Which of the following is an example of a tight monetary policy? (a) an increase
ID: 2507413 • Letter: W
Question
Which of the following is an example of a tight monetary policy?
(a) an increase in the reserve requirement
(b) a decrease in the discount rate
(c) a decrease in the federal funds rate
(d) the Fed buying government securities in the open market
The interest rate that banks are charged when they borrow reserves (overnight) from other commercial banks is the
(a) commercial paper rate.
(b) discount rate.
(c) federal funds rate.
(d) prime rate.
toy store adds bicycles to its inventory in 2012 in anticipation of an increased demand for bicycles. But the store is not able to sell the bicycles in 2012. The bicycles the toy store added to its inventory will
(a) not be counted in 2012 GDP, because they were not sold in 2012.
(b) be counted in 2012 GDP as a durable consumption expenditure.
(c) be counted in 2012 GDP as part of gross private domestic investment.
(d) not be counted in 2012 GDP because they are intermediate goods.
In 2010 final sales equal $110 billion and the change in business inventories is a negative $10 billion. GDP in 2010 is
(a) $110 billion.
(b) $120 billion.
(c) $100 billion.
Explanation / Answer
The answer is A. It will reduce money supply.
B and C will increase money supply. D is a fiscal policy.
(c) federal funds rate.
(c) be counted in 2012 GDP as part of gross private domestic investment.
(b) $120 billion.
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