1. The money supply in the U.S. is backed: A. by the government\'s ability to co
ID: 1163585 • Letter: 1
Question
1. The money supply in the U.S. is backed: A. by the government's ability to control the supply of money and keep its value relatively stable. B. by government bonds. C. dollar-for-dollar by gold and silver. D. by gold reserves representing a fraction of the total value of dollars in circulation. 2. The fractional reserve banking system in the U.S. is based on the practices of a. the goldsmiths. b. the federal reserve system c. the latest world banking regulations. d. currency speculators. 3. Expansionary monetary policy operates initially by a. increasing aggregate supply b. decreasing the inflation rate c. increasing investment and thereby increasing aggregate demand d. all of the above 4. An easy money policy would include the Fed: a. increasing the discount rate b. increasing the reserve requirement c. buying bonds. d. all of the above. e. none of the above. 5. A tight money policy would include the Fed: a. decreasing the discount rate b. increasing the reserve requirement c. buying bonds d. all of the above e. none of the aboveExplanation / Answer
1) It is a fiat money so the answer is option A.
2) Fractional reserve banking system is based on the practice of the federal system (b).
3) Expansionary monetary policy increases the (c) investment and thereby aggregate demand.
4) An easy monetary policy will increase the flow of credit. Hence the answer is c.
5) A tight monetary policy will decrease the flow of credit in the economy. Hence answer is b.
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