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/ Homework Answers / Finance / MULTIPLE-CHOICE QUESTIONS 1.The monetary base will decrease when: a.banks withdraw currency

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MULTIPLE-CHOICE QUESTIONS

 

1.The monetary base will decrease when:

a.banks withdraw currency from the Fed.

b.the Fed makes loans at the discount window.

c.the Fed sells securities on the open market.

d.the Fed buys securities on the open market.

 

2.Deposits tend to expand whenever:

a.reserve requirements decrease.

b.the public holds more cash.

c.reserve requirements increase.

d.monetary policy “tightens”.

 

3.An increase in excess reserves will cause

a.the Fed Funds rate to rise.

b.planned inventory investment to fall.

c.depository institutions to lend more freely.

d.foreign investors to buy more T-Bills.

 

4.The velocity of money measures:

a.the rate of growth of the money supply.

b.the relationship between the monetary base and the money supply.

c.the relationship between the money supply and economic activity.

d.all of the above.

 

5.Ordinarily the money supply will decrease if:

a.the Fed makes fewer loans at its discount window.

b.the Fed sells securities on the open market.

c.the Fed raises reserve requirements.

d.all of the above.

 

6.The money supply

a.is exclusively controlled by the Fed.

b.is smaller than the monetary base

c.excludes any interest-bearing deposits

d.none of the above.

 

7.Which of the following tools of monetary policy has the greatest impact?

a.discount rate

b.Regulation Q

c.open market operations

d.bank examination

 

8.An increase in the assets of Federal Reserve banks

a.decreases the monetary base.

b.increases the monetary base.

c.has no effect on monetary base.

d.always decreases another Federal Reserve Bank asset.

 

9.Consumption spending should increase if

a.financial wealth decreases.

b.reserve requirements decrease.

c.interest rates increase.

d.credit availability decreases.

 

10.Generally, plant and equipment investment spending will decrease if

a.interest rates rise while inflation remains unchanged.

b.inflation decreases while interest rates remain unchanged.

c.reserve requirements rise.

d.any of the above

 

 

 

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