Question

1. What is the primary tool of monetary policy?

   		required reserve ratio
   		discount rate
   		Temporary Auction Funds
   		Open Market Operations

5 points   

QUESTION 2

1. What is the policy goal for unemployment in the U.S.?

   		zero
   		zero cyclical unemployment
   		unemployment equal to inflation rate
   		low unemployment in urban areas

5 points   

QUESTION 3

1. What is the policy goal for inflation in the U.S.?

   		zero
   		zero inflation on food items
   		low unemployment that is consistent with full employment level of unemployment
   		low inflation in college tuition and other education costs

5 points   

QUESTION 4

1. Which one of the following types of economic shock could send an economy into a recession?

   		unexpected tax decrease
   		interest rate cut
   		financial crisis
   		decrease in oil prices

5 points   

QUESTION 5

1. Who controls monetary policy in the U.S.?

   		The Fed
   		Congress
   		President
   		Supreme Court

5 points   

QUESTION 6

1. Which one of the following is an example of an expansionary monetary policy tool?

   		Buy bonds
   		Decrease taxes
   		Increase discount rate
   		Increase government spending

5 points   

QUESTION 7

1. Which one of the following is an example of a contractionary monetary policy tool?

   		Buy bonds
   		Increase taxes
   		Increase required reserve ratio
   		Decrease government spending

Answer 1

1. The Answer is "Open market operations"

The primary tool of Fed is open market operations to influence the money supply in banking system.

2.The answer is "Zero Cyclical unemployment"

At zero cyclical unemployment , the situation will be full employment or Natural rate of unemployment

3. The answer is "Low inflation that is consistent with full employment level of unemployment"

The Fed target 2% inflation target constitent with low unemploment in the economy.

4. The answer is "Financial crisis"

Financial crisis can distort the markets and tighten the credit markets leading to fall in GDP.

5. "The Fed " controls moentary policy in the US.

6. The answer is "Buy Bonds"

Fed indulzes in buying and selling government securities to change the money supply in the banking system. When it buys bonds it increases the money supply in the banking system and vice versa.

7. Example of contractionary monetary policy tools is"Increase required reserve ratio", which result in higher interest rates and lower money supply.