If a Central Bank wished to increase the supply of money it should
(a) Raise the reserve requirement.
(b) Raise the rate of discount.
(c) Buy government bonds in the money market.
(d) Do any or all of the above.
Answer: (c) Buy government bonds in the money market.
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The real wage rate will fall if the
A) labor supply curve shifts rightward and the labor demand curve does not shift. B) labor supply curve shifts leftward and the labor demand curve does not shift. C) labor demand curve shifts rightward and the labor supply curve does not shift. D) labor demand curve shifts rightward more than the labor supply curve shifts rightward.
The statement "Households maximize utility" means that households
a. try to be as useful as possible to the economy b. are only interested in maximizing their earnings c. are assumed to buy useful things before they buy luxuries d. are only interested in acquiring material wealth e. are assumed to do what they think will increase their satisfaction
One disadvantage of discretionary fiscal policy is that it can return the economy to its potential level of output, but at the cost of increasing the price level
a. True b. False Indicate whether the statement is true or false
If the Federal Reserve conducts an open market purchase, the:
A. interest rate will not change. B. interest rate will increase. C. interest rate will decrease. D. money supply is decreased.