Worksheet 15

15 October 2022
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12 test answers

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The basic determinant of the transactions demand for money is the
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Level of Nominal GDP
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The basic determinant of the asset demand for money is the
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Interest Rate
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Total money demand is the
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horizontal sum of the transactions demand for money and the asset demand for money.
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The equilibrium interest rate is determined
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at the intersection of the total demand for money curve and the supply of money curve.
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Suppose there is an increase in the total demand for money. In this case,
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the equilibrium interest rate will rise.
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Which of the following Fed actions will increase bank lending?
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1. The Fed lowers the discount rate from 4 percent to 2 percent.
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Which of the following Fed actions will decrease bank lending?
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1. The Fed raises the discount rate from 5 percent to 6 percent. 2. The Fed reverse repos $10 billion worth of Treasury bonds to non-bank financial firms. 3. The Fed raises the reserve ratio from 10 percent to 11 percent.
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If the Federal Reserve wants to increase the federal funds rate using open-market operations, it should _____________ bonds.
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Reverse Repo
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True or False: In the United States, monetary policy has two key advantages over fiscal policy: (1) isolation from political pressure and (2) speed and flexibility.
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True
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All else equal, an increase in technology will:
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increase aggregate supply, and increase real ouput
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Fiscal policy can be used to target:
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government spending, targeting changes to aggregate demand
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A depreciation of the dollar will:
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increase to net exports and aggregate demand.