online econ - Monetary policy refers to the practice of...

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Monetary policy refers to the practice of regulating the money supply and bank credit as a tool to stimulate or control the economy. As the central bank of the United States, the Federal Reserve can manipulate the money supply in order to impact the economy. here are two general types of monetary policy: expansionary and contractionary (also called restrictive). Expansionary monetary policy results in an expansion of the money supply and bank credit, while contractionary monetary policy results in a decrease of the money supply and bank credit. The Federal Reserve has a variety of tools at their disposal to implement the two above mentioned types of monetary policy: conducting open market operations (the purchase and sale of U.S. treasury securities), setting reserve requirements (for bank reserves), and setting the discount and federal funds (interest) rates. Question 1 text Question 1 0 out of 1 points Incorrect If the Fed fears inflation, it would be most likely to Question 1 answers Selected Answer: Incorrect buy additional bonds in order to increase the federal funds rate. Correct Answer: Correct sell additional bonds in order to increase the federal funds rate. Question 2 text Question 2 1 out of 1 points Correct A decrease in the nominal interest rate would Question 2 answers Selected Answer: Correct encourage people to hold larger money balances. Correct Answer: Correct encourage people to hold larger money balances. Question 3 text Question 3 1 out of 1 points Correct If the growth rate of real GDP is 3 percent, velocity is constant, and the money supply grows at 9 percent, the rate of inflation will be approximately Question 3 answers Selected Answer: Correct 6 percent. Correct Answer: Correct 6 percent. Question 4 text Question 4 0 out of 1 points Incorrect Classical economists believed that Question 4 answers Selected Answer: Incorrect the velocity of money was unaffected by the frequency of income payments. Correct Answer: Correct the velocity of money was constant in the short run. Question 5 text Question 5 0 out of 1 points
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Incorrect A major advantage of monetary policy over fiscal policy is that monetary policy Question 5 answers Selected Answer: Incorrect affects all sectors of the economy equally. Correct Answer: Correct can be put into effect more quickly. Question 6 text Question 6 1 out of 1 points Correct An increase in the money supply Question 6 answers Selected Answer: Correct lowers the interest rate, causing an increase in investment and an increase in GDP. Correct Answer: Correct lowers the interest rate, causing an increase in investment and an increase in GDP. Question 7 text Question 7 0 out of 1 points Incorrect Which of the following best describes the relationship between the velocity of money and the demand for money? Question 7 answers
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online econ - Monetary policy refers to the practice of...

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