How do changes in open market operations alter the monetary base, and how do changes in the monetary base translate to changes in the money supply?
The monetary base is the sum of commercial bank reserves and currency in circulation. Open market purchases will increase bank reserves and, therefore, increase the monetary base; open market sales will reduce bank reserves and reduce the monetary base. Since additions to the monetary base are at least partly reflected in additions to bank reserves, each dollar added to the monetary base represents several dollars added to the money supply. This is a consequence of the deposit multiplier process.
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People know that the inflation rate will decrease from 7 percent to 3 percent. As a result
A) the nominal interest rate falls by 4 percentage points. B) the nominal interest rate is constant. C) the nominal interest rate rises by 4 percentage points. D) the nominal interest rate equals 3 percent.
What is the impossibility theorem?
What will be an ideal response?
Attacking inflation through wage/price controls is part of a
a. orthodox stabilization strategy b. response to inertial inflation c. strategy supported by the International Monetary Fund d. response to rapid money supply growth e. none of the above
Monitoring of employees
A) is only effective while the employees are working, so that payment may be withheld for shirking. B) can be effective after-the-fact if the shirking behavior can be detected later and the employee punished. C) is only effective after-the-fact when it is possible to fire them for shirking. D) None of the above.