Econ week 12 QUICK PASS 2023//2024

Econ week 12 QUICK PASS 2023//2024 When the central bank decides it will sell bonds using open market operations - ANSWER the money supply decreases When the central bank decides to increase the discount rate, the interest rates - ANSWER increase Atlantic Bank is required to hold 10% of deposits as reserves. if the central bank increases the discount rate, how would atlantic bank respond? - ANSWER by increasing its reserves _____ will often cause monetary policy to be considered counterproductive because it makes it hard for the central bank to know when the policy will take effect - ANSWER long and variable time lags Which of the following is described as an innovative and nontraditional method used by the Federal Reserve to expand the quantity of money and credit during the recent U.S. recession? - ANSWER quantitative easing The central bank uses a _____ monetary policy to offset business related economic contractions and expansions - ANSWER countercyclical Which of the following terms is used to describe the proportion of deposits that banks are legally required to deposit with the central bank? - ANSWER reserve requirements If the economy is in recession with high unemployment and output below potential GDP, then _____ would cause the economy to return to its potential GDP - ANSWER loose monetary policy If you were to survey central bankers from around the world and ask them what they believe the primary task of monetary policy should be, what would the most popular answer likely by? - ANSWER fighting inflation THe _____ is the institution designed to control the quantity of money in the economy and also to oversee the - ANSWER Central bank; safety and stability of the banking system If GDP is 3600 and the money supply is 300, what is the velocity? - ANSWER 12 How are the specific interest rates for the ledning and borrowing markets determined? - ANSWER by the forces of supply and demand If a central bank decides it needs to decrease both the aggregate demand and the money supply, then it will follow - ANSWER tight monetary policy According to the quantity theory, if constant growth in the money supply is combined with fluctuating velocity