Question

 

1. Which of the following will cause the aggregate demand curve to shift to the left?

A. a reduction in interest rates

B. An expansionary monetary policy

C. A reduction in the reserve requirement

D. Fed sales of bonds to the public

E. None of the above

 

2. Suppose the demand for money falls. In order to maintain interest rates at their previous level, the Fed might:

A. Sell government securities

B. Lower the reserve requirement

C. Lower the discount rate

D. Sell additional reserves through the Term Auction Facility

E. None of the above

 

3. Suppose banks are just meeting their reserve requirement of 25% and the Fed sells $30 billion in government securities to commercial banks. The effect of this sale is to:

A. Increase excess reserves by $30 billion

B. Reduce excess reserves by $7.5 billion

C. Reduce the potential money supply by $90 billion

D. Reduce the potential money supply by $120 billion

E. None of the above

 

4. If the intent of the Fed is to increase GDP, it should:

A. Raise the reserve requirement

B. Raise the discount rate

C. Purchase government securities in the open market

D. Ask banks to reduce their amount of loans outstanding

E. None of the above

5. For some time now, the U.S. has been pressuring Japan to institute policies to improve its weak economy. What effect would these policies have on the U.S.?

A) They would cause the U.S. to move up its aggregate demand curve.

B) They would cause the U.S. to move down the aggregate demand curve.

C) They would shift the U.S. aggregate demand curve left.

D) They would shift the U.S. aggregate demand curve right.