

When people receive loans from their banks

Ans 25)

Excess reserves Option B

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