15. Which of the following is true? a) The money multiplier is easily calculated
ID: 1155619 • Letter: 1
Question
15. Which of the following is true?
a) The money multiplier is easily calculated by the Fed.
b) Monetary policy is usually not successful because the government cannot control its expenditures.
c) Monetary policy can no longer fix the economy because the Fed cannot precisely calculate the money multiplier.
d) None of the above.
16. Expansionary monetary policy
a) Decreases private investment.
b) Increases aggregate demand.
c) a and b.
d) None is correct.
17. Which of the following is true?
a) To tackle inflation, the Fed sells treasury bills, thereby decreases the money supply.
b) To tackle inflation the Fed purchases treasury bills, thereby decreases the money supply.
c) To tackle inflation the Fed sells treasury bills, thereby increases the Federal Funds Rate.
d) None of the above.
e) a and c.
18. Contractionary monetary policy
a) Decreases private investment.
b) Increases aggregate demand.
c) a and b.
d) None is correct.
Explanation / Answer
15) The federal government controls the money supply by using money multiplier. Option a is correct.
16) An expansionary monetary policy is for creating money in the economy. This policy includes low federal fund rate, Decrease the discount rate, open market purchase etc. Option d is correct.
17) To tackle inflation FED should take contractionary monetary policy. FED can withdraw money from the economy by selling treasury bill. Option a is correct.
18) The contractionary monetary policy includes open market sell, higher federal fund rate, Increase discount rate. Option d is correct.
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