29. An open market purchase by the Fed from a bank a. Increases bank reserves b.

Question

29. An open market purchase by the Fed from a bank a. Increases bank reserves b. Decreases bank reserves c Increases the bank's demand deposits immediately d. Reduces the bank's lending power h of the following monetary measures would best complement fiscal measures designed to stimulate aggregate demand during a period of high unemployment? a. An increase in reserve requirements b. The purchase of bonds by the Federal Reserve c. An increase in the Fed's discount rate d. An increase in margin requirements necessary to buy stock 30. Whic 31. A decrease in required reserves would a. Increase the money multiplier and spur monetary growth b. Decrease the money multiplier and spur monetary growth c. Increase the money multiplier and reduce monetary growth d. Decrease the money multiplier and reduce monetary growth Which of the following does not represent one of the goals of the Federal Reserve? a. 32. Balanced budget b. low inflation c. high employment d. economic growth 33. A tighter monetary policy is intended to Slow the economy down in order to keep inflation in check a. b. Speed the economy up in order to have an expansionary effect on the economy Slow the economy down in order to have an expansionary effect on the economy c. d. Speed the economy up in order to keep inflation in check 34. If the government increased spending and borrowed the money to do it, some economists argue that aggregate demand will not increase because of the a. Crowding-out effect b. Interest rate effect C. Wealth effect d. Income effect 35. Compared to the Aggregate Expenditure model, the Aggregate demand/Aggregate Supply model a. Cannot show changes in prices as well b. Ignores aggregate demand c. More clearly shows distinctions between the short run and long run d. All of the above are correct e. Both a and c are true

Explanation / Answer

Ans)
29.
a. increases bank reserves
An open marker purchase would mean that the Fed will buy securities and pay money to banks.This will increase the bank reserves and thus lead to an increase in the money supply.

30.
b. The purchase of bonds by the Federal Reserve.
The purchase of bonds by the Federal Reserve will increase the money supply and help in lifting the economy out of recession.

31.
a. increase the money multiplier and spur monetary growth.
Multiplier=1/RRR
A decrease in the required reserves would increase the multiplier

32.
a. Balanced budget
The main goals of the Federal Reserve are to increase employment, achieve economic growth and stable prices.

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