Which of the following is the most accurate description of events when monetary authorities increase the size of commercial banks' excess reserves?
A. A rise in interest rates increases the money supply, causing a decrease in investment spending, output, and employment.
B. The money supply is decreased, which increases the interest rate, and causes investment spending, output, and employment to decrease.
C. A fall in interest rates decreases the money supply, causing an increase in investment spending, output, and employment.
D. The money supply is increased, which decreases the interest rate and causes investment spending, output, and employment to increase.
Answer: D
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Suppose that the price of bread rises. This rise could be the result of
A) a decrease in the supply of bread. B) an increase in the supply of bread. C) a decrease in the demand for bread. D) Both answers A and C are correct. E) Both answers B and C are correct.
People in the U.S. will rarely pay a great deal per gallon to obtain water because
A) there are so many excellent substitutes for water. B) there is no relationship between objective price and subjective value. C) they are usually creatures of habit. D) they think water, as a basic necessity, ought to be supplied at a very low price. E) they place a very low marginal value on water.
The Fed's policy tools include all the following except _______
A. required reserve ratio and open market operations B. quantitative easing C. discount rate D. taxing banks' deposits at the Fed
The fixed exchange rate regime established at a meeting in New Hampshire in 1944 has been known as the
A) General Agreement on Tariffs and Trade. B) Bretton Woods system. C) International Settlement Fund. D) Balance of Payments Compliance Accord.