If the Federal Reserve wants to increase the money supply, which open market operation should they conduct? (Pg. 624 Paragraph 5)

Monetary Policy Quiz

Quiz
•
Financial Education
•
12th Grade
•
Medium
Evan Lahr
Used 3+ times
FREE Resource
14 questions
Show all answers
1.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
They should sell bonds
They should lower the required reserve rate
They should buy bonds
They should increase the discount rate
2.
MULTIPLE CHOICE QUESTION
45 sec • 1 pt
Take a look at the bank balance sheet, what is the required reserve ratio and the maximum possible growth of the money supply?
2.4%, $249,021
10%, $24,000
24%, $0
24%, $317,000
3.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
What is a possible explanation for the scenario presented for this Phillips curve?
An increase in unemployment
A negative supply shock
An increase in inflation
Appreciation of the Japanese Yen
4.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
According to the short-run Phillips Curve, which of the following scenarios would likely lead to a decrease in both inflation and unemployment?
A) An increase in aggregate demand.
B) A decrease in aggregate supply.
C) A decrease in aggregate demand.
D) An increase in expected inflation.
5.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Which of the following best explains why a fast increase in the money supply leads to inflation in the long run?
A) Increased money supply reduces interest rates, which decreases investment spending.
B) Increased money supply raises the purchasing power of households, increasing real GDP beyond its potential level.
C) Aggregate supply shifts to the left due to increased production costs.
D) More money in the economy leads to higher aggregate demand, but real output is limited by full employment.
E) Banks hold onto excess reserves, limiting the money multiplier effect.
6.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
If a central bank continually increases the money supply quickly, which of the following is the most likely long-term consequence?
A) Decreased nominal interest rates as inflation expectations fall.
B) A stable price level as the economy adjusts to higher demand.
C) Hyperinflation, as the value of money decreases rapidly.
7.
MULTIPLE CHOICE QUESTION
30 sec • 1 pt
Which of the following scenarios best illustrates the crowding-out effect?
The government borrows heavily to finance deficit spending, causing private firms to delay investment due to rising interest rates.
The Federal Reserve lowers the federal funds rate, leading to an increase in private investment.
A decrease in government spending results in higher levels of private savings and investment.
Foreign investors increase their purchase of domestic bonds, lowering domestic interest rates.
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