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21.Changes in spending caused by changing security values are called the

a. liquidity effect

b. wealth effect

c. income effect

d. reactionary effect

 

22.Monetary policy probably affects all of the following except

a.housing investment.

b.consumer durable investment.

c.inventory investment.

d.federal government budget outlays.

 

23.Monetary policies directed toward increased economic growth may have what impact upon the value of the dollar in relation to other currencies?

a. increase

b. decrease

c. no effect

d.none of the preceding

 

24.Monetarists believe that an increase in the money supply, all else equal, will cause:

a.consumption expenditures to rise.

b.investment spending to fall.

c.national income to fall.

d.government expenditures to rise.

 

25.M2 includes

a. currency in circulation

b. demand deposits

c. both

d. neither

 

26.Which of the following is not a channel of transmission of monetary policy?

a.  Reg Q interest rate ceilings

b.  consumer spending for durable goods and housing

c.  net exports

d.  business investment in real assets

 

27.The “tools” of monetary policy, whether “viable” or not, include all the following except

a.  changing the discount rate.

b.  open market operations.

c.  changes in reserve requirements.

d.  changes in the Federal Funds rate.

 

28.Which of the following would most likely decrease the Federal Funds rate?

a.  decrease in the discount rate.

b.  sale of securities by the Fed.

c.  decrease in reserve requirements.

d.  none of the above

 

29.Which of the following was not a responsibility of the early Federal Reserve System?

a.  replace the National Banking system

b.  improve the payments system

c.  establish more rigorous bank supervision

d.  act as “lender of last resort”

 

30.Monetarists and Keynesians agree that

a.  monetary policy influences the real sector

b.  changes in the money supply drive changes in interest rates

c.  changes in interest rates drive changes in the money supply

d.  monetary policy does not influence the real sector

 

 

 

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