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.Management Sciences
Category: Money, Interest Rates And Output
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
Each point on the IS curve represents the equilibrium point in the ?
A. goods market for the given interest rate
B. goods market for the given level of government spending
C. money market for the given level of the money supply
D. money market for the given value of aggregate output
Which of the following events will lead to a decrease in the equilibrium interest rate ?
A. A sale of government securities by the central bank
B. An increase in the level of aggregate output
C. An increase in the discount rate
D. A decrease in the price level
If the investment demand curve is vertical ?
A. both monetary and fiscal policy are ineffective
B. monetary policy is effective but fiscal policy is ineffective
C. monetary policy is ineffective but fiscal policy is effective
D. both monetary and fiscal policy are effective
The difference between a bank’s actual reserves and its required reserves is its?
A. required reserve ratio
B. profit margin
C. excess reserves
D. net worth
The main reason that people hold money to buy things is referred to as the ?
A. Profit motive
B. Precautionary motive
C. Transactions motive
D. speculation motive
According to the simple Keynesian view the aggregate supply curve is ?
A. downward sloping over all levels of output
B. upward sloping over all levels of output
C. horizontal until it reaches full capacity and then becomes vertical
D. vertical until it reaches full capacity and then becomes horizontal
The way in which government spending is supposed to reduce investment is by increasing ?
A. incomes
B. overseas investment
C. imports
D. interest rates
An example of an expansionary monetary policy is ?
A. a reduction in the taxes banks pay on their profits.
B. an increase in the required reserve ratio
C. an increase in the discount rate
D. the Central bank buying government securities in the open market
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