Explain two ways by which the Federal Reserve System can increase the monetary base. Why is the effect of Federal Reserve actions on bank reserves less exact than the effect on the monetary base?
What will be an ideal response?
The Fed can increase the monetary base by purchasing government bonds and by extending discount loans. Because the Fed cannot control the distribution of the monetary base between reserves and currency, it has less control over reserves than the base.
You might also like to view...
One reason demand curves slope downwards is
a. Marginal value increases with each purchase b. Marginal value declines with each purchase c. Total value declines with each purchase d. All of the above
What is the amount that individuals would have been willing to pay, minus the amount that they actually paid?
a. efficiency b. consumer surplus c. social surplus d. deadweight loss
Give two examples of activities, one legal and one illegal, that would be part of the underground economy. Explain why each example is considered an underground activity. Avoid giving examples from the text.
What will be an ideal response?
Consider a perfectly competitive firm with MC = 10 + q. If market demand is Q = 100 - P and the current industry output is 80 units, then the firm will produce
a. zero units. b. 10 units. c. 20 units. d. the answer cannot be determined without knowing what the supply curve is.