Chapter Review Questions
- Which of the following are considered open-market activities?
A. Raising taxes
B. Increasing spending
C. Increasing the reserve requirement
D. Selling government bonds
E. Decreasing interest rates - If policymakers wanted to fight a recession using monetary policy, which of the following would be appropriate?
A. Decreasing taxes
B. Increasing spending
C. Increasing interest rates
D. Lowering the discount rate
E. Increasing transfer payments - Which of the following would be the most appropriate monetary policy to achieve equilibrium output?
A. Increase the money supply.
B. Increase the reserve requirements.
C. Increase taxes.
D. Increase the discount rate.
E. Decrease inflation. - Which of the following would weaken the value of the multiplier?
A. High interest rates
B. High velocity of money
C. People holding their money in the form of currency
D. A low unemployment rate
E. An increase in government spending - If the Fed wanted to fight a recession, which monetary policy tool would it employ first?
A. Increasing interest rates
B. Lowering interest rates
C. Buying government bonds
D. Selling government bonds
E. Raising the discount rate - Which of the following explains the role of the Federal Reserve?
A. To control interest rates
B. To control the printing of money
C. To control the demand for money
D. To control the money creation process
E. To work closely with the government to reduce deficits
Part II: Macroeconomics