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Pre-Test Chap 33 e18 - Pre-Test Chap 33 e18 Student 1...

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Pre-Test Chap 33 e18 Student: ___________________________________________________________________________ 1. Assume that there is a 25 percent reserve ratio and that the Federal Reserve buys $4 billion worth of government securities. If the securities are purchased from the public, this action has the potential to increase bank lending by a maximum of: A. $4 billion, but only by $1 billion if the securities are purchased directly from commercial banks B. $4 billion, but by $16 billion if the securities are purchased directly from commercial banks C. $16 billion, and also by $16 billion if the securities are purchased directly from commercial banks D. $20 billion, and also by $20 billion if the securities are purchased directly from commercial banks 2. When the Fed buys government securities in the open market, it: 3. If the dollars held for transactions purposes are, on the average, spent four times a year for final goods and services, then the quantity of money people will wish to hold for transactions is equal to: 4. The interest rate that banks use as a benchmark rate for interest rates on a wide range of loans to businesses and individuals is the: 5. The purpose of an expansionary money policy is to: A. Increase aggregate demand B. Decrease aggregate demand C. Increase investment demand D. Decrease investment demand
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