Question

Writhe these answers first, and then give the explanation please, thank you.

(1)In response to the financial crisis, the Fed implemented quantitative easing programs mainly to

A   keep inflation from falling.
B   ensure that banks continued to make credit available to the economy.
C   reduce interest rates.
D   reduce the quantity of reserves.

(2)Central bank independence refers to central banks'

A   ability to operate without the financial support of the government.
B   power to negotiate with other central banks or governments in the world.
C   actions above the law.
D   power to make monetary policy decisions without interference from the government.

(3)The Phillips curve captures a

A   negative relationship between the inflation rate and the unemployment rate.
B   negative relationship between real GDP and the unemployment rate.
C   positive relationship between real GDP and the unemployment rate.
D   positive relationship between the inflation rate and the unemployment rate.

(4)The Fed changes the federal funds rate by

A   changing the supply of reserves in the overnight market.
B   changing the interest rates that banks charge consumers.
C   changing banks' reserve requirements.
D   directing banks to charge each other a new rate.

(5)Suppose that the Fed aims at fixing the interest rate. The Fed will respond to an increase in money demand with

• A no policy action.
• B open market purchases.

• C open market sales in some markets and open market purchases in other markets.

• D open market sales.

Answer 1

ANSWERS

Q 1) C

Q 2) D

Q 3) A

Q 4) A

Q 5) B

EXPLANATION

1) The answer is option C because , when interest rate are lower banks can lend with easier terms . This is commenly applying when interest rate are in zero level this is because at this time central bank have some tools to influence economic growth.

2) The answer is option D because independence meance without any controll from any external entity. Unnecessery controll will make or will compell to make unsatisfied and incorrect financial decisions in country. There is a chance to un wanted interference by government. That will arise questions about the integrity of the central bank.