Proponents of the interest-rate-based monetary policy transmission mechanism argue that when the Federal Reserve buys bonds, there will be
A. a decrease in the money supply.
B. a decrease in the price of outstanding bonds.
C. an increase in investment spending.
D. a decrease in nominal Gross Domestic Product (GDP), but not in real income.
Answer: C
You might also like to view...
Based on the information in the above table, the price of A is $3, the price of B is $2, and the price of C is $5. If Mary has $22 to spend, what combination of products A, B, and C should she buy in order to maximize her satisfaction?
When the Fed sells government securities, banks' reserves ________, the quantity of money ________, and the federal funds rate ________
A) decrease; decreases; falls B) decrease; increases; falls C) increase; increases; falls D) increase; decreases; rises E) decrease; decreases; rises
Suppose the measured unemployment rate is 7.5% and the true natural rate of unemployment is 5.1%. If the chair of the Fed believes the natural rate of unemployment to be 6.7%, then the chair will
A) stimulate the economy when it should be slowed. B) slow the economy when it should be stimulated. C) stimulate the economy, exactly as called for. D) slow the economy, exactly as called for.
At macroeconomic equilibrium
A) total taxes equal total transfers. B) total consumption equals total production. C) total investment equals total inventories. D) total spending equals total production.