Monetary Policy

Question 1

M1 is independent of ?

Answer 1

Interest rate

Question 2

What is discount rate

Answer 2

When banks borrow from the fed

Question 3

Prime rate definition

Answer 3

Loan rate to best customers

Question 4

Fed funds rate

Answer 4

Overnight lending rate between banks to correct temporary imbalance

Question 5

Transaction demand is related to? And asset is related to

Answer 5

Medium of exchange

Store of value

Question 6

What happened to GDP when demand for money shifts right ?

Answer 6

Increase

Question 7

Asset demand raises inversely with what

Answer 7

Interest rate

Question 8

ER is the maximum possible change in?

Answer 8

Dollar value

Question 9

What is the primary purpose of the RR

Answer 9

Influence lending ability of the commercial banks

Question 10

Main tool of fed in regulating money supply

Answer 10

Open market operations

Question 11

When the public buys bonds from the fed what happens to the DD and what happens to the bank reserves

Answer 11

Both decrease

Question 12

What happens when the fed increases RR

Answer 12

Interest rates higher, GDP lowers, dollar appreciates

ER of member banks decreases and MM decreases

Question 13

Federal bank and demand pull inflation what happens

Answer 13

Raise discount rate , raise RR, buy bonds

Question 14

What is monetary best for what is fiscal best for

Answer 14

Inflation

Depression

Question 15

Easy money policy versus tight money policy

Answer 15

Depreciates dollar , increase exports

Appreciate dollar , decrease exports

Question 16

In a recession what happens

Answer 16

Lower dr, lower rr, sell securities,

Question 17

What is the main purpose of the fed

Answer 17

Elastic money supply