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.Management Sciences
Category: Money, Interest Rates And Output
In terms of the demand for money the interest rate represents ?
A. the rate at which current consumption can be exchanged for future consumption
B. the price of borrowing money
C. The opportunity cost of holding money
D. the return on money that is saved for the future
The three main tools of monetary policy are ?
A. fiat, commodity and deposit money
B. Open-market operations reserve requirements and the refinancing rate
C. The money supply, government purchases and taxation
D. Government expenditures taxation and reserve requirements
E. Coin, currency and demand deposits
A reduction in interest rates, causes an increases in the monetary base that results in an _________ in the availability of consumer credit and a ________ in the cost of consumer credit?
A. reduction, increase
B. reduction, reduction
C. increase, reduction
D. increase , increase
If The Central bank tries to keep the interest rate constant when the economy is operating on the steep part of the AS curve, _________ will occur?
A. a hyperinflation
B. a depression
C. stagflation
D. a recession
If there is a general shortage of liquidity in the money market then ?
A. The banks will increase their lending
B. The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will fall and the central bank may be expected to reduce the supply of liquidity to the banks
C. The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the long-term interest rate may be expected to rise as a result
D. the long-term interest rate in the economy will rise and the central bank will raise its interest rate in response
E. The short-term interest rate at which the economy’s commercial banks lend to and borrow from each other will rise and the central bank may be expected to increase the supply of liquidity to the banks.
Banks create money by ?
A. printing it
B. issuing debit cards
C. accepting cheques
D. lending out part of their deposits
One of the transmission mechanisms of monetary policy is through consumer demand when interest rates ________ household wealth ________ and consumption _________?
A. rise; increase, increase
B. rise, falls, increase
C. rise, increase, falls
D. rise, falls, falls
An increase in the money supply aimed at increasing aggregate output is referred to as ?
A. contractionary fiscal policy
B. expansionary monetary policy
C. contractionary monetary policy
D. expansionary fiscal policy
Which of the following policy actions by a central bank is likely to increase the money supply ?
A. Increasing the refinancing rate
B. All of these will increase the money supply
C. Buying government bonds in open market operations
D. Increasing reserve requirements
Assume that commercial banks are holding excess reserves because business firms and consumers are not willing to borrow money A decrease in the discount rate is likely to ?
A. increase the money supply because it is now cheaper for banks to borrow from the central bank
B. decrease the money supply because it will now be more expensive for business firms and consumers to borrow money
C. Not change the money supply because banks already have excess reserves they cannot lend
D. Decrease the money supply because it is now cheaper for banks to borrow from the central bank instead instead of buying government securities
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