6.In the context of monetary policy, “discounting” refers to: a. private banks r
ID: 1222887 • Letter: 6
Question
6.In the context of monetary policy, “discounting” refers to:a. private banks reducing interest rates for their best corporate borrowers.
b. the Fed lending reserves directly to private banks.
c. the U.S. Treasury lending bonds to the Fed.
d. producers reducing prices on unsold inventory. 7.The two primary functions banks perform in the macro economy are:
a. set interest rates and determine fiscal policy.
b. determine monetary policy and set taxes.
c. transfer savings from savers to investors and create money via their lending activities.
d. set the discount rate of interest and create money via their lending activities. 8.Assume that we have an inflation problem in the economy, i.e., an inflation gap has emerged. Given this situation, it's likely that the Federal Reserve (the Fed) will engage in contractionary monetary policy. This policy might include:
a. lowering the discount rate of interest and open-market purchases of U.S. government securities.
b. lowering the reserve requirement (r) and lowering the discount rate of interest.
c. open-market sales of U.S. government securities (which would put downward pressure on the fed funds rate of interest and other market rates of interest).
d. open-market sales of U.S. government securities (which would put upward pressure on the fed funds rate of interest and other market rates of interest).
6.In the context of monetary policy, “discounting” refers to:
a. private banks reducing interest rates for their best corporate borrowers.
b. the Fed lending reserves directly to private banks.
c. the U.S. Treasury lending bonds to the Fed.
d. producers reducing prices on unsold inventory. 7.The two primary functions banks perform in the macro economy are:
a. set interest rates and determine fiscal policy.
b. determine monetary policy and set taxes.
c. transfer savings from savers to investors and create money via their lending activities.
d. set the discount rate of interest and create money via their lending activities. 8.Assume that we have an inflation problem in the economy, i.e., an inflation gap has emerged. Given this situation, it's likely that the Federal Reserve (the Fed) will engage in contractionary monetary policy. This policy might include:
a. lowering the discount rate of interest and open-market purchases of U.S. government securities.
b. lowering the reserve requirement (r) and lowering the discount rate of interest.
c. open-market sales of U.S. government securities (which would put downward pressure on the fed funds rate of interest and other market rates of interest).
d. open-market sales of U.S. government securities (which would put upward pressure on the fed funds rate of interest and other market rates of interest).
6.In the context of monetary policy, “discounting” refers to:
a. private banks reducing interest rates for their best corporate borrowers.
b. the Fed lending reserves directly to private banks.
c. the U.S. Treasury lending bonds to the Fed.
d. producers reducing prices on unsold inventory. 7.The two primary functions banks perform in the macro economy are:
a. set interest rates and determine fiscal policy.
b. determine monetary policy and set taxes.
c. transfer savings from savers to investors and create money via their lending activities.
d. set the discount rate of interest and create money via their lending activities. 8.Assume that we have an inflation problem in the economy, i.e., an inflation gap has emerged. Given this situation, it's likely that the Federal Reserve (the Fed) will engage in contractionary monetary policy. This policy might include:
a. lowering the discount rate of interest and open-market purchases of U.S. government securities.
b. lowering the reserve requirement (r) and lowering the discount rate of interest.
c. open-market sales of U.S. government securities (which would put downward pressure on the fed funds rate of interest and other market rates of interest).
d. open-market sales of U.S. government securities (which would put upward pressure on the fed funds rate of interest and other market rates of interest).
Explanation / Answer
6. B is Correct, Fed lends directly to Banks using Primary Discount Window.
7. C is Correct, Money Saved by Savers will be lent at an interest rate which will generate money.
8. D is Correct, Sales of securities will decrease money supply and put an upward pressure on interest rates
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