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mhw7ANS - MHW7 WITH EXPLANATIONS FOR QUESTIONS IN BOLD...

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MHW7 WITH EXPLANATIONS FOR QUESTIONS IN BOLD CAPITALS 1 2 3 4 5 6 7 If moderate deficits put ________ pressure on interest rates, the Fed may ________ bonds, leading to an increase in high-powered money. A. downward; buy B. downward; sell C. upward; sell D. upward; buy 8 WITH GOV T BUDGET DEFICITS, GOV T IS BORROWING MORE, RAISING PRICE OF FUNDS (INTEREST RATES). IF FED DOESN T WANT RATES TO INCREASE, THEY MAY ENGAGE IN OPEN MARKET BOND PURCHASES, INCREAING RESERVES AND MB (HIGH POWERED MONEY) Some economists contend that a policy of shifting the aggregate demand curve will be costly because it produces more volatility in both the price level and output. These economists likely are advocates of ________ policy. A. nondiscretionary B. discretionary C. demand-management D. supply-side 9 THIS IS ONE OF THE ARGUMENTS AGAINST DISCRETIONARY MONETARY POLICY DUE TO LAS AND INCORRECT DECSISIONS, ATTEMPT TO STABILIZE ECONOMY THRU DEMAND MANAGEMENT (MONETARY) POLICIES MAY IN FACT MAKE ECONOMY MORE UNSTABLE 10 11 12 13 14 15 16 17 18 19 The quantity of reserves supplied equals A. nonborrowed reserves plus borrowed reserves. B. total reserves minus required reserves. C. nonborrowed reserves minus borrowed reserves. D. required reserves plus borrowed reserves. JUST A DEFINITION NONBORROWED + BORROWED = TOTAL RESERVES. WE SEPARATE SINCE FED CONTROLS NON-BORROWED WHILE BANKS DECIDE HOW MUCH TO BOIRROW
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36 The facility that was created in December of 2007 that banks can use to borrow from the Fed that has less of a stigma for banks compared to borrowing from the discount window is the ________. A. Term Securities Lending Facility B. Commerical Paper Funding Facility C. Primary Dealer Credit Facility D. Term Auction Facility 37 TERM AUCTION FACILITY. PROBLEM WAS THAT BANKS IN NEED WERE AFRAID TO USE TH
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