Monetary Policy Application
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by Stephanie Foy
| 5 Questions
1
1
Assume that the Consumer Price Index is rising too rapidly. Which of the following actions could the Federal Open Market Committee take to combat the inflation?
Sell bonds/securities
Lower the reserve requirement
Lower the discount rate
Raise taxes
2
1
The Federal Reserve sees signs of contraction approaching in the economy. Which of the following could the Federal Reserve reasonably do?
Raise the discount rate
Sell bonds
Lower interest on reserves
Increase government spending
3
1
The Federal Reserve begins an aggressive bond-buying program. How would the money supply, aggregate demand and real GDP be affected?
The money supply would decrease. Aggregate demand and Real GDP would decrease.
The money supply and aggregate demand would increase. Real GDP would decrease.
The money supply and aggregate demand would decrease. Real GDP would increase.
The money supply would increase. Aggregate demand and Real GDP would increase.
4
1
Jay Powell announces that the Federal Open Market Committee will discuss lowering the interest rate that banks must pay the Federal Reserve for loans. Which monetary policy tool are they discussing?
Interest on Reserves
Discount Rate
Required Reserve Ratio
Open Market Operations
5
1
The Federal Reserve's monetary policy results in a decline in aggregate demand and a drop in the price level. Which of the following could have been a part of their monetary policy? CHOOSE THE TWO THAT APPLY.
Raising interest on reserves.
Lowering the discount rate.
Raising income taxes.
Selling securities (bonds) on the open market.
Lowering the reserve requirements for banks.
Reducing government spending.
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