The portion of deposits that banks need to hold at the Central Bank is:
(a) The required reserve ratio;
(b) The discount rate;
(c) The open market operation;
(d) The interest rate.
Answer: (a) The required reserve ratio;
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In which of the following situations would the Fed conduct contractionary monetary policy?
A) The Fed is worried that deflation will become a problem. B) The Fed fears that unemployment is climbing above the natural rate. C) The Fed believes that aggregate demand was growing too slowly to keep up with potential GDP. D) The Fed is concerned that aggregate demand would continue to exceed the growth in potential GDP.
Which of the following is not a step involved in cost-benefit analysis?
a. Conversion of the costs and benefits to dollar terms. b. Enumeration of the costs and benefits. c. Enumeration of the special interests. d. Enumeration of the options.
Assume the Fed initiates an expansionary monetary policy that is correctly anticipated by economic agents in the economy. According to the rational expectation hypothesis, the result is
A) an increased price level in the short run, but no effect on price level in the long run. B) decreased real Gross Domestic Product (GDP) in the short run, but increased real Gross Domestic Product (GDP) in the long run. C) increased real Gross Domestic Product (GDP) and increased employment in the long run. D) an increased price level, but no change in real Gross Domestic Product (GDP) in the long run.
Which of the following flows from the government to the households?
a. Goods and services b. Resources of production c. Taxes d. Government services e. Loans