The monetary policy instrument the Federal Reserve chooses to use is the
A) federal funds rate.
B) monetary base.
C) fixed exchange rate.
D) discount rate.
E) flexible exchange rate.
A
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If a currency rapidly depreciates, what are the possible negative results to the economy of using contractionary monetary policy to address the depreciation?
What will be an ideal response?
The sharp increase in the excess reserves held by the commercial banking system since the second half of 2008 increases the potential for
a. a sharp contraction in the money supply, which is likely to increase the length and severity of the recession. b. a rapid increase in the money supply, potentially leading to inflation. c. a gradual increase in the money supply, following the trend of the previous decade. d. a reduction in the ability of banks to extend additional loans.
A tariff can be defined simply as a
a. tax on imports. b. tax on exports. c. legal limit on imports. d. legal limit on exports.
Suppose the real exchange rate is 3/4 gallon of country A's gasoline per gallon of U.S. gasoline, a gallon of U.S. gasoline costs $3.00 U.S., and a gallon of gas in country A costs 6 units of their currency. What is the nominal exchange rate?
a. 3/8 of a unit of country A's currency per dollar. b. 3/2 units of country A's currency per dollar. c. 8/3 units of country A's currency per dollar. d. None of the above is correct.